San Antonio Sticks to Growth Playbook, Despite Turndowns by Startups

San Antonio—There’s plenty of scrutiny of whether it’s worthwhile for governments to offer incentive packages that aim to attract businesses and the jobs they bring. Still, city and state leaders across the nation continue to do it, among other efforts to bolster their business communities.

Most arrangements aren’t gargantuan billion-dollar deals, like the tributes offered to Amazon for its proposed second headquarters. Officials in San Antonio, TX, and its surrounding Bexar County have for years promised cash, tax breaks, and other incentives to dozens of small businesses and large corporations—cumulatively worth tens of millions of dollars—often with the caveat that the businesses relocate to San Antonio, or at least bring in new jobs.

Xconomy reviewed city data this week. The main takeaway is that financial incentives have had mixed results in San Antonio, but local economic development officials still see them as a useful tool in their toolbox, as they try to lure and keep businesses here.

The city currently has 61 active agreements with startups such as Easy Expunctions and Pelican Therapeutics and giant corporations such as Microsoft, Toyota, and Hulu. (A reported $1.3 million cash grant to Hulu from the state of Texas surely helped out, too). San Antonio has distributed more than $15 million in grants and loans and has abated $44 million in taxes for 57 of those companies, according to the city’s economic development department. (About five of the companies are tech or life science startups; the rest are more traditional businesses. Four companies have agreed to deals but haven’t yet received any funding or tax abatement.)

Not all the proposed deals work out. As Xconomy reported Tuesday, Houston-based immunotherapy biotech Kiromic decided not to accept a $200,000 preferred equity investment offer from the San Antonio Economic Development Corporation, a business growth-focused nonprofit corporation created by the San Antonio city council in 2010. In addition to giving up an equity stake, Kiromic would have had to relocate its headquarters to San Antonio and create at least 20 jobs. The company still plans to have a presence in the Alamo City, according to the economic development group, and it’s possible Kiromic could choose to move its headquarters here for some other reason. (Kiromic officials aren’t making themselves available for comment until next week.)

Last year, a deal with a more prominent company had a sudden end: Dialpad, a San Francisco-based software startup, closed a satellite office it had opened in San Antonio only one year earlier. A few months after the closure, it opened a new office in Austin, about 90 miles north, in central Texas.

Dialpad, which announced a $50 million Series D round of venture funding two days ago, had accepted $175,000 in incentives from … Next Page »

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David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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