During this time Austin's population had dropped below 200. When was Austin founded? This took us down multiple productive paths with no … Did it really originate with O. Henry? In 1845 Texas was annexed into the United States and on February 19, 1846, Austin formally became the state's capital. Why was Austin called Waterloo? A reader asks our Austin Answered project why the community that became Austin was first named Waterloo. Return to Frequently Asked Questions about Austin. Why was Austin called Waterloo? Where did the name "Waterloo" come from? Question Two Where did the name "Waterloo" come from? It has been suggested that the name derives from the battle where Napoleon was defeated by the English, but there is no evidence to substantiate this. What's the origin of the term "City of the Violet Crown" referring to Austin? Click on the link in each question to see the answer. Waterloo was the name of the very small community that existed near the confluence of the Colorado River and today's Shoal Creek before Austin was founded.