Where?

Thumtronics started in Busselton, Western Australia, because that’s where I happened to be living when I thought up my first musical innovations. Busselton is a very pleasant seaside resort town – but it’s a lousy place to start a new high-tech company. It’s three hours’ drive south of Western Australia’s capital city, Perth, which is “the most isolated major city in the world.” It’s as far from the next large Australian city as LA is from New Orleans (about 1700 miles), with absolutely nothing in between but sand, salt flats, and stranded Japanese tourists. Perth is a great place to raise money for a new nickel mine, but a lousy place from which to launch a high-tech disruptive innovation.

Australia’s venture capital community is absolutely clueless. This is not just an opinion; it’s a demonstrable fact. Over the decade from 1995 to 2005, American venture capitalists earned a whopping 41.4% Internal Rate of Return (IRR) on their investments (overall). Over that same decade, Australian venture capitalists earned 0% – that’s right, zero, nada, zilch. Even the top quartile only earned 2.7%, which was less than inflation. Whatever else people might say about American venture capitalists, they know how to pick companies that earn incredible returns – and, demonstrably, Australian venture capitalists don’t. Australian venture capitalists wouldn’t recognize the next Google if it hit them in the face.

So, I couldn’t get funding in Australia, despite the recognized disruptiveness of Thumtronics’ innovations. To get funding, it became clear that I would have to move Thumtronics to the USA.

But… where in the USA should Thumtronics go? Perhaps a high-tech center, like Silicon Valley, Boston, or Raleigh? Or perhaps a center of the music industry, such as New York or Los Angeles? What I really needed was a single city that had successful industry clusters in both electronics and music.

Austin has both. Although its much-touted claim to be the Live Music Capital of the World is somewhat dubious, there is no doubt that Austin takes music – and the music industry – very seriously. Whereas in other cities, having a CEO play live gigs in a local band would be considered somewhat flaky, in Austin it is normal and well-regarded. Austin’s live music scene is mentioned repeatedly in Richard Florida’s Rise of the Creative Class as being one of the hallmarks of, and contributors to, its success as a high-tech city.

Likewise, Austin has a deep local electronics industry, with numerous large firms such as AMD, Applied Materials, Cirrus Logic, Freescale, IBM, Intel, National Instruments, Samsung, Silicon Laboratories, Sun Microsystems, United Devices, and others having headquarters or major facilities there, and thousands of smaller electronics firms. Importantly, Austin also has a deep and broad infrastructure of service providers such as lawyers, accountants, patent attorneys, etc., that understand the needs of innovative high-tech start-ups. Austin’s rapid growth has also spawned a host of high-tech millionaires, who are ready and able to invest in the Next Big Thing.

Austin is Texas’ state capital, giving me access to Texas’ government decision-makers and influencers. This will become important as Thumtronics’ innovations start to move into government-funded educational institutions. With 23 million people, Texas is the USA’s second-most-populous state after California, so influencing Texas can influence the USA, which can influence the world. Furthermore, Austin is still a relatively small city (at 1.5 million, about the same population as Perth), so it’s relatively easy to gain access to Austin’s movers and shakers.

Austin is also a remarkably nice place to live, which has attracted (and will continue to attract) top talent from elsewhere. Finally, its cost of living is low enough to allow Thumtronics to minimize its burn rate.
Fortunately, Austin’s investor community understands disruptive innovation, so I am quite confident that, one way or another, Thumtronics will get the funding it needs to disrupt the $30 billion musical instrument & lesson industries from its new home here in Austin.