Is Silicon Valley’s Time in the Sun Over?
By: Dylan Hughes
Tags: Investing, Business, Technology, Economics, Silicon Valley

Silicon Valley, the home of tech giants Facebook, Apple, Google, and more, located in San Francisco’s southern Bay Area, is undergoing a change from which it may never recover.

In August, the Wall Street Journal did a deep dive on the mass exodus of employees from Silicon Valley. With the global pandemic forcing employees to work from home and San Francisco hit particularly hard with government-enforced shutdowns, companies gave their workforce permission to skip on the area’s crazy-high cost of living and work from other places in the country.

Facebook and Google allowed employees to move away through the summer of 2021, allowing them to sign one-year leases elsewhere, before returning to their California HQs. This benefitted cities all over the country including Phoenix, Las Vegas, and Austin.

The Silicon Valley exodus is just a small piece of the pie, though: California as a whole is losing net residents on an annual basis. Political mismanagement has given upper-middle-class citizens, which most if not all Silicon Valley workers would fall into, plenty of justification to leave.

Per the prior-linked WSJ story, 40% of Facebook’s staff said it would be interested in permanent remote work in a May 2020 survey. Hired, a job search marketplace, conducted its own survey of 371 Silicon Valley workers. If asked by their employers to work remotely full-time, 42% would move to a less expensive city.

These numbers speak volumes — a good chunk of tech workers are living in the Bay Area because they have to, not because they want to.

This brings up an interesting question: if tech workers want to leave the state, why shouldn’t their employers come with them?

Well, some of them are.

Oracle recently announced it was moving from Redwood Shores, California to Austin, Texas. Hewlett Packard Enterprise, a spinoff of Hewlett-Packard, announced a move from San Jose, California to Spring, Texas — just outside of Houston.

HP’s founders, Bill Hewlett and David Packard, are credited with beginning the creation of Silicon Valley while working on their company in Palo Alto.

Tesla and SpaceX founder Elon Musk as well as Dropbox CEO Drew Houston have recently announced that they are personally moving from Cali to Austin — perhaps paving the way for their companies in the future.

According to census data, 12.5% of those that left California in 2019 went to Texas, which is more than any other state. Why are all of these companies and executives choosing Texas, though?

Texas politicians have been trying to woo California-based companies for years now, using no state income tax and lower costs of living as a bargaining chip. With remote work proving to work and workers wanting out of California, we may see a continued Silicon Valley exodus even after the coronavirus is under control.

Texas isn’t the only beneficiary, though.

While the vast majority of venture capitalists are located in California, New York, and Boston, some are trying to buck that trend. Some cities are giving themselves their own monikers to try to attract companies: Denver/Boulder, Colorado is “Silicon Mountain,” Dallas/Austin, Texas is “Silicon Praire,” Atlanta, Georgia is “Silicon Peach,” and Salt Lake City, Utah is “Silicon Slopes.”

Some of the more popular destinations, like Austin, may eventually hold the majority of tech companies if this trend out of the Bay Area continues. With remote work proving to be successful, though, companies may turn to a variety of different cities. There are plenty of other cities around the country offering a relatively low cost of living and plenty outside-of-work fun to attract companies and their employees.

Either way, Silicon Valley is slowly crumbling before our eyes. It may never completely go away, but it is hard to imagine it being regarded as the “tech hub of the world” for much longer.