- While some tech elites are moving out of Silicon Valley as they rethink the area’s costs, political climate, and other issues, the supposed mass exodus will fail to materialize in 2021, several VCs say.
- The San Francisco Bay Area will remain the global capital of entrepreneurship because no other region has the same potent mix of talent, nearby feeder schools, and large potential business customers.
- “Many companies will be able to grow to 100 people in Miami, Austin, et cetera, but will fail to scale their businesses as they fail to find team leaders and experienced execs,” said tech investor Zal Bilimoria.
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In San Francisco, idle cable cars, rents in free fall, and “for lease” signs on bars tell a story of a city on the decline. But the supposed permanent exodus of tech talent out of the region has been way overblown, startup insiders say.
We won’t know how many people left the Bay Area until after the release of the 2020 census data. But some of the loudest defectors so far are rich, politically conservative venture capitalists who say they’ve had enough of the area’s grime, commutes, and liberal politics, and are moving away to sunny tax havens.
Yet, the tech industry’s builders — its visionaries, product wizards, and growth hackers — are here to stay, other VCs say.
By summer, the mass availability of coronavirus vaccines will encourage millennials and Gen Z employees to “rush back” to tech supercities like San Francisco, New York, Boston, and Los Angeles, said Zal Bilimoria, founder of Refactor Capital.
“Investors and founders caught up on Twitter today in the Miami and Austin debates will quickly remember next summer why those four metros historically account for 90%-plus of startups formed and capital raised,” he said.
That’s because the San Francisco Bay Area has lots going for it: all the things that helped it become the center of the startup world to begin with are still in play, he said.
This includes a concentration of highly educated talent, feeder schools, and large businesses that can serve as investors, customers, and training grounds for job candidates for startups, particularly managers.
“Many companies will be able to grow to 100 people in Miami, Austin, et cetera, but will fail to scale their businesses as they fail to find team leaders and experienced execs,” said Bilimoria, who lives in a suburb of San Francisco.
That’s why many companies will want to stay in tech’s heartland to stay plugged into that eco-system. But their employees will have other reasons to stay.
“San Francisco and Silicon Valley will continue to be at the center of global technology innovation — but it will look different in years to come,” said Pete Flint, the cofounder of Trulia and a general partner at NFX
In 2021, cities will go from “being a place people live to be near work, to being a place where people live to socialize,” said Flint, whose firm has offices in San Francisco, Palo Alto, and Tel Aviv, Israel.
He predicts that more office workers will want to work from home but not full-time, so they will settle in the suburbs or other commutable distances and come in to the office less often for face-time with coworkers and others.
Sam Altman, who ran startup factory Y Combinator, added that Zoom is no substitute for in-person interactions. His advice to aspiring founders is to move to the Bay Area “to have the biggest possible impact in tech,” he tweeted.
“The people here, and the network effects caused by that, are worth it. It’s hard to overstate the magic of lots of competent, optimistic people in one place,” Altman said in a tweet thread on Wednesday. He expects many of the “most important US companies” built in the next decade to set up shop within 50 miles of San Francisco, he said.
Other cities have tried to woo tech dollars and founders en mass during the pandemic and are working on making changes to make themselves more attractive to such residents.
When some startup investors tweeted at the mayor of Miami saying the state needs to ban non-compete agreements in order for tech to thrive there, the mayor responded that he would talk to state legislators about taking action.
Keith Rabois, a general partner at Founders Fund who recently moved to Miami, said on Twitter that he’s working to bring coding classes to Miami’s public schools, adding, “The parents in Silicon Valley will move here asap.”
Still, Ravi Mhatre, a founding partner of Lightspeed Venture Partners, said no other region has the same tranche of talent, “technical creativity,” or “depth of experience” to rival Silicon Valley as the global capital for entrepreneurs.
“It means for some long period of time, Silicon Valley will continue to be a center of the kind of highly creative technology-activity that can lead to these sort of unanticipated outlier-types of companies and ideas,” he said.