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As Austin aims to build a Southern Silicon Valley, it’s spending $20 billion on infrastructure

March 15, 2022, 4:22 PM UTC

When Austin Mayor Steve Adler and I met at City Hall just after 9:30 a.m. yesterday, he had already had a busy morning. Adler had to step away twice during our interview to take phone calls, and we ended up having to move into his office so the CEO of Amtrak could use the conference room. 

I wasn’t surprised: We were in the midst of South by Southwest, one of the largest entertainment and film events in the world and a centerpiece of Austin’s spirit and culture. The city was bustling and traffic jams were everywhere, but Austin felt alive.

“It’s great to have that energy back,” Adler says of the event’s return after the two-year hiatus of the in-person event.

While the largest cities in the U.S. have struggled to maintain their workforce amid the pandemic, surging crime levels, and freshly remote lineups of workers, relatively smaller metropolitan areas like Austin, Tex. or Jacksonville, Fla. have never been so big.

Austin has been experiencing a migration of tech workers into the city that has accelerated during the pandemic and, a few months ago, Tesla moved its headquarters to a factory it’s building just outside the city. Austin’s startup ecosystem has been booming for years, with venture capitalists throwing an unprecedented $4.9 billion into some 387 Austin-based companies last year, per Pitchbook. The city is now one of the more well-funded startup ecosystems in the U.S. and a primary example of investor interest in markets outside of Silicon Valley.

Adler credits Austin’s growth to being a place where people want to live: The art, music, barbecue, and “wonderful breakfast tacos—I mean that’s as important a contribution that we make as anything else.”

The challenge is how the city will be able to maintain its culture—the “weird,” as Adler calls it—as the airport and roads fill up, and as a flood of high-earning tech employees force housing costs to new heights. 

The city is spending billions of dollars in an effort to update its infrastructure for its near-one million residents: A $4 billion airport overhaul that will double its size, a $7.2 billion transit system project in design that will build two new rail systems, and $6 billion to add two managed lanes in each direction to its interstate highway. “We have nearly $20 billion of infrastructure projects underway in this city,” Adler says.

But issues like housing affordability and homelessness that plague cities like San Francisco and New York may become difficult to tackle as the city swells in size. The median price of a home in Austin hit an all-time-high of nearly $500,000 in February 2022, according to the Austin Board of Realtors—that’s up 27.9% from 2021. And the average rent for a 1-bedroom apartment in the city is up 32% from last year, according to Zumper.

“We don’t have an answer for that yet,” Adler says of the rising housing costs in Austin.

But Silicon Valley investors don’t seem perturbed by the rising rent, which pales in comparison to San Francisco: They’ve been opening up offices or accelerator programs in Austin. An added bonus: being one step closer to the brisket (and espresso barbecue sauce) at Franklin’s.

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Akeneo, a Nantes, France-based product experience and information management company, raised $135 million in Series D funding led by Summit Partners and was joined by investors including Alven and Partech.

- Cowbell Cyber, a Pleasanton, Calif.-based cyber insurance provider for small and medium-sized companies, raised $100 million in Series B funding led by Anthemis Group and was joined by investors including Permira Funds, PruVen Capital, NYCA Partners, Viola Fintech, and others.

- Snappt, a Los Angeles-based fraud detection company for rental applications, raised $100 million in Series A funding led by Insight Partners

- Bear Robotics, a Redwood City, Calif.-based company using robots to serve in restaurants, raised $81 million in Series B funding led by IMM and was joined by investors including Cleveland Avenue and others.

- Bazaar, a Karachi, Pakistan-based B2B e-commerce and fintech platform, raised $70 million in Series B funding. Dragoneer Investment Group and Tiger Global Management led the round and were joined by investors including Indus Valley Capital, Defy Partners, Acrew Capital, Wavemaker Partners, B&Y Venture Partners, and Zayn Capital

- ChannelEngine, a Leiden, Netherlands-based online marketplace integration platform, raised $50 million in Series B funding led by Atomico and was joined by investors including General Catalyst, Inkef, and Airbridge Equity Partners

- Mori, a Boston-based food tech company focused on extending shelf-life, raised $50 million in Series B1 funding led by Prelude Ventures and was joined by investors including The Drawdown Fund, Acre Venture Partners, The Engine, Refactor Capital, Blindspot, Closed Loop Partners, Knollwood Investment Advisory, Collaborative Fund, and Thia Ventures.

- Perlego, a London-based online textbook subscription service, raised $50 million in Series B funding led by Mediahuis Ventures and was joined by investors including Raine Ventures and Evli Growth Partners. Angel investors Jamie Brooker and Johan Brand also invested in the round through their fund, We Are Human

- Bobbie, a San Francisco-based organic infant formula company, raised $40 million in Series B funding led by Park West and was joined by investors including VMG and NextView. AirAngels provided more than 100 new investors to the founders of Bobbie as well.

- Selector, a Santa Clara, Calif.-based network monitoring and analytics solution platform, raised $28 million in Series A funding led by Two Bear Capital, SineWave Ventures, and Atlantic Bridge and was joined by investors including Comcast Ventures and Azure Capital Partners

- Magic Eden, an NFT marketplace on Solana, raised $27 million in Series A funding led by Paradigm and was joined by investors including Sequoia, Electric, Greylock, Kindred, Variant, and the Solana Foundation.

- ​​Compete, a Ramat Gan, Israel-based compensation and benefits benchmarking SaaS platform, raised $15 million in Series A funding led by Tiger Global and was joined by investors including Aleph and Vine Ventures.

- ​​Vira Health, a London-based women’s health company focused on menopause, raised $12 million in funding from investors including Octopus Ventures and Optum Ventures.

- Kamino, a São Paulo, Brazil-based B2B fintech for founders based in Latin America, raised $6.1 million in pre-seed funding led by Inspired Capital and was joined by investors including Global Founders Capital, QED, Picus Capital, Flourish Ventures, Propel VC, Clocktower Technology Ventures, Norte Ventures, Gilgamesh Ventures, Sergio Furio, Sergio Fogel, Florian Otto, and David Arana

- Naco, a Riga. Latvia-based nano-coating solutions provider for manufacturers, raised €1.5 million ($1.65 million) in funding led by The Untitled Ventures and was joined by investors including Buildit Accelerator and others. 

PRIVATE EQUITY

- Goode Partners acquired a minority stake in Jocko Fuel, a Maine-based provider of sports and lifestyle nutritional products, for $30 million.

- Cross-Fire & Security, an AE Industrial Partners portfolio company, acquired Adcock's Systems, a Waldorf, Md.-based fire alarm, electrical and sprinkler contractor. Financial terms were not disclosed.

- Fourshore Partners acquired Buske Logistics, an Edwardsville, Ill.-based provider of contract logistics services with a focus in the packaging, food & beverage, and automotive industries. Financial terms were not disclosed.

- Gen II Fund Services acquired Update Capital, a Vancoucer-based investment management technology solution for real estate. Financial terms were not disclosed.

EXITS

- JP Morgan agreed to acquire Global Shares, a Cork, Ireland-based stock plan management software provider, from Motive Partners. Financial terms were not disclosed. 

- One Equity Partners agreed to acquire PGW Auto Glass, a Cranberry Township, Pa.-based automotive glass installer, from a subsidiary of LKQ Corporation. Financial terms were not disclosed.

OTHER

- SentinelOne agreed to acquire Attivo Networks, a Fremont, Calif.-based-based identity security and movement protection company, for a cash and stock deal valued at $616.5 million. 

- Overwolf acquired Tebex, a Nottingham, England-based game server monetization platform, for $29 million. 

- ​​Clarify Health acquired Embedded Healthcare, a Washington D.C.-based behavior change platform company. Financial terms were not disclosed. 

- CM.com acquired Building Blocks, a Tilburg, Netherlands-based consumer A.I. software company for businesses. Financial terms were not disclosed.

- DigitalOcean Holdings acquired the CSS-Tricks website, a learning website for front-end developers. Financial terms were not disclosed.

- impact.com acquired Pressboard, a Vancouver-based analytics and reporting platform for branded content. Financial terms were not disclosed. 

IPOS 

- GoTo Group, a Jakarta, Indonesia-based ride-hailing and ecommerce fintech company, plans to raise approximately $1.3 billion in an IPO in Indonesia, per Bloomberg. A deal could value the company at up to $28.8 billion.

- Discord, a San Francisco-based instant messaging platform, is in talks with bankers to go public, per Bloomberg. A deal could value the company at around $15 billion. Index Ventures, Greylock Partners, Benchmark, and Spark Capital back the company.

PEOPLE

- a16z Crypto, the Menlo Park, Calif.-based crypto arm of a16z, hired Michele Korver as head of regulatory. Formerly, she was with the Department of the Treasury Financial Crimes Enforcement Network.

- NewView Capital, a Burlingame, Calif.-based venture capital firm, hired Chetan Chaudhary as partner. Formerly, he was with Scale.ai

- PineBridge Investments, a New York-based global asset manager, hired Kirk Sweeney as Asia Pacific CEO. Formerly, he was with ExodusPoint.

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