It’s more about getting funding than getting talent. My last gig was at a start up. They were given the option of SF or near PA for location from the VC powers that be.
I suppose the big guys that don’t need funding can relocate but at that point, the ship it too big to easily change.
And very often it’s thru people connections. Like you go to some random party and meet someone who knows someone who knows some big name VC. It works for talents too. Zuck met Sheryl in a Christmas party. It’s surprising that in the forefront of tech it’s still the old world face to face people connections that matter the most.
Now if you work out of Ohio you will likely never bump into Sheryl. I say at least half of Facebook’s success is due to her.
Already happening. Startups need cheaper talent to make the money go farther. We know someone who decided to run their startup out of Wisconsin even though he lived in the Bay Area. Programmers cost $70K, not $170K.
They’re lying.
There is no spring in the Northeast. There is Winter, Summer, and Fall. Of those, only Fall is pleasant. Anyone who tells you Spring exists is lying or mistaken. I can assure you that after 20 years, I rarely experienced a spring. Sometimes Winter would last until May 15 and then June was hot and humid. Sometimes winter lasted until April and then May was hot and humid. Spring is a moment of wishful thinking between the two.
In my lifetime, there have been way, way more people transplanting out here and loving it than vice versa. There is a reason why they say, “Go west, young man, go west…”
I think the cloud changed the financial formula. It used to be you needed big money to build out your servers. You had to build them out ahead of demand. It was a cash flow nightmare. Now that everything runs in the cloud buying hardware doesn’t consume the cash. They can afford to pay full wages instead of paying less with the promise the options will be worth a lot later.
Now recruiting is a different animal. It amazes me how little advancement there’s been in the last 20 years. The big innovation is letting you login to linked in and share your profile while applying. Companies still use the same Internet 1.0 applications which are garbage. There’s no real filtering of who can apply to what so recruiters are flooded with unqualified applicants. That makes it a struggle to find the quality applicants. Most recruiters work 15-20 reps at a time. They get 100-1000+ applicants per req. That’s an insane number of resumes to filter. I’d blow up that whole model and change it.
They use people as filters. Especially the early employees. People going to the same schools as founders. Employees friends and classmates. Old world people connections still carried tons of weight in this world of LinkedIn.
meanwhile, google buys 330K square feet of office space in colorado
Having your high powered execs and shot-caller engineers in the valley makes a lot of sense, for the reasons you describe. Having your rank-and-file worker bees does not.
The company I work for has long had a policy of only going after “targeted hires” in the valley. If they need to staff up real engineering, they do it at one of many other design centers around the world.
My experience has been that the people that love it are in two camps. They have either “made it”, and own a house, can afford a family, etc. Or they are young and aren’t thinking about family, retirement, etc. For those two groups, the bay area is paradise. There is a big population of folks with young families (or thinking about families), that are priced out, or looking at terrible commutes with miserable quality of life. For those folks, the bay area is just unneeded torture. Why not move?
The article’s premise is “In 5 years, Midwest will have more startups than Silicon Valley”. I simply don’t see that happening. I didn’t say Midwest will have zero startups though. Sure some people prefer there and started good businesses there.
But we will stay the world champion for the foreseeable future. No.2 and 3 will be very distant No.2 and 3.
It’s something I think a lot about. That’s the foundation of my investment thesis. If I think the current situation in SV is unsustainable and that it will revert to the mean so to say, it makes no sense for me to invest so heavily in the region. But the current trend I see is actually going to take things to extremes. Network effect means very often winners take all. If you want to be a winner you gotta pay up by hiring the best. And the best is and will always be here.
@marcus335 brings up the cloud. It’s a game changer in 3 ways at least:
It lowers hardware cost so companies can spend more on people.
That number of people will also be lower because you don’t need to maintain hardware and software yourself. Bigger HR budget but smaller headcount means more money for the people that remain.
Companies don’t need big server rooms. So their RE need goes a lot lower. That’s why the current crop of startups can afford to be in the most expensive bit of Bay Area: San Francisco.
Fundamentally the idea that startups, and business in general, are exiting Bay Area en masse goes against this fact: many startups choose to set up in the MOST expensive part of Bay Area: San Francisco.
They can lower the cost a lot by just setting up in say Daly City. Or even a bit farther in Pleasanton.
In fact I think more companies will move or start in the Easy Bay like Oakland and the Tri Valley before they will entertain the option of moving out of state. If they set it up in Pleasanton or Dublin, people can commute from Tracy or even Stockton no problem.
Similar line of thought.
Place is expensive for a good reason. In UK, RE is cheaper everywhere except London, the global city. The best RE investment is in London, the most expensive place in UK !!!
I wonder how much money some of these non-valley companies will throw at proven valley talent to relocate. I’ve been considering it, but I’d keep my place here and rent it. I’ve worked with too many people that made that move and sold their home here. Then they were priced out of moving back or had to come back as renters. The base salaries appear to be within 5% of here. Of course a huge part of comp is how well the stock does.
Just make sure the company is real before relocating: https://medium.com/startup-grind/i-got-scammed-by-a-silicon-valley-startup-574ced8acdff#.j9bqcjb96.
Excellent summary of the situation. And even those who own a house are stressed. Many lifetime peninsula residents are finding that their kids can’t rent a house anywhere near them nor can they move because of the price difference and the property tax difference. I hear people complaining on all fronts.
Move to the east bay…The trend to the burbs has been going on for 80 years…Most newcomers come to SF or the valley…they will move east like BA families have been doing since the 20’s
Thank you for the story. The employees are very qualified, PhD, MS and some from very good Colleges. Technically competent, not streetwise? In any case, I think the CEO’s hype is not sufficiently sexy to seduce angels to throw away money at them. From what I read, that’s how startup rolls (talk big, employed highly qualified, seduce angels), till they can come up with a solid product.