Data Sheet—Tuesday, August 30, 2016


There’s a Silicon Valley backlash bubbling up. Not against the idea of Silicon Valley or what it represents, but against the actual geographic location.

Startups Try to Spread Outside of Silicon Valley,” the Wall Street Journal reports. “Tech Workers Are Increasingly Looking to Leave Silicon Valley,” Quartz writes. “The Case for Working in Silicon Valley and Living in the Rust Belt,” Bloomberg argues. “Bay Area Startups Find Low-Cost Outposts in Arizona,” The New York Times reports.

The clear reason is the out-of-control cost of living in the Bay Area. The average home price in Palo Alto, Calif., has doubled between 2011 and 2016, according to Zillow. A dilapidated 93-year-old home with no heating just sold for $4.5 million! (“This is your 10,000 Sq Ft opportunity to create your very own ‘dream home’ in the heart of Silicon Valley,” the listing gushes.)

At a certain point, the cost of doing business in the Bay Area negates the benefits of Silicon Valley’s capital availability, expertise, support system, and talent pool. Startups are coming around to that reality.

On Monday a VentureBeat columnist predicted that the Midwest will have more startups than Silicon Valley in five years. Non-Valley startups have been cheerleading for their budding ecosystems in Austin, Denver, Boston, Chicago, Seattle, Los Angeles, New York, and St. Louis for years. Along the way, each city has experienced its share of hype victims, unsung heroes, big exits, and big meltdowns.

Despite their low-cost allure, these up-and-coming startup cities have a way to go to catch up with the Valley: By my count, 57 of the world’s 174 privately held billion-dollar startup “unicorns” are based in the Bay Area. I think it’ll take more than five years for a Midwestern city to rival that feat. But if Palo Alto housing prices double again in that time, cities like Columbus, Ohio, or Ann Arbor, Mich., may not have to build their unicorns from scratch—enough may flee the Valley on their own.

Erin Griffith is a senior writer at Fortune. Reach her via email. Share this essay:


EU wallops Apple with $14.5 billion in back taxes. The trading block alleges that illegal breaks in Ireland enabled the tech giant to get away with paying just 1% on its European profits between 2003 and 2014.

The fine was actually brought by the EU's antitrust watchdog, because Margrethe Vestager believes deals like the one Apple had in Ireland have made it more difficult for local companies to compete. Investigations of several other similar deals are under way, including one between Luxembourg and Amazon. Plus, you can definitely expect Apple and Ireland to appeal. (Fortune)


IT spending will mushroom to $2.7 trillion. Despite a decline in big-ticket hardware sales, research firm International Data Corp. projects a 12.5% increase in spending on mobile technologies, analytics software, and cloud services by 2020. The three biggest spenders: manufacturers, telecos, and financial services firms. (Fortune)

VMware takes another swing at cloud strategy. The company's new approach centers on its new offering due in the third quarter called Cloud Foundation, which is a service that helps businesses move applications between internal data centers and cloud computing services, such as those offered by Amazon Web Services and Microsoft. Its first big partner for the initiative is IBM. (Fortune)

Post-buyout Dell will prioritize "private" clouds. Michael Dell believes many companies will assemble their own cloud services within their own data centers, rather than using public offerings from Amazon, Microsoft, or Google. He wants Dell Technologies (as the post-merger company will be known) to be the leader in supplying the servers and storage hardware for those "private clouds." He remarks came during a speech Monday at VMware's customer conference. Dell's $60 billion acquisition of EMC should be complete within a matter of weeks, if not sooner. (Wall Street Journal)

Uber-Alphabet rivalry intensifies. David Drummond, the senior vice president of corporate development and chief legal officer for Google's parent company, resigned his Uber board position after being barred from meetings. The reason? Conflicts of interests, including the two companies' competing agendas for self-driving cars. (Fortune, New York Times)

And now, the Apple speculation will achieve overdrive. The tech giant's next big product launch is officially scheduled for Sept. 7 in San Francisco. You can anticipate details on the iPhone 7 and maybe early hints about a new iPad (meant for businesses) and a MacBook notebook overhaul. (Fortune, Bloomberg)

Fitbit revamps fitness trackers. It introduced two new models, including the $150 Charge 2, which updates the best-selling devices on the market. (Fortune)

Cybersecurity firm raises $50 million after postponed IPO. The new round for LogRhythm, which led by Riverwood Capital, raises total funding for the company to $120 million. The company, which sells intrusion detection technologies, had hoped to go public in the second half of last year. (Reuters)


Why Getting Rid of Human Editors Won't Solve Facebook's Bias Problem, by Mathew Ingram

How Alphabet's Nest Helps Utilities Cope With Summer Heat Waves,
by Katie Fehrenbacher

Startup Glint Uses Artificial Intelligence to Tell What Your Employees Think, by Heather Clancy

What Obama's New Proposal Would Mean for Immigrant Entrepreneursby Jeremy Quittner

Meet the Couple Who Paid $815K for a Rare Apple I Computer, by Don Reisinger


Mark Zuckerberg meets the Pope. The Facebook CEO's gift to the pontiff? A solar-powered drone that could bring Internet connectivity to developing countries. (Fortune)

This edition of Data Sheet was curated by Heather Clancy.

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