Twitter didn’t actually launch at SXSW, but it might as well have. During 2007’s interactive conference, the company blanketed the convention—and the city—with a PR campaign that convinced people that they were missing out on a golden opportunity if they didn’t start documenting their actions in 140-character bites. The rest, as they say, is history—but history that hundreds of companies have tried to repeat. But it’s not just burgeoning startups looking to become the next Twitter that invest heavily in SXSW. Sponsors from McDonald’s to Mazda spend a fortune each year to reach the crowd of influencers, hipsters, next-Zuckerbergs, and guys who look a lot like the cast of Silicon Valley in Austin every March.
Austin needs these people too. Those downtown hotels that sprang up over the past few years didn’t get built in anticipation of people wanting to soak up the sun at Barton Springs, or because they need somewhere to house all of the people who are going to wait in line at Franklin Barbecue. Much of the development in Austin is built around the tech industry, and even specifically around SXSW. That’s led to tension—between, say, the Hyatt House going in near Red River and clubs like Cheer Up Charlie’s and Mohawk, which began facing legal and practical challenges as a result of the construction—but also to an economic impact that even Austinites who don’t go anywhere near SXSW benefit from.
It’s all complicated, in other words, and it’s not getting any less complicated anytime soon. In fact, over the past few months, the tenuous balance between an Austin that wants and needs the development a booming tech industry can provide and an Austin that wants to maintain control over how it’s governed has grown from “cold war” to pretty friggin’ hot.
Visitors to Austin during SXSW are going to be able to use Lyft and Uber to get from the airport to their hotel/Airbnb/friend’s couch/whatever-house-the-startup-they-work-for-rented-for-three-months’-worth-of-the-owner’s-mortgage/etc. They’ll be able to do that because those companies are still operating in Austin for the time being—though that’s not a guarantee for the future—and because when Austin-Bergstrom International Airport (which requires its own permits to operate) imposed restrictions that Uber refused to meet, the company opted to disregard those restrictions until the airport agreed to a sweetheart deal for both companies.
Things have only gotten more tense between the ridesharing companies and Austin in the year that’s followed. The city passed regulations that would require drivers to pass fingerprint background checks, and both companies responded by threatening to leave the city if those regulations are enforced. Since then, a nominally independent PAC called Ridesharing Works For Austin collected signatures for a recall of the ordinance that imposed the restrictions, scheduling a vote that would repeal the regulations voted on by Austin’s city council and replace them with regulations favored by Lyft and Uber themselves.
That vote happens in May, and it’s not the only case of tension between the tech industry and Austin’s local government. Another petition attempted to collect signatures to recall city councilmember Ann Kitchen, who’s one of the leading voices in the city in favor of regulation of peer-to-peer services like Uber and Lyft, or Airbnb and its local competitor HomeAway (which recently sold to Expedia for an eye-popping $3.9 billion). That petition was coordinated by a PAC called Austin4All, and helmed by political vets Rachel Kania and Tori Moreland, who’ve worked with the presidential campaigns of Rand Paul and Ted Cruz.
The money for the campaign to recall Ann Kitchen, though, came largely from Joe Liemandt of Austin-based software company Trilogy, who donated $20,000 to the PAC for its efforts. That petition was denied after the campaign failed to get the petition documents properly notarized—but it speaks to the level of displeasure among Austin tech industry vets with the regulatory efforts of politicians like Kitchen.
Mike Maples of the venture capitol firm Floodgate isn’t happy, either. He tweeted in late February that his company would no longer be investing in on-demand companies in Austin because local government is “too hostile” to the business model.
@JoshuaBaer Yep. FLOODGATE now has policy not to invest in on-demand companies in Austin. Local government too hostile.
— Mike Maples (@m2jr) February 25, 2016
That tweet came in response not just to the ongoing battle over regulations regarding Lyft and Uber, but also regulations that the city passed around short-term rental companies like Airbnb and HomeAway. Specifically, those regulations—which supporters told the Austin American-Statesman were intended to preserve the residential character of Austin neighborhoods—will prohibit “type 2” rentals shortly after SXSW in 2022, or rentals in properties that aren’t occupied by the owners the rest of the year.
Preventing swathes of residential neighborhoods from serving as de facto hotels has its proponents, but it also hit folks like HomeAway CEO Brian Sharples square in his feels. Sharples told the Statesman that the message he got from it is that “maybe the city isn’t the friendliest to innovation and change,” and that “I’m not sure it was intended to be a slap in the face of HomeAway, but it’s a little embarrassing for us to essentially have our prime product be illegal in the town in which we operate.”
All of this is tricky, and very complicated. Austin has an affordability crisis, particularly in housing, but every house or apartment that’s used as a full-time short-term rental property is one that isn’t on the market for someone who intends to live in the city full-time. At the same time, Austin’s reputation has been built over the past decade-plus around the idea of being extremely friendly to the tech industry, and it’s courted businesses and infrastructure to facilitate that. Changing course around that carries consequences that it’s unlikely that the city is prepared to weather—and regardless of whether fingerprinting Lyft drivers, or reserving Airbnb for people who want to rent out their house part of the time is as destructive to these companies as they claim, if the tech world sees them as prohibitively restrictive, then they can certainly bail on Austin.
What that means is that this SXSW, the city that hosts much of the tech world is facing an identity crisis. The ties between Austin and that industry run deep, but the future right now is a big question mark.
[Editor’s note: An earlier version of the article misstated that the city does not run Austin-Bergstrom International Airport. The city does own the airport—but the airport doesn’t receive tax money from the city, or pay into the city’s tax pool, and it requires operating permits different from those required to operate in the rest of the city. The airport is self-sustaining, and the permits it requires—independent of the city permits that Lyft and Uber already had to operate elsewhere in Austin—are used to fund the airport’s operations. We regret the error.]