FORTUNE — Austin-based venture capital firm Silverton Partners announced Thursday its new $75 million fund for investing in Texas-based technology companies. The burgeoning tech scene in Austin in recent years inspired Silverton’s three partners, Bill Wood, Kip McClanahan, and Morgan Flager, to raise the investment fund, which will focus on seed and Series A funding for startups. “A number of factors are coming together to contribute to fast-paced tech community in Austin,” McClanahan told Fortune. “It’s never been more economical to start a company.”
While tech startups tend to be cloistered within major metropolitan areas like Silicon Valley and New York City, the community-oriented lifestyle and relatively low cost of living in Austin has fostered a unique environment for startups. $65 million of the new Silverton fund was raised from two prominent university endowments (Silverton Partners are not allowed to disclose) and Wood himself, and the remaining $10 million comes from the support of 40 other entrepreneurs in Austin.
Compared to Silicon Valley in particular, the startup scene in Austin might not seem especially catching. However, the venture capital environment in Austin is quickly growing, as many of the firms are early stage investors and active angel investors. “By definition, this is a smaller geography, so that engenders a tighter-knit community,” said McClanahan. “There’s a little bit more loyalty between employees and particular companies … It’s a little less of a ‘fog of war.’”
MORE: Corporate daredevil John Chen might just turn Blackberry around
In the same vein, the amount of competition on the west coast changes the dynamics of how venture capital funds work. Companies that receive large amounts of funding wind up being able to out-pay other companies for talented employees. “It creates a very haves/have-nots environment,” said Flager, who lived and worked in Silicon Valley before moving to Texas. “In Austin, founders can retain more of the company themselves and don’t have to raise as much at the beginning.”
Silverton Partners has so far worked primarily with business and consumer software companies. One of those companies, SpareFoot, helps its customers compare prices and sizes for local storage units from different providers. Another, Famigo, helps parents create an app section on their smartphone or tablet for their children called the “sandbox,” which prevents children from accessing the rest of the device.
Jason Cohen, the founder of WordPress hosting company WP Engine, is one of the people that Silverton Partners helped with early funding rounds. He has found that the startup environment for Austin is more inclusive compared to Silicon Valley, where “bigger is better” when it comes to funding and competition. When Silverton Partners started raising its $75 million fund, he was one of the entrepreneurs that decided to give back to the community with financial help because he believes it’s important to support early companies. Austin will continue to be a place to watch for tech talent, especially as investors help entrepreneurs set up shop.
