‘Cool’ Austin Icy Toward Uber, Airbnb, Bristling Tech Sector

Austin, Texas, boasts a reputation as one of most cutting-edge cities in the U.S, but new local regulations on ride-hailing apps such as Uber and rental sites such as Airbnb are stirring discontent in the tech sector, where some entrepreneurs say they’re now feeling less welcome.

Many U.S. cities are grappling with how to oversee the growing on-demand economy. But the fight has struck a particular nerve in Austin, where startups flock and Google is testing its self-driving car because of what the tech titan has called the city’s embrace of new technology.

The City Council last month passed rules that limit certain types of short-term rentals made popular by companies such as Airbnb and Austin-based HomeAway. More contentious was a decision by city leaders that drivers for ride-hailing companies such as Uber and Lyft must complete fingerprint-based background checks.

“I’m not sure it was intended to be a slap in the face of HomeAway, but it’s a little embarrassing for us to essentially have our prime product be illegal in the town in which we operate,” HomeAway CEO Brian Sharples told the Austin American-Statesman.

Sharples’ company, which was acquired by online travel giant Expedia in December for $3.9 billion in cash and stock, has 1,300 employees in Austin.

Austin Mayor Steve Adler said the city has been thrust into the intersection of government and the new sharing economy.

“This city cannot and should not abdicate its role to help ensure safety in the community,” he said. “But how it does that is something that needs to innovate and evolve.”

In May, Austin voters will decide whether to repeal the fingerprint requirement for drivers for Uber and Lyft, which lobbied hard against the measure. The city has said that at least five other major U.S. cities, including Houston, conduct background checks for ride-hailing drivers rather than letting the companies conduct their own background checks.

Mike Maples, a Silicon Valley venture capitalist with longtime ties to Austin, said he has stepped out of the city market based on risk factors.

“Startups are impossible to begin with, and if I’m going to invest in one, I have enough uncertainty without worrying about what the government’s going to do,” Maples said. “If I invest in a company that has high consumer appeal and could end up facing regulatory issues, that becomes a problematic investment.”