THE STORY OF HOW IT ALL STARTED 40 YEARS AGO
By Ray Niekamp
How does a city transform itself from an economic backwater to a high-tech powerhouse? In the case of Austin, it started with a short conversation. Austin Mayor Lee Cooke was on his way to give a speech when the mobile phone in his car rang. It was George Kozmetsky, the dean of the business school at the University of Texas. He asked Cooke to swing by.
“He came downstairs and I rolled down the window and asked, ‘Dr. Kozmetsky, what can I do for you?’” Cooke said.
“I need $300,000 from the City, and I need $300,000 from the Chamber and I’m either going to find $300,000 from the university or from the Kozmetsky Foundation,” Kozmetsky replied.
Cooke knew he didn’t have the authority to do it without the support of City Council, and he didn’t have authority from the Chamber of Commerce, although he had been its president a few years earlier. Nonetheless, “I said, ‘You have the $300,000 from the City and you’ve got the $300,000 from the Chamber.’” Cooke rolled up the window and drove off, and the Austin Technology Incubator (ATI) was born — the first technology incubator in Texas.
Of course, it takes more than a conversation. Austin had been slowly moving toward a high-tech economy for twenty years. Companies like IBM, Texas Instruments and Motorola had already set up shop in Texas’ capital city; and several years earlier, the city, the university and private industry had collaborated to lure Microelectronics Computer Technology Corporation — or MCC — to town, outbidding dozens of other cities with a $62 million incentive package to land the computer industry research consortium. Now it was 1989, and the city was just coming off its biggest win with the arrival of Sematech, another consortium that did semiconductor research and development. The public and private sectors combined to pony up $68 million in incentives.
There had also been lots of work at the University of Texas to develop technology as a third economic pillar, after the university itself and the state government. Kozmetsky had been instrumental in starting the IC2 Institute, a think tank devoted to Kozmetsky’s idea that industry, government and academia could work together to spur economic development. At a conference in Austin on the UT campus celebrating the 40th anniversary of IC2, key figures in the Austin technology boom shared stories about those early tech days.
Laura Kilcrease, who was associate director and right hand partner with Kozmetsky, ran both IC2 and the Austin Technology Incubator at different times, said Austin in the 1980s was not the happy place it is today. “Austin had about 400,000 people, about 1,000 homes were being foreclosed per month because of the oil and gas bust, and oil had gone from $30 a barrel to $8,” she said. Banks and savings and loans had been taken over by the Fed, and unemployment was high. Kilcrease said during that time, Kozmetsky viewed the family as the basic unit of the economy. “We had to move from basic to applied research to do things that would make this environment better for the family unit,” she said.
The key to IC2 was and is technology transfer — creating wealth and jobs from science and technology. Kozmetsky had been the co-founder of Teledyne before he came to UT, and a project Teledyne had been working on for the military eventually became the WaterPik. “Doing the basic research and converting it to applied and into an economic output of some kind is and continues to be a challenge,” said Bill Cunningham, who was president of UT at the time. “George lived it himself.” The recruitment of Kozmetsky was part of the process of moving UT from a regional school to a nationally renowned one. “The university basically said, ‘Yes, George,’ at every level,” Cunningham said. “George had the cachet of being very wealthy, a successful entrepreneur and a business man from California. That played well.”
Cooperation between the university and business led the city down parallel economic development paths. “There was the more traditional economic development that the Chamber of Commerce does on behalf of its business members,” said Glenn West, who was the Chamber’s president for 13 years. “We got good at going to California to recruit technology companies because we were Texas, and we had low costs, and we had an incredible university that was generating the workforce people wanted to hire.”
Meanwhile, Kozmetsky was looking over the horizon into the future. He saw that Austin would eventually hit a critical mass of technology companies, and they would spin off new operations. “He began to put in place all of the infrastructure we would need to support that type of initiative,” West said. “It was an exciting and collaborative team effort. It created a period of economic prosperity that’s extraordinary in Austin’s history.”
Cooke said Austin’s story is about leadership and collaboration. “We have so little of that around the world today, with so much animosity and division,” he said. He said Kozmetsky created trust.
The efforts have paid off. IC2 has brought $3 billion and more than 6,500 jobs to the Austin startup economy. It has created an economic impact of over $1 billion in India, South Korea, Mexico, Portugal, Poland, Turkey and Colombia, among other countries. Besides ATI, it created the Texas Capital Network and the Austin Software Council (now the Austin Technology Council). Austin is now considered the top tech city in the country. Big companies are part of the mix, too, with Samsung, AMD and Dell employing thousands.
Since it started in 1989, ATI has raised over $3.5 billion for startup companies. Kilcrease said ATI started the first angel network in Texas, the Texas Capital Network, and collaborated with NASA to commercialize their technology, which resulted in the creation of the first executive Master’s degree in Science and Technology Commercialization. “What made Austin what it is today is the University of Texas,” Cunningham said. “Anybody who misses that point, misses the whole deal.”
Kozmetsky passed away in 2003, at the age of 85. But if he were still around today, it’s likely he would still be thinking ahead of everyone else. “The first thing George would do is kill everything we’re doing today,” said John Butler, a former director of IC2. “He would tell me on our Wednesday meetings, ‘John, you need to kill ATI, it’s done.’ Butler said Kozmetsky would get everyone together to ask what’s the next problem we need to solve.
Kay Hammer, whose company, ETI, was one of the first spinouts of MCC and got a big push from the ATI, said Kozmetsky would still view his work as unfinished. “I think he would think we have challenges today that we have not addressed,” she said. “While wealth creation is important, it doesn’t seem to have made a difference in improvements in the world George would have liked. We need to think about the next steps. If he were here, he’d be kicking our butts.”
Author Ray Niekamp is the Managing Editor of Texas CEO Magazine. Congratulations and thank you to the 40th Anniversary Committee of IC2.