> I still expect a significant % of the $10B+ startups will get created here, so it makes sense for investors to still focus here. But I bet a lot of the ~$100M startups will happen elsewhere.
> There are still some things—e.g great startup executive talent, particular kinds of engineering talent—that are much harder to find outside the bay area.
This is spot on and it becomes a real bottle neck if you want to scale your startup beyond $500MM valuation.
Obviously you often can’t choose if you want to be a $100M startup or a billion dollar startup, and by the time you’ve passed the $100M mark it can be too late to refocus on the Bay Area and you might lose momentum by dealing with all kinds of things that shouldn’t matter.
We’ve run into serious talent recruiting issues when we reached this stage and we “solved” it by opening offices in SF and Mtn View. But it was not ideal and a huge waste of money/time.
The flipside of this is that SF's high burn rate kills many startups that otherwise would have been $100M companies. In particular, startups that are margin-sensitive.
I totally agree that you often can't choose if you're a $100M or a $1B startup, but if you're a founder, I think it often makes a lot more sense to optimize for the $100M scenario, given that it's more likely. The caveat is the founder who's already made f-u money, and whose true goal is to shoot for the moon.
Agree with the assumption, disagree with the conclusion.
Optimizing for that as a founder only doesn’t make sense, but when your investor money is trying to chase after $1B+ grand slams to make up for the dozens of failures, it probably makes a lot more sense.
Sure, and optimizing for those massive returns is the VC's problem, not the founder's problem. You're one out of dozens, if not hundreds of their investments. They'll be fine.
you've 'wasted' time/money when you had it - at a later stage not at an early stage when every penny is critical. SO IMO you've proven that it was the right choice/sequence
I wonder if the "kinds of engineering talent" issue aren't a bit an issue of finding people that can be trained on the job/betting on the right people instead of just trying to get "person that does this exact thing at FAANG".
I think it could happen if the incentives are set up differently, otherwise right now you spend time and effort training people only to have them change jobs in 2 years at a better company.
In 18 months I'm moving somewhere with not amazing job prospects due to an arrangement with my ex-wife about our kids. It's not a legal arrangement but I take promises seriously. My children are a higher priority than my career.
I could work remote for 70% of a regular salary and it will be an amazing salary for my new region. I'm sure I'll give at least 0.9 productivity remotely. I'd be silly not to hire me and I hope others see the same.
Collaboration is so much harder remote. Slack and video can help! But you still lose some. I have been on both sides of the remote equation, and I think it’s not optimal.
Yep. We just did yearly reviews and I got a raise, after a year of hard work leading a project that is now bringing in a bunch of revenue, that was...underwhelming. Doubly so when I compare to the two offers that I turned down last year. They were both rather more than my post-raise salary. I like working for this company for a bunch of reasons, but come on...
Yeah, at FANG when you get promoted, your RSU grant isn't increased to match the new level. So if you can get a job elsewhere at your new level, it's almost always a big pay increase.
> I think it could happen if the incentives are set up differently, otherwise right now you spend time and effort training people only to have them change jobs in 2 years at a better company.
- Can't you simply make a contract that binds them to your company for a longer time? (I don't know about the law in the US)
- Focus the training on technology that is rather specific to your company so that other conpanies are less incentivized to poach the employee because the training that you gave him/her is much less of use for other companies.
Why doesn’t your employees move out of Bay Area with you? Assuming if you keep offering same comp, this would cut down mortgage expenses to half and even gain much better housing in better school areas. It should be no brainer to move out if comp remains same. So you can come in to shop for talent, have them work remotely until they are ready. No need to open expensive offices in Bay Area.
Why would the assumption be that most people would want to move away from their homes because their current employer wants to save money?
Sure, many tech employees probably moved to the Bay Area primarily to find employment, but even if they don’t enjoy other aspects of the area, a place you live in for a while will become your home, and abandoning your home is not an easy or obvious decision to make.
I live in SF. Of course all the well-known problems exist and are troubling. I’m sure there are places I would enjoy living more. It still doesn’t mean that I would uproot and move at a moment’s notice because we company decided to move. Nearly all my friends are here. I have hobbies and routines. I have an apartment with furniture. I don’t understand why people seem to think that moving is such a trivial decision. And I don’t even have a family.
Only a small portion of SF is matches the dystopian vision you claim. Even those portions are not any worse than other urban areas. There is a reason why housing here is extremely expensive. People want to live here.
> Only a small portion of SF is matches the dystopian vision you claim.
My impression of SF having spent time there is that it hits the nail on the head. Sure, I doubt you get junkies asking you for money for heroin in Marin County, but it certainly happens in Union Sq.
> Sure, I doubt you get junkies asking you for money for heroin in Marin County, but it certainly happens in Union Sq.
Meth hit San Rafael pretty hard, Novato was taking federal money for anti-gang police work, and homelessness is definitely a visible problem in Marin (well, more visible these days).
Edit: Oh yeah, and the Canal was a hot spot for child sex trafficking when I was younger (cash wages + men away from their families), dunno if it still is. Marin City, well, that's a story for another time.
Union Sq is right next to the worst neighborhood in SF, so not surprising. But overall, people tend to forget how life was prior to the boom. Oakland was facing homicide epidemic. East Palo Alto was gang central. Redwood City was sketchy as hell. Dublin was a blue collar town. Now crime has virtually disappeared from the stretch of land between SF and San Jose
> Only a small portion of SF is matches the dystopian vision you claim. Even those portions are not any worse than other urban areas.
If you believe that you either live an extremely sheltered existence in SF or you've not visited recently.
San Francisco is pretty bad no matter where you go (except, perhaps, for the affluent areas like Sea Cliff and St Francis Woods). Out in the Outer Sunset I saw what looked like someone shat out a tapeworm over the course of three blocks the other day (if you'd like pictures, I'd be happy to oblige).
I went down to Rainbow Grocery last week and sat outside munching on some popcorn. It only took a few minutes before I was approached by a guy asking for some. Sharing food is something I've done before and will do again, but finger foods? No thanks. So the guy walks away, picks up his walking stick, gives me the crazy eyes, and then starts swinging the stick at me while muttering incoherently. This is also a part of town where you never know which side of the street you'll have to avoid due to the massive encampments (side effect of the super bowl bullshit really). Meanwhile I walked away as quickly as I could only to get hit with the stench of human shit. Turns out someone had dropped a steaming five inch mound of fresh shit nearby. The 311 ticket got closed out because they couldn't be bothered to figure out which corner if the intersection the smell was coming from (despite there being GPS coordinates in the damn picture).
I took BART last weekend to the Oakland Museum of California (the Eames exhibit was fun). I managed to get stuck on the periphery of no less than two fights on the damn trains. Last time I took BART late at night I hadn't quite realized what an open air drug market it had become. And, of course, Civic Center station has never been great but I've been seeing folks shooting up on the steps during the day. Something I never saw when I was working in that neighborhood years ago.
Backing up to earlier last week I sat next to a well traveled woman a few years younger than myself on my flight to SFO. She's from Harlem and visits SF annually. The thing that struck her most about SF vs NY was that drug use is far more open than in New York and so is homelessness. That jives with my experiences as well — San Francisco is demonstrably worse than other urban areas I've visited.
For fun search youtube for videos on sideshows. How many other urban areas get their major roads (e.g. the bay bridge, I-880) shutdown to make way for people hooning their cars? Let's not spend too much time talking about the condition of the roads out here either. They put Newark to shame. And we don't even have the excuse of extreme weather like they do in Jersey.
> There is a reason why housing here is extremely expensive. People want to live here.
That is a large part of the reason, but San Francisco is also seeing the Vancouver-like thing of rich folks parking their money in housing.
Don't forget that people often have entirely irrational reasons for wanting to live in San Francisco. Some of them have been deported from other states (thanks Las Vegas!), some of them still have a very romanticized view of San Francisco (it's not the summer of love anymore but there are plenty of kids that migrate out here in pursuit of that dream).
Some of them have been deported from other states (thanks Las Vegas!), some of them still have a very romanticized view of San Francisco
From what I gather, both of these statements are true. But it is also my understanding that our best data suggests that only about 10 percent of homeless come from elsewhere. The vast majority supposedly wind up living on the street in whatever place they last had housing in.
I'm not sure how reliable such data is. I suspect data on homeless folks is somewhat hand-wavy.
I work near Civic center and go there everyday. You know, like, Chicago has 500 murders a year. Nothing in SF and Oakland even comes close to that. Oakland used to be the crime capital in the US. People can actually live in West Oakland now. Oakland hill homes now run at $2mn. Drug use in SF has been prevalent since, what like 60s. I have been living in SF since well before the boom. Mid market and Tenderloin used to be way more troubling. I am continually amazed that they actually managed to our Uber, Twitter, and Dolby HQ there. Did you ever go to 9th and market prior to the tech boom ?
What's your point, regarding Chicago? Chicago is much larger than San Francisco; it's 5 times larger by area and over 3 times as many people. Chicago isn't one of the country's top cities by murder rate. Further, Chicago murders are largely confined to west and south sides of the city, a result of redlining, and most people in the city (even fewer professionals) don't live in those areas.
It's true, San Francisco used to have sketchy areas (I lived in Bayview in the late 1990s) and now basically doesn't, since the worst apartment in Bayview probably costs more than my house in Chicago does. Ok, you win. But the comment you're responding to is about quality of life in San Francisco. Nobody in Chicago is going to ask for your popcorn and swing a stick at you if you don't comply. We don't have tent cities on our main-drag sidewalks. The CTA goes pretty much everywhere and isn't an open-air drug market. We manage this despite being a larger city, with our own real pressures, and having nothing resembling the tax base San Francisco has.
San Francisco is broken. I'm sure it's fixable, but people probably need to stop pretending things are OK first.
> The CTA goes pretty much everywhere and isn't an open-air drug market.
To be fair, the antisocial behavior I witnessed on the CTA {Green Line|Red Line south of Roosevelt} and the Muni is comparable. I've never been verbally accosted by passengers on CTA like I have on Muni, but I did witness blatant pickpocketing and a drugged passenger break the bus door on CTA, which I've never seen on Muni.
For what it's worth, my sense is that the issues that SF has Chicago doesn't--homelessness, untreated mental illness--largely stem from cost of living differences, particularly housing prices. Everything from opening shelters to operating mental health facilities to avoiding homelessness in the first place is easier when real estate is more affordable. (To give an example, my hometown of College Station, Texas--hardly a bastion of liberalism!--had a quite effective program for preventing homelessness in the '90s and the aughts: straight-up building enough houses to house virtually all the needy and pricing them far below market rate. This worked because of the combination of a rich suburban tax base and rock-bottom real estate prices, which would not work in Chicago or anywhere in California.) That doesn't excuse SF and the state of California from failing to better address the problems, of course.
For what it's worth, my sense is that the issues that SF has Chicago doesn't--homelessness, untreated mental illness--largely stem from cost of living differences, particularly housing prices.
My experience is that Muni itself is generally OK (yes even the 8/9, 14, and 38), but that BART has gotten really bad over the past couple years. For a while Muni stopped running the (then new) hybrid buses in the Bayview because people would hit the external kill switches when the bus was stopped.
There are a couple of California-specific and SF-specific issues at play as well. SFPD simply doesn't ride Muni, although I believe they're contractually obligated to. Meanwhile BART PD is spread very thin (around four officers at any given time for their SF stations).
At the state level, California makes it very difficult to force someone to stay on psychiatric medication or keep them in an institution. I don't believe this is as much of an issue in Illinois.
Well, I grew up out here so yes I remember things like when the Mission was a war zone and when the Embarcadero was pretty sketchy due to that elevated highway.
I worked at Sixth and Market for a few years, so, yes I think it's largely worse than it was in the early 2000s. The big tech companies haven't helped the situation by attempting to sanitize it. Getting rid of the chess players did not help anything.
The overwhelming majority of homeless San Franciscans became homeless as California residents; the notion that they're "deported" from other states (or somehow migratory) is mostly a myth.
If you work in tech and a short commute is important to you, you can make it happen anywhere in the Bay.
I had a 2 mile commute when I was working at Google - it was 5 minutes by car, and about 12 minutes by bike. I've got a 30 foot commute now - I work from home. I've put about 30k miles on my 10 year old car.
Many of my friends are the same - live in Mountain View, work at the Googleplex, ~10 minute commute. Well, at least back when I was still commuting. I've heard traffic over the 101 bridges has gotten stupendously bad such that it can take 30 minutes to drive 100 yards, but that's easily averted by walking or biking. (Apparently it now takes less time to walk from most of North Mountain View to the Googleplex than to drive, during rush hour.)
You do pay for the privilege, and you sacrifice in other ways (eg. there's not much in the way of night life in the South Bay). But most of the folks with the 1-2 hour commutes in the Bay are a.) not in tech, and therefore screwed in many ways b.) consider living in the city to be non-negotiable, and therefore willing to put up with all sorts of literal shit to maintain that lifestyle or c.) consider living in the mountains to be non-negotiable, and so are willing to put up with a long but beautiful commute to maintain that lifestyle.
My wife's family all lives here, and my work is all on scalable startup ideas (i.e. they either fail outright or will need outside capital in a hurry), and my wife basically has her dream job, of which very few positions exist in the world. It's the right choice for us - we've discussed it several times - but probably wouldn't be without the family considerations or startup dreams.
> I know of no startup in the last ten years that‘s any substantial or enhancing live tremendously.
Uber/Lyft has saved me thousands of dollars as it enabled me to live downtown without owning a car. It has also saved many lives since people can now easily order a ride instead of driving their car to the bar.
The reason why the homeless and junkies are in SF are because of the wealth, and the good support and benefits that exist for homeless people here. There's no borders in SF, so the nation's homeless will flock here because the police don't harass them as much, and they can get a lot of easy money from tourists/petty crime on the local rich people. So the homeless problem isn't an SF problem as it is is an American problem, and SF's one of the few places that doesn't kick them out again.
Most of us bay area folks fantasize about leaving this place. But, it's hard to get out of here. all our friends and family are here, not to mention our jobs. if it wasn't for that, I'd bet people would be leaving in droves.
All the same reasons people don’t want to move everywhere else: family, friends, jobs (held by the spouse, for example), local culture, owning property, and just the general hassle of moving (it’s way easier to move jobs than to move houses).
Move the company somewhere cheap and continue paying the same salary so your employees can live like kings there, and I’d wager you’ll still lose the majority of them.
So you're gonna trust your company will not lay you off in a year? What will you do after two years even if it didn't,? I doubt you'll continue to keep finding similar paying jobs in Dallas.
This already happens all the time when starting remote offices, but not when moving the HQ. Employees who aren't attached to SF life or open to change of environment are willing to make the move. The pay vs cost of living usually works in their favor too. Smaller startups usually hire remote or start second HQs to tap into and train cheaper engineers outside SF.
However, the post you're replying to was talking about larger startups moving INTO the bay area not out.
Not everyone is willing to move. If you're looking for very specialized engineers you might end up with only a single potential hire who is unwilling to uproot his/her family.
I think part of the reason is the same reason companies stay in the Bay Area -- companies are in the Bay Area because they can find lots of good engineers in the area. Engineers like the area because they can find lots of good companies that want to hire them. No startup is guaranteed to survive, and if you move to Idaho with your company and it fails, it can be difficult to move back to the Bay Area.
The difference between Boston and SF for biotech is so interesting. SF has a lot of future-tech looking biotech companies, super cool DNA sequencing, longevity, synthetic biology, whereas the Boston area is much more pragmatic. It is so funny how west coast vs east coast biotech really is--romantic futurism vs pragmatic present.
The other way to look at the divide is protein vs nucleic acid. A lot of very interesting MAb and designer protein companies are in the bay area, but all the major CRISPR, mRNA, siRNA companies are in Boston. Sure you have Ionis and Caribou in CA, but that's really it.
If you believe the future is in the digital information nature of nucleic acid, Boston is the center of gravity by a huge margin.
Are you sure? I think synthago is critical to crispr technology across the world. I think they are expanding into new fields and are no longer just sending supplies to universities. That story is the old story
Just chiming in from the perspective of a medical technology company guy, I think biotech talent in the bay area is second to none. My own startup was in Wisconsin, but the guys and gals out in San Fran knew... their... stuff!
That said, I would agree that Boston was right up at the top with the bay area in that respect. We always thought of it as Boston for depth, and the bay area for breadth.
The rest of the country was lagging way behind as I remember it, but this was a while ago. I mean there were a few bright spots. Places like Maryland-NOVA-DC area believe it or not, but they didn't shine like Boston and the bay area.
Obviously the things that shouldn't matter are the things that you would normally have all set up in your current location that you need to replicate when you move to a new one. Especially if you happen to move internationally.
So - things that shouldn't matter that you would have to do if you moved
Get New office.
Deal with people that need to staff new office because some of your people won't move. Hiring. If you don't do that then you get an office through some co-working solution and have to deal with whatever requirements there are there.
If international - visas etc.
If opening local bay area office but keeping your other offices setting up culture to be able to work together between two or more locations.
If opening bay area office but closing local dealing with people's issues about moving. For example I would never move to the U.S from Denmark, so I had a job opportunity from a startup that was making the move right at the time and I said no. If I had been hired 6 months before I would have of course refused to move, and they would have had to deal with that.
I think it’s important for anyone getting to this page to read his whole thread, which is more nuanced than suggested by the sensational title. The point he seems to be making is that it’s better for startups that aren’t looking at being unicorns to look at other locations where they might have a better chance of success.
He sort of shows the bay area bias with the bit about how “$100M” startups will be created elsewhere. There have been some much larger startups outside of the Bay Area and I suspect that trend to continue. Unicorns aren’t just a bay area phenomenon anymore
The Bay Area has less than 1/30th the US population and yet the majority of US unicorns and decacorns have hailed from here. It's wildly disproportionate.
In my experience, it is largely attributable to local culture. The intersection of high-quality engineering talent and ambition bordering on megalomania is quite rare, but you need it to build a strong tech-driven company. In the vast majority of places in the world, and even in much of the US, this is neither socially prevalent nor culturally accepted. You have this in the Bay Area and to a lesser extent Seattle, but not too many other places in my experience.
There are a number of cities around the world that have high-quality engineering talent in sufficient quantity, that part is easy to replicate. The complaint I consistently hear from startup founders across Europe (where I've worked) and in some parts of the US is that there is a broad and deep-seated lack of ambition or appetite to do very difficult engineering. The reasons for this are multi-faceted and complicated, so it isn't something that can be reduced to a soundbite or easily changed. The intensity of effort applied to technical problem solving that we take for granted on the west coast is very much not the default case most other places, and this is compounded by the relative lack of experience building high-performing engineering organizations.
I've seen the same thing at several places on Germany. Managers pulling people off a product that was growing rapidly and just needed a bit more time to gain industry credibility, to put them on contracting rolls to Tier 1 suppliers to the automotive industry. There were also silly things like hampering future growth through exclusive/paid feature development in order to make today's profits look better.
It was really short term thinking that didn't understand the industry requirements and ended up throwing the product under a bus to get a tiny bit of upfront guaranteed income.
I’d say it’s the people — combination of mindset and talent. Self-selecting group traveling to a place where only the strong can survive and the exceptional can thrive.
Most of the people I work with day to day are not just brilliant, but extremely driven as well. That was never true in the other places I’ve lived. The were lots of brilliant lazy people, and lots of super driven, less naturally gifted people.
In the Bay Area you kinda have to be both and have your eye on some bigger future, or there’s no point in being here.
Easy access to capital, easy access to large numbers of potential employees (many of whom have prior experience working for tech startups), and access to early-adopter customers / users.
Whether you'd consider that "quality of startup" or not is up to you. When it comes to hyper growth success, there are multiple structural factors that really make it easier to scale in the Bay Area, despite the 2-3x multiplier in cost per employee.
That wasn’t my point. The framing was clearly used like “lifestyle business” is used. There have and will be unicorns outside of the valley, but he doesn’t seem to want to recognize that, hence the “$100M” framing
I think you’re misinterpreting his point. He’s not saying there won’t be unicorns outside of the valley. He’s saying the cost/benefit of being in SV makes sense for unicorns but not for many 100m startups. As a result, you’ll still see a disproportionate number of unicorns in SV but more 100m startups will start moving away.
How is that tautological? It's clearly an empirical statement. My source is my own observations of decacorns as well as IPOs during the last year.
That said, feel free to skim through this (slightly outdated) list and note how a large fraction of the US-based companies are based in SF or SV: http://fortune.com/unicorns/
Skimming through that list they look like long-running businesses, not startups. They may have been startups once upon a time (same as any publicly-traded business for that matter), but they're completely irrelevant to a discussion of where modern day startups seeking to scale to billion dollar entities should be founded.
They worked in a field for 10+ years, understood the underserved needs of customers in that field, and built a product that addressed those underserved needs for customers.
Working for yourself. You only need so much money to be happy. And statistically speaking, you’re not going to be a unicorn. You’re more likely to fail entirely. But if you make a nice business out of it that you can go to each day and be happy, you enjoy the work, and have your bills paid comfortably, that’s enough for a lot of people.
you’re responding to the converse of GP’s statement, which yes, is not true. but he said none of those things. you have projected a false dichotomy which wasn’t proposed.
I think it's sometimes hard to understand how quickly marginal utility of money decreases. As someone who makes high seven figures, I have genuinely no idea how more money could possibly affect my happiness -- there's just no appreciable difference between making 5m and 500m to me.
sounds like you have a distinct lack of imagination. interesting that you could reach 7 figures with that mindset. every power of 10 TC is another level of liberating.
At 7 figures you can still go broke. that isn’t fuck you money. you can’t buy houses around the world (and staff them) in a whim. you can’t go to davos and mingle with the true global power brokers. you can affect social change but only on a small perhaps local scale.
at 500m you can put the people YOU want into government to affect the change you want.
>you can’t buy houses around the world (and staff them) in a whim. you can’t go to davos and mingle with the true global power brokers. you can affect social change but only on a small perhaps local scale.
I can't imagine any of these things increasing my happiness (or even be particularly interesting to me).
Totally agree. From my experience, operating out of the bay area means you pay more for rent, employee salaries, and employee retention (higher turnover). All up, it costs somewhere around ~$50K/year more per employee.
If you run a modest team of 10, you're paying an additional $500K/year to be in the bay area. That's huge for a large fraction of startups.
> All up, it costs somewhere around ~$50K/year more per employee.
I'd guess this is significantly under-representing the additional cost compared to most cities in America (exceptions might be NYC, LA, and Seattle). I bet it's quite a bit more than that for someone from, say, Portland.
> This is particularly true in Silicon Valley, where a recent think tank report estimates that 17 percent of workers in “highly technical occupations” are native Californians, with 40 percent hailing from India or China and 29 percent from other non-U.S. countries.
And I thought Toronto was multicultural (~51% born outside of Canada)! I wonder what is the rate regardless of occupation?
Edit to answer my own question:
> More than a third of city residents (35.6%) were born outside the United States.
"Silicon Valley" has come to have two definitions: a geographic one, referring to Santa Clara County, and a metonymical one, referring to all high-tech businesses in the Bay Area.
I suspect the VC industry itself will be disrupted at some point (the irony of the VC industry is that the biz model has remained basically the same for 50 years when everything else has changed).
It will become incrementally easier to raise money from non-traditional sources at better terms as "accredited investor" laws are relaxed e.g. through a Security Token Offering.
The industry is no longer self-funded by exits and large LPs, but funded by large institutional investors, sovereign funds and the like who demand a reliable IRR. This in turn, leads to ever larger rounds, fewer IPOs and less equity to employees.
What if YC or 500startups were allowed to go public and people can buy their stock? Returns on YC model far exceeds S&P. I think pg has created an incredible framework which can be further evolved in open markets. I can absolutely see S&P index dominated by company-aggregators as opposed to individual companies. That seems to be the natural evolution.
that only holds true if financiers have no relationships with the companies they fund, but that isn't the case. E.g. people want to get into YC for the network and the relationships.
One of the biggest reasons so many startups moved (or started) in the Bay Area was because VCs didn't bother traveling and funded mostly local companies.
Has that changed?
I believe it has. We work with a few coastal firms where we were among their first non-traditional tech hub investments and conversations suggest many are looking for gems in new places.
If the VCs are that lazy, and assuming they still seek for the most profit, wouldn't VCs move to the bay area to find the unicorns? Wouldn't it create a virtuous (or vicious depending on the perspective) cycle of formibg a cluster of the companies and VCs in the area?
Eventually too much of such cycle would give way to the increased cost of living. But I see a tendency of more moderation in employee compensation by big companies, which would favor small startups again around the area.
One thing to note. Since the time Bay Area became “expensive”, contrary to expectations it is actually crushing other geographies (exception being China) when it comes to massive fund raising for startups. Just this week Flexport raised $1bn and DoorDash raised $400mn. A few weeks back Nuro raised $1bn and Juul got $12bn. There is an excellent Crunchbase article on this https://news.crunchbase.com/news/how-northern-californias-re...
Clearly the lesson is that if you want to scale, you are better of being here
I would consider fundraising and local cost of living to be completely orthogonal. Fundraising is easier when there is a cluster of potential donors in a central geography. Other important factors are regulatory environment, taxes, potential employees, transportation, and so forth.
I mentioned fundraising as a proxy for health of the startup sector in the Bay Area. The expectation was that with high cost of living and relentless FAANG hiring, startups will move en masse to other locations. But fundraising data suggests otherwise.
I'd take that with a big grain of salt, I spent over a decade of my 20 years living in SF looking elsewhere to move to since I couldn't afford the real estate. So I'd be counted as one of the ones that want to leave, but I never left until finally I moved down the Peninsula.
I don't keep up with the home price trends, but I bought a 2 bedroom condo on the peninsula within walking distance of Caltrain for less than any one bedroom I could find in SF.
Median price doesn't matter as much as the point-in-time price for what the homebuyer is looking for. A 3 bedroom house in Palo Alto can distort the price curve when all you want is a small condo in Burlingame.
I wouldnt, I’m just surprised it’s not higher. Most of my friends hit 30-32 then move out to Marin, Walnut Creek or San Mateo. Once you get to the age where you’re married and thinking about kids, you want out of SF.
I think for many people it comes down to go exactly where and do exactly what there. Once lived in Bay Area for while, you have certain expectations on compensation, services, things to do, career growth etc.
If you are used to a city like SF and enjoy the level of things in there, in the world and US there only few cities similar. Like nyc, la, London, Tokyo etc. Portland, Seattle, Austin, Berlin are all good but not the same.
Most of these places are almost as expensive or in similar category as SF but all of them have lower tech salaries than SF, by little or by a lot.
In addition, if you live decently and your salary doesn’t only go to rent, then any decrease in rent is always less than decrease in your salary. Say your rent is $3000 in sf and you make $300k+ per year in total comp. Say moving to Austin your rent would be $1500 but your salary would be $200k. You are only saving $18k year in rent but your salary dropped $100k. Go to Berlin and you maybe pay $1000 for apartment but your salary is $60k.
Lastly, as messed up lot of startups and companies are in Bay Area, there is still a lot of experience and drive to build succesful companies. Go anywhere else in the world and you will encounter more clueless people with absolutely no networks, who have no ambition, and are just trying to do some local play of a global company. I know it sounds harsh but I think for many people thinking about moving to London and working in some consultancy or bank doesn’t sound very exciting or a growth opportunity.
So I think lot of people want to move, but cannot find good or exciting reasons to do that financially, growth or general job happiness. Quality of living and housing yes for sure.
I think options are:
1) start your company and build the culture and company you want whenever or in a distributed way
2) Decide to retire to the countryside and work on your own projects
3) Find a fulfilling, not exactly high tech job or position, but more like a foundation / helping governments with socially responsible software etc. Essentially financially retire, but work on meaningful things
I think Bay Area is still great for singles or couples without kids, that you can get dual high income and share housing costs. Also the career and company options in tech are unparaller.
Starting companies needing massive engineering force, less so.
It’s not just cost of living but taxes. Living in a state with no income tax is an automatic 10-12% bump in take home pay.
Agree though if you’re single your living situation is more flexible and you can find a place for less than market rate here pretty easily. It’s once you get married and want kids that SF makes no sense for most people.
Someone making 200k in Austin has a much much better quality of life than someone making 300k in SF. No question.
As someone from Austin living in SF I disagree. Austin has better housing affordability and less severe homelessness. To me, just about everything else is nicer in SF. But more to the point, everyone is different and you really can’t generalize about what place is better or worse, because people’s tastes, interests, and logistics vary so widely.
Define nicer. To me housing affordability is a massive lever that drives quality of life. You can find a place for 300k in Austin (renovated) what would cost 1.5m in SF.
There isn’t a neighborhood in the entirde Austin metro where you can walk to all your daily needs. The summer heat is brutal and the winters are surprisingly chilly given how hot the summer is. You don’t have anything like the natural beauty of California at your doorstep.
For me though the walkability is the biggest thing. There’s not a single neighborhood in Austin that can compare to the quality of life in my “middle of the road” SF neighborhood. Miles of beautiful archictecture all around. My kids can and do walk everywhere.
It’s just a completely different experience, being in an actual pre-car city, and unfortunately there’s nothing like it in Texas.
Just left Austin for this exact reason. All the companies, except a few startups and exceptions are not in downtown. They are out in the boonies. Live downtown and you are looking at 2-3 hours of commute every day and traffic is gloriously terrible. The transportation system in Austin is none to speak of. The other thing that bugs me is none of these companies are actually in Austin. It's more like Round Rock. So, when people say Austin is a tech hub, it seems like play on marketing.
This is why I left for Minneapolis, I actually bought a condo in central downtown. I can walk and bike everywhere. I can take a train or bus at any given moment to everything I would ever need and there is something to be said when you are easily and casually attend any of the major 6 sporting leagues at a drop.
As for the tech and pay. I find it pays the same or actually more in my experience. Finding a job is easy. Most companies don't play that Leetcode game, some do, but most don't it seems. Tons of huge fortune companies that use modern tech and have interesting problems, including places like Target, big banks and tons of healthcare. There are hidden startups, if you look, hard, but many haven't even take VC are only 2-5 people right now and are bootstrapped and highly profitable.
If I ever decide to take that job at a big tech in SF I'll rent out my condo in central downtown, pack up my backup and take the light rail to the airport with my one way ticket.
I read an article (a month or so back) saying that Austin's great quirkiness was a fluke, of an economic downturn creating a transitory surplus of very cheap housing.
In that case, taxes and rent only would account for about a $50k difference at those numbers - not enough to make up the gap between Austin and SF if we're talking $200k and $300k, and I'd imagine $200k isn't as easy to hit in Austin as $300k+ in the Bay Area.
The difference is buying. A 300k house in Austin would be 1.5m in SF. Again, if you’re single and renting and ok with roommates SF makes sense, but if you’re buying 300k/year will not be enough to afford a 1.5m place (which probably won’t be renovated and in a bad location)
It is more than enough to buy - not sure what you're expectations are around buying here. Sure, it maybe possible to buy instantly in Austin, to my understanding in not as great neighborhoods if you want it cheaper, as I hear house prices have gone up there as well, but in 5-10 years of working at $300k+, it's very possible to buy in most of the Bay Area.
The benefit becomes compounded in the Bay Area if you have a spouse also working, and timelines accelerated.
Not if the best places are cash offers only. And cap on SALT taxes starting 2018 tax year means many high earners will not be able to deduct expensive property taxes and most income above and beyond their base salary.
300k is living with a roommate level IMO unless you’re just looking to buy a 1 bedroom and not have kids.
What the heck would you be spending $ on to be living with a non-significant other roommate necessarily at $300k?
This is extraordinary hyperbole that pretty much ignores what it’s really like in the Bay Area - many people making $100k or even less don’t even live with roommates here if they don’t want to. I make over $300k myself and the only reason I have a roommate is because she’s one of my best friends and I am helping her out while she’s early in her career.
There’s no need to put down another place just due to whatever biases, especially if there are few facts behind it. It’s ok to like where you’re at without going to extraordinary lengths to stretch it to everyone.
Saving up $100k/year towards ownership is just treading water; prices will easily rise that much on their own. This leaves another ~$70k/year to play with in your $300k salary. The marginal cost of living alone vs. with roommates is not insignificant in that context. So yes, if you are making $300k/year and serious about buying, it would be hard to justify renting an entire apartment.
Absolutely agree that you can afford to live alone if you do not particularly care about buying.
What? Yes TX has higher property taxes as % property value than CA but, again, if you’re buying a 300k place in Austin your annual property taxes are going to be <<< than the CA property taxes you pay on a typical 1.5m place + income tax in CA.
And because TX does not have income tax it also means for a 300k place your state and local taxes won’t hit the $10k limit for fed deductions which you will easily hit if you earn and have property in CA.
a 300k place in austin is not comparable to a 1.5m place in sf bay.
the 10k limit is irrelevant because most people will be in the 200k-500k AMT range where prop tax is not deductible anyway.
please compare apples to apples.
why picking on austin? it was just an example. wyoming has no income tax. you think living in jackson, WY is cheaper than cupertino? and that the reason is taxes???
Let’s not discount weather. As pg had said, places with bad weather can cut opportunities in half (paraphrased). Think about all the time you didn’t go out because of bad weather. Those are the times you didn’t bump across some founder or partner or VC or new job.
Also, there is huge cultural aspect that is much harder to articulate. If you are young, you can find lots of peers arriving in office on roller blades or playing video games on Friday or going for long drives in weekend. You might not find this in NYC or Seattle mature companies. People often change employers like cloths and that’s perhaps good for cultural because you continuesly encounter new ideas, opportunities and people. There is much less fear about not able to find job and that allows to take risk in working at startups at peanuts salaries. In most other places it would be hard to find folks who had more than 2-3 employers in 30 years and even more harder to find people taking pay cuts to get job at risky companies.
Yet another aspect is that either people don’t have kids or married couples both work in tech. Because of tremendous numbers of tech companies it’s easy to find tech jobs for spouses. Once you have double income in tech, housing cost is not huge deal.
But then the meaning of “want to leave” seems unclear. Of course everyone by definition wants to leave if there is somewhere else to go that is strictly better according to their personal preferences.
I think it’s but like say people “want to be healthy” but don’t want take action or compromise.
I think lot of people in sf feel the pressures of housing and homelessness, that potentially makes them want to leave, but they cannot find enough ways to justify why move to place x.
I had dinner with a co-founder of Hotmail who has spent years buying up lots of real estate in the Bay Area. They commented that less than 4% of property in San Francisco is owned by someone born in the city.
Don’t know how to fact check that but it would be fascinating if true.
This comes up time and time again. Here are a few reasons (whether they're real or perceived) 1) H1B transfer difficulty 2) Family nearby 3) Friends 4) Immigrant friendly culture 5) Velvet handcuffs
Commute times and rent control. I’d love to move to North Bay but I have to be in San Jose twice a week for meetings. We need better public transit and we could solve a portion of these problems.
Remote isn’t a panacea. I worked remotes for about 8 years and then went back to a traditional office environment when I had kids. I liked remote, but I enjoy the office more, and it has been much nicer for my family. It’s often difficult for little kids to understand when a parent is working from home, or for a spouse to emotionally accept that “just help me for a second” is enough to disrupt work.
In my life, having that separation so I’m physically gone when I’m not available and then fully present and available when I’m home has made everyone a lot happier.
Before you go telling me I needed an office space or a cowork, I did have an office space, and for a while I tried coworking. Once you’re going to a cowork —- well, to me it’s more fun to just go to a nice office with your actual coworkers than it is to rent a desk with a bunch of strangers.
I think this is a really key point to consider with remote. I'm fortunate enough that I have a dedicated office space in my house I can use for remote work, but even then there's occasional issues with my kids not really understanding the difference between working and being available to play. If I was in shared space, it would be a nightmare.
I agree, but quite a few people get lonely working remotely and not having a proper office to go into, and software won't solve that (at least not until VR presence or something of the sort is really good). I've managed great engineers who have complained about this and I haven't seen a good solution.
This is more and more of a myth, to the point where it rings outright false. Tons of people work remotely successfully and don't miss walking into an office building. Basic tooling and online presence suffice.
I'm happy with my current setup. I live about an hour away from a satellite office. I go in once or twice a week by train. It's enough to get me out of the house and keep my face fresh with my coworkers but not so much that it's a burden. I fly to HQ every month or two for similar reasons.
Sure. Have a look at Eve online as an example. You have communities of thousands of people (up to 20k). And the environment is quite close to the one of the current market for corporations. They also face spying, people not doing their fair share, etc.
They work together in a scarce and hostile environment and still build an inclusive culture that make people feel at home. To the point that your alliance is in a lot of way your family, at least as much as all these companies want.
The way they do that is through multiple channels, and the game itself helps ofc. But the main tool they use is always on vocal server. Teamspeak and Mumble are the incumbent there, with Discord being the new entrant.
The way it usually works is that people are always logged in these server the moment they are online. They stay online but go in an "AFK" channel if they went away for a break. Otherwise they will be in a shared "quiet" channel. Or in a "general" channel which is about talking with each other and having a shared space.
If you go do something, like play another game, organize a squad to do something specific, have a meeting, etc. Then you create a dedicated channel.
What happens is that you get people to share the space and feel a community mostly through the vocal channel.
You also usually have a forum for longer run things and "out of band" fun. And in general you also add a slack equivalent. Historically Jabber or Discord these days.
The only thing missing is a good whiteboarding experience, but i have high hope for VR there.
So yeah anyway, always on vocal is the thing most people miss that create that feeling of belonging.
Quite a few people hate working in traditional office environments too but remote only options are still relatively rare. There's room for both approaches and probably some hybrids too. For now it still seems to me that the demand for remote work from people who prefer it outstrips the supply of good remote friendly positions.
No no, I mean a coworking space just to get out and socialize with other knowledge workers. Doesn’t need to be geographically close to other coworkers.
I think so too.
The gold standard of productivity communication - slack, doesn't have voice clips, whatsapp doesn't have searching in voice clips, etc.
none of the messengers have screen sharing except for fb messenger.
Would be nice to see something that isnt very expensive and had the needed features.
I've been working on the logistics of this and it's pretty tough.
If everyone at your "semi off grid" live/work community works in tech, you have plenty of money but little free time, and end up bringing in most of the maintenance of the environment, which is expensive and alienating. It's much the same kind of way that it's unaffordable to live in SF if you're a janitor.
If you have some residents working in tech and the rest maintaining the built environment, it's uncomfortably landed-gentry-and-underclass-of-serfs, with people toiling the land.
The best model I've found is something like the East Wind Community, but you need a business model that is highly accessible to all potential residents, and an extremely high level of social cohesion, and I don't think tech fits the bill. You also have to live somewhere extremely remote in order to be able to afford the land to be self-sustaining in any significant degree. https://www.eastwindblog.co/
I'm interested to hear what other people think though. I think that the fact that we have so much of the space in cities set aside for office space is a little ludicrous.
I'd probably go the opposite direction of East Wind: not require people to buy into a philosophy or make any community commitments. My biggest goal would be to use group buying power to buy good land and put in a sizeable well, some very minimal facilities (shower/ restrooms/septic), etc. Maybe a few RV pads.
I've actually got some land in the desert and spent some time working out of a camper. If anyone's ever interested in chatting about future plans, I'm always down to collaborate. Kind of a long term thing that's always on my mind.
I mean that already exists, it's basically just an RV park, right? Without the philosophical bent and off-grid aspects, you can already find those things. I spent a big chunk of my childhood bumming around the country on vacation in an RV, and I think that's ultimately the source of my wanderlust, but it doesn't really build a community for the longer term.
There are similarities. It would be more spread out and have far fewer residents than an RV park. People could build what they want (tiny homes, earthbag houses, etc). It would also be more of a co-op compared to a commercial RV park. RV parks cost millions to build, this would be more than an order of magnitude cheaper.
I've spent time in RV parks too, I like them. Even the crappiest ones are ~$450/mo in California though.
I bought my 5 acres for a few thousand dollars. If you're able to pull it off, you can live insanely cheap. It's more about hacking cost-of-living than creating a cohesive community. My biggest issue with living in the desert was going it alone - if I had a group of 10 people who had a vested interest in the project, it would have been more enjoyable.
These are all just random thoughts though - maybe at some point I'll look into it more seriously.
I'm chuckling because you're right on the same path I was, though I never bought any land.
I think you're dead on when you say "a group of 10 people", and that's where you have to get into building community dynamics, even for a group of hermits :)
you're probably right about that being a number where things start getting more complicated. Starting with 5 people might make even more sense, and add members later to raise additional funds.
I have read about off-gridders who live in the middle-of-nowhere in Southern California near the Mexico border because it's possible to live on next to nothing. Like they support themselves on as little as $600/month (or did, whenever the piece in question was written). They also do stupid stuff like reclaim ordinance as a means to make money and sometimes get blown up that way.
It's possible this was mentioned in the book "Salt Dreams," a book about water issues in Southern California. But I couldn't swear to that.
At least from the talent side, everything I see seems to say the opposite. I see startups in Philly and other cities struggle to retain any kind of talented employee, losing engineers to the west coast companies and business side to everywhere else. We even had a senior marketing employer leave for a brewery because apparently even a local brewery is more competitive compared to VC funding.
I like the contrarian attitude and I believe it's somewhat true, but hard to reconcile what I see on the ground.
The VCs love the cheap talent narrative but it rings hollow.
Its interesting that he mentions short job tenures. I always thought it was weird how common job hopping is in the Bay Area, I thought job-hopping employees was perhaps a good thing rather than a problem. It does mean its easier to build a team.
I don’t even see how it’s a realistic place to start out as a new college grad anymore either. If you don’t have a friend in a rent-controlled multi-bedroom house who can let you move into an open room, you’re unlikely to find rent for a decent price. A crappy house costs about a million here. If you have that kind of money, why not just buy something in cash somewhere else or just move to another city like Seattle or Denver or Austin where you can make 80% of the income for a fraction of the cost of living and taxes? I don’t think the differential income really makes up for the cost of living, taxes, or quality of life.
We absolutely have to be approaching or beyond the breaking point where it stops making sense for a lot of new college grads to want to move here. I have a friend who just started at Google but lives 3+ hours away... that’s crazy. Once workers stop wanting to live in the Bay Area, tech companies will have to shift hiring (even more) than they already have. I know at the company I work for they have been pushing more new hires to Austin.
I wish he shared more reasoning in why he decided in 2017 being the pivotal year. I mostly agree with 2017 being a bad year for the bay area startup as that was the period where a lot of the top startups like airbnb, uber, and theranos were getting significant negative outlooks, and probably some others that I have forgotten about.
I think it basically became the year when the "norm" for talent in SF Bay Area was 1) work at a FAANG or 2) work at a late stage private co (like Uber).
Working at an early stage startup was already risky, but the opportunity cost sort of peaked around then and remains high.
Unless the opportunity cost noticeably drops (i.e. a massive recession that causes a 50%+ drop in public stock market) I think smaller startups will thrive in places like NYC more so than SF.
Larger companies have an inherent sales and marketing advantage due to brand size. If 20 engineers at a small startup develop a product and 20 engineers at some big co develop a similar product the latter will generally outsell the former. The big can consequently also pay its engineers more since it is able to make more money from the fruits of their labor.
This conversation seems to take place toward the end of every "wave of innovation" I've seen in the bay area and I'm sure it took place long before I got here in '97. There's nothing to suggest to me that things are any different this time around. I'll be looking forward to the next one.
Though the point it more about funding and founders, seems like a salient point for developers too.
You can learn a lot, really fast, and with very long odds maybe get a nice reward in the Bay Area.
Or you can choose a slightly more boring path with a startup almost anywhere else with a normal 9-5 schedule, pretty good pay, and a low cost of living.
Quality of life is likely better in most other cities as well, the only downside being concentrated tech talent in Bay Area.
Unless you're working at one of the mega companies, how much of a benefit is it really for developers to live there?
Actually it’s simple. the people who come to san francisco now vs when i came here is totally different. i’m happy to have all these pretty people but their ability to network into opportunities is the major reason why none of those opportunities fail.
I see that myself. And I mean this as absolutely no offense to anyone in the area. I've met incredibly intelligent people there, among the best. Though, I believe the very best are distributed throughout the world, and command the ability not to move.
All that said, first, well, the silicon part is all but gone. I find the signal to noise ratio pretty low. For every 10x developer, there are 50 people who did a bootcamp and/or moved for the easy jobs. Salaries are high because the cost of living is on the breaking point. People complain about the area because of high taxes, high cost of living, and of course the homeless epidemic. And to top it off, everyone who can seems to leave the area when they get the chance.
Again, I mean no offense, I think it's a nice area on the whole. But if I were in need of a lot of good engineers today, I'd first offer remote only. If I needed collaboration or a lot of people in one area, I'd look to New York or Northern Virginia before the bay area.
That is only one aspect and I think a minor one. What made silicon valley is access to capital, proximity to stanford and a feedback loop of successful entrepreneurs using their experience to create the next generation of successful entrepreneurs
I actually feel like a MAJOR factor is the way in California non-compete clauses are largely non-enforceable. This allows the top performers to cycle out of an organization when it stagnates and greatly increases the velocity of innovation.
I wonder why Boston hasn't risen further, with Harvard and MIT both at their doorstep along with a lot of other really great universities and good companies.
There are lots of places with a wealth of well educated talent and poor to non-existent amount of startups coming from there. Access to capital is probably the largest factor.
Boston is doing pretty well and many things started in Boston such as YC, Facebook, Dropbox, etc. Boston is small and already expensive. Plus the weather. I also think it doesn't have a lot to offer for single people. It has much more to offer for families.
Boston is also more diverse in terms of opportunities. If you're a researcher or biologist let's say, you are more likely to find a good job in Boston than SF.
Stanford was unique in the aspect of students being encouraged to take their research and make companies out of it. The vast majority of universities are not as selfless.
Ashburn, Tysons, Reston, Sterling, McLean. Where the original kings of the internet existed. The area is full of talent, though not as flashy as the bay area.
Austin rent has gone through the roof, and they’ve got a strong nimby and zoning problem just like SF so it’s just going to get worse. It’s on the exact same track, just ten or so years behind.
Austin doesn't have Prop 13, and Texas imposes reasonable property taxes. Unless those things change, it's HIGHLY unlikely real estate in Austin will approach The Bay area in terms of prices.
There's a lot more to it than that. Innovation can happen anywhere. But the combination of human and financial capital, there is probably no where better.
If you start a company outside the Bay area, you're at a disadvantage there. You'd better find enough other advantages and leverage them to get on a level with that. If your company needs venture funding, you'd probably be crazy to start it anywhere else still. Most don't.
Sam just realizing this in 2019 is a testament to how insulated the millionaire VC class is from the everyday struggles of the of the middle and lower classes.
This is something everyone in my circles have been talking about for 5+ years, it's not a particularly novel take in 2019.
My friends and I have also been saying the same thing since 2013 and boy do people love to bury their heads in the sand. Controversy aside, people called Thiel nuts for moving out of that area
I just spent the week in San Jose and I marveled at the ocean of vacant office space. I find it hard to believe that Sam is only now coming to this conclusion.
> There are still some things—e.g great startup executive talent, particular kinds of engineering talent—that are much harder to find outside the bay area.
This is spot on and it becomes a real bottle neck if you want to scale your startup beyond $500MM valuation.
Obviously you often can’t choose if you want to be a $100M startup or a billion dollar startup, and by the time you’ve passed the $100M mark it can be too late to refocus on the Bay Area and you might lose momentum by dealing with all kinds of things that shouldn’t matter.
We’ve run into serious talent recruiting issues when we reached this stage and we “solved” it by opening offices in SF and Mtn View. But it was not ideal and a huge waste of money/time.