Home South By Southwest as a Silicon Valley Startup: Time to Sell

South By Southwest as a Silicon Valley Startup: Time to Sell

If the last few days at the South by Southwest Interactive conference in Austin are any indication, the technology and digital media industries have never been healthier. At least that’s my interpretation of the vast amounts of free BBQ, booze, performances, parties, t-shirts, and toys that hundreds of brands and sponsors just fed us.

In a sense, SXSWi – though based in Texas – is a prototypical, successful Silicon Valley startup. It has made the right biz-dev partnerships, recruited the right people, and it’s still even pretty cool.

But it’s also showing signs of distress – “scaling” problems, if you will. So in startup terms, it might also be a good opportunity to “sell” and expand beyond its current footprint, perhaps under the wings of a larger partner.

The Rise of SXSWi

SXSW Interactive started as a side project to the SXSW Music festival in 1994, called the “SXSW Film and Multimedia Conference”. (Multimedia split off as a separate entity the next year, and became “Interactive” four years later.) It has rapidly grown in popularity and coolness over the past decade, especially the last 5-6 years, as it fed off the new Web boom, the rise of digital social networking, and more recently, the appetite of brands and agencies to reach the types of people who attend SXSW.

Attendance reflects its rise in influence. In 2007, some 6,500 people attended SXSWi. Two years later – the first year I attended, when things still felt relatively tame – it had reached almost 11,000 participants. Last year, it passed 19,000, triple the 2007 attendance. And this year, the conference expects “healthy growth” again, a rep tells me.

Over this time, SXSW Interactive has even become more popular than the music festival that created it – though that comes as no surprise, given the diverging fortunes of the music and Internet industries.

SWSWi As A Marketing Platform

One of the things fueling SXSWi’s rise is its growing popularity as a place to launch and promote products and brands. SXSWi is often cited as the place where Twitter launched. That’s not actually true, but it was the 2007 SXSW conference where Twitter saw a huge spike in usage. This helped Twitter catch on among the tech set, eventually leading to mainstream notoriety. And that has fed the belief that being the “it” startup at SXSW can catapult an unknown company into fame and fortune. Some now plan their business around it.

“We thought of South by Southwest as a deadline,” Foursquare co-founder and CEO Dennis Crowley said in his keynote interview at this year’s conference. (Foursquare launched at SXSW in 2009, and had a huge time at SXSW in 2010.)

“The same way you have a term paper that’s due the Friday before the end of the semester, this was the end of the semester for us. ‘This thing has to work on Friday so we have something to talk to people about while we’re down here’. We didn’t have any panels, we didn’t have any business cards. There were no t-shirts or stickers. It was just, ‘hey this is something we want to talk about and show people, to see if it’s a good idea or not’. And then it just kind of took off.”

But it was the marketers that were really out in droves this year, highlighting how SXSW’s organizers have succeeded in bringing big business to the conference.

To give you a few examples of the excess, this past week, there has been a gala AmEx concert performance by Jay-Z, a massive promotional push by Nike – including a big, dark studio space and an outdoor sports facility – for its neato FuelBand exercise gadget, a restaurant re-branded the “CNN Grill,” some sort of igloo-looking building for Nokia, huge parties thrown by every tech and media brand imaginable, and even a tasteless campaign to turn homeless people into Internet hotspots.

Things that would have seemed like stunts in 2007 – an actual foursquare court for Foursquare, or a grilled cheese sandwich shack for GroupMe – now appear as the calm among the chaos.

Austin at its Limits

SXSW is still fun, but it’s also getting to be uncomfortable. The line to pick up badges was absurdly long. Many panels filled up well before they started, even those a decent hike from the main venue. I walked over to a hotel to see the one session I actually wanted to watch, about Lego’s big comeback, and couldn’t get in. Annoying.

The parties – the real reason SXSW became so popular, anyway – were similarly frustrating. If you aren’t on the VIP list, or at least important enough to have been invited and quick enough to RSVP, you were often S.O.L. No longer a weekend of impromptu open-bar hopping if you’re not plugged in.

Austin is a great city, but it is proving its inability to handle these crowds. Hotels were supposedly sold out months ago, forcing many to stay in sub-par lodging or far from the center. And the city’s taxi companies were not prepared to handle the increase in demand. Multiple times, a cab I was promised was minutes away simply failed to show up, including the one that was supposed to take me to the airport. The companies – I was regularly in touch with three – basically told me to get lost. (I made my flight, barely, with some creative bus routing. Thanks, Google Maps!)

This isn’t going to become a smaller problem as the conference continues to grow. Sure, some of the money that SXSW pours back into the community – more than $167 million in 2011, the conference boasts – can go towards investing in more hotels, bigger cab companies, etc. But those won’t be useful most of the rest of the year. It’s just hard to put a lot of people in a small place for a short time without some pain.

Time to Sell?

After the last few days in Austin, I’m impressed by what SXSW has become, and many parts of the experience were rewarding. But I’m in no hurry to go back next year – the chaos factor edged out the happiness.

The SXSW festivals and brands are worth a lot. Hundreds of millions of dollars, perhaps. There are many possibilities for growth. But with the city’s resources – and the show’s focus – already strained, expanding beyond here adds risk and new challenges.

It actually seems like a smart time for SXSW Inc. and boss/co-founder Roland Swenson to consider cashing out. Buy low, sell high, right? Surely some of the bigger media companies or ad holding companies – still in love with the show as a marketing platform – might be interested.

Then what? I’d take some risks, starting with a new “back to basics” conference, maybe not even in Austin, to take some of the pressure off SXSWi. South by Mobile in New Orleans? South by Design in Savannah? South by Southeast Asia in Singapore? I’d go. How about building out the SXSW media brand? Web sites, maybe even a TV channel?

Even if some of the original coolsters aren’t coming anymore, it’s unlikely that SXSW has peaked yet. And there is a real opportunity for “SXSW the startup” to do much more and continue its ascent. (It’s already doing a SXSW “Eco” conference this fall.) But it could be trickier. If I owned SXSW, now’s when I’d consider selling.

Also: SXSW In A Nutshell: Homeless People As Hotspots

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