Austin’s potential as a successor to Silicon Valley is in jeopardy. Over the years, Austin has seen a huge migration of tech companies moving to the city, from billionaire owners of Twitter (X), to the largest search engine in the world. But many startups are now choosing to leave the capital city they once flocked to because of the rising cost of living, low funding, and lack of diversity, according to TechCrunch. 

On Thursday, December  7, the cloud computing company, VMWare announced it was laying off 577 employees in Austin as part of a nationwide job reduction to cut costs, according to the Austin American-Statesman. 

TechCrunch is reporting that startup founders, like Techstars Managing Director Amos Schwartzfarb, are announcing their decisions to leave Austin’s “lackluster” startup scene. This is only a few years removed from tech investors and startup founders started bringing their businesses to Austin in droves, living it up with lower rent (than California and NYC), the young and “hip” population, and the beauty of no state taxes.

This year alone was full of tech layoffs. Indeed announced in March that it was letting go of 15% of its workforce after tech giants Google, Meta, and Amazon did the same.

In 2022, Meta abandoned plans to move into the biggest skyscraper in Austin, and Google froze plans to move into 35 floors of a different downtown building, despite paying rent to the developer, according to the Washington Post. TikTok also announced it was subleasing six floors in downtown Austin, but has yet to announce a move-in date, according to Inc.com.

In January, Don Ward, the CEO of Laundris, a B2B enterprise industrial software platform, announced he would be relocating his company to Tulsa because it reminded him “of where Austin was 10 years ago in terms of the tech ecosystem being built,” according to Tulsa World. 

Last month, unicorn Cart, an e-commerce business, announced it was moving its headquarters back to Houston after relocating to Austin in late 2021, according to TechCrunch. 

Airlines have also responded by shifting their focus from Austin after American Airlines cut 21 routes from the Austin-Bergstrom International Airport. The CEO of Austin’s Technology Council told the Austin Business Journal in March, “We’re not seeing a lot of pain yet in Austin,” after the journal revealed a list of the largest tech companies in Austin not yet reporting a widespread loss. 

If this is a growing trend, it begs the question. What will Austin have to do to remain the darlings of the tech world?