Sep 6, 2018

Costs and competition make Silicon Valley less of a must for startups

A U.S. Coast Guard boat passes in front of the San Francisco Skyline on June 20, 2018 in Oakland, California. Photo: Justin Sullivan/Getty Images

Investors haven't totally lost their infatuation with Silicon Valley as the heart of tech innovation, but skyrocketing costs of living and competition for talent have definitely cooled the affair, according to several speakers at TechCrunch's Disrupt conference on Wednesday.

Why it matters: As technology and engineering jobs have spread into other industries and locations, more startup founders are questioning whether they need to be in Silicon Valley, though many still acknowledge the region's unique strengths.

The Bay Area’s cost of living and intense competition for employees have become unsustainable, said some investors.

  • "I used to believe that if you wanted to build a multi-billion dollar company… you have to be here,” said Benchmark managing partner Sarah Tavel. “I’ve stopped giving that speech — it’s amazing how you have to compete for talent here,” she added, especially with deep-pocketed companies like Facebook and Google.
  • Cowboy Ventures co-founder Aileen Lee and Spark Capital managing partner Megan Quinn said they increasingly have conversations with their portfolio companies about opening offices outside of the Bay Area, especially in cities within a short flight and with a good university, as Quinn added.
  • Yi Wang, co-founder and CEO of Chinese language app LingoChamp and a former employee at Google’s Silicon Valley headquarters, also pointed out the Bay Area’s rising costs during a separate panel. There’s now a growing number of Chinese engineers who decide to go back to China found startups instead of staying around Silicon Valley, he said.

But, but, but: While finding talented employees and engineers is no longer limited to Silicon Valley, the region remains unique in some ways.

  • “I do still believe that if you want to reach escape velocity, you need people who have been there before,” said Tavel, echoing a common sentiment that experienced startup executives remain scarce and can best be found in Silicon Valley.
  • Wang said he believes the region is still the center of innovation for many important technologies.

Go deeper

Tech can't remember what to do in a down market

Illustration: Rebecca Zisser/Axios

Wall Street's two-day-old coronavirus crash is a wakeup alarm for Silicon Valley.

The big picture: Tech has been booming for so long the industry barely remembers what a down market feels like — and most companies are ill-prepared for one.

Brace yourself for a coronavirus outbreak

Illustration: Aïda Amer/Axios

Public-health officials’ warnings about the coronavirus are sounding increasingly urgent, with one top CDC official asking the public yesterday "to prepare for the expectation that this might be bad."

Reality check: Other administration officials, including President Trump himself, were more subdued in their assessments. But underneath those tonal differences, the reality of the coronavirus is the same: It spreads quickly, and has already spread to many countries, making it likely to start spreading here, too.

Go deeperArrow50 mins ago - Health

Exclusive: Pro-Trump group plans post-Super Tuesday blitz on Democrats

Democratic presidential hopefuls take the debate stage in South Carolina. Photo: Logan Cyrus/AFP via Getty Images

Pro-Trump super PAC America First Action is preparing to unleash a series of targeted, swing-state attacks on the Democrats most likely to face President Trump after Super Tuesday, people familiar with the group's plans tell me in an exclusive preview of its strategy.

The state of play: The group has been tracking favorable/unfavorable ratings in Florida, Georgia, Michigan, North Carolina, Ohio and Pennsylvania for 2020 candidates Joe Biden, Bernie Sanders, Elizabeth Warren, Pete Buttigieg and Michael Bloomberg — under the theory that if Trump wins each of these six states he would win re-election.