Austin IS a great place for a startup, particularly for a software company. It's got three main industries: The University of Texas, the State Capital and Government, and Technology. I started Blue Fish here 10 years ago because the quality of developers is much better than in Houston where I was living. Also, the quality of life here is amazing - great music, a laid back culture, and lots of outdoor activities. Austin is a liberal town surrounded by the rest of conservative Texas, so it has a feel very different from other Texas towns.
I currently pay $12 per square foot for very nice Class A office space in Downtown Austin. It's a triple net lease, so I also pay some maintenance fees, etc. We have about 8,500 square feet with normal offices (no cubicles). We pay $125 per month for each parking space.
I prefer office space in Downtown since there are tons of restaurants and lots of clubs to walk to after work - my employees appreciate that they can use their parking space to come downtown on the weekends. There are two bar/club areas downtown: 6th street, which caters to people in their 20s, and the Warehouse District, which is geared more towards those in their 30s. The options downtown range from old historic buildings to 20-40 year old office towers to a handful of brand new office towers that have been built in the past few years.
There are a few other sections of town where office space is cheaper, but it tends to be souless suburban office parks that I can't really deal with.
A buddy of mine runs a company that lists sub-leases in Austin. You can see some of them at www.AustinSubleases.com to get an idea of what some of the rents are going for.