The Silicon Valley Backlash

August 30, 2016, 12:30 PM UTC
Morning view of silicon valley
View of silicon valley after sunrise and water in distance.
Frank Chen — Getty Images

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 amount of 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.

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