Silicon Valley’s prices from Mountain View to Market Street have become unbearable, spreading the seeds of talented startup ecosystems across the western United States
They want to wake up in a city where they can get some sleep. The Guardian’s headline sounds as ominous as it does pretentious: “Scraping by on six figures? Tech workers feel poor in Silicon Valley’s wealth bubble.” San Francisco and other Bay Area cities stubbornly hold onto the bulk of the world’s venture capital and command an unreachable lead in startup population and the headquarters of high-paying companies like Google, Facebook, and Uber. People from across the US, increasingly from across the globe, have moved to the region to open up second offices, find new work opportunities, or because their current investors wanted them to relocate.
The Guardian article highlighted the stark reality that Silicon Valley salaries are giving people enough money to live a basic life in the area, not so much to profit from their careers, with little opportunity to save or buy a home.
It’s been a socioeconomic disaster for some. Not everyone makes it in the big city. That trope is as true today as it was for people moving to New York in the first half of the 20th century. For every Kansas-born Clark Kent who nails down a steady reporting job at Metropolis’s Daily Planet, there are ten other would-be fearless reporters who can’t make ends-meet. And even for Clark Kent nowadays, the cost of living can be prohibitive and force you to move to the economically troubled neighborhoods of Gotham City.
That is the story of today’s Silicon Valley, except those other options aren’t like Gotham. They’re thriving. The high cost of living is driving some of the best engineers in the world, even those educated nearby in ecosystem landmarks like Stanford University, to leave for other growing cities on Pacific coast and the Midwest.
“For the first time since 2011, net domestic migration in Silicon Valley was negative, meaning that more Silicon Valley residents left the region for other parts of the US than arrived from other parts of the US,” says the Silicon Valley Competitiveness and Innovation Project, which evaluates the state of Silicon Valley’s own startup ecosystem and points to weak points in the local economy. The report goes on to say that the region’s positive net migration isn’t because of Americans moving in, but visa holders, indicating American tech workers might be exhausted by the city.
Tech workers in the valley are turning to Hacker News forums for suggestions on where to go. CEO Mehul Patel of Hired.com, a Bay Area HR startup, told Bloomberg recently that top software engineers and developers had every reason to look for greener, more affordable pastures.
“They’ve become tech hubs in their own right in a way that they weren’t three to five years ago. It’s a lower cost of living, high quality of life and a great tech ecosystem there.”
There are a few tools that compare salaries and the cost of living across the United States according to city. In this case, we are going to use Salary.com’s analysis to compare San Francisco to each of the cities on this list, calculating at an average salary of $80,000 (a very arbitrary mean between the salaries of highly paid software engineers and lower-paid account and content managers, two different but common positions in Silicon Valley).
Reducing this list down to 10 places benefiting from the Silicon Valley exodus by no means precludes plenty of other towns taking in top talent, but these 10 are seeing explosive change because of the peak cost of living in the San Francisco Bay Area.
1. Portland, Oregon
Cost of living compared to San Francisco: -31.8% ($54,548 maintains SF standard of living)
Typical Salary at Work compared to SF: -16.6% ($66,749)
Disposable income net change: $12,202
“When you look elsewhere, the cost of living is totally different,” Automation Resources Group CEO David Nichols, who moved his company from San Francisco to Portland, told Bloomberg in 2016. “We bought a beautiful Craftsman home in an awesome neighborhood and that just would not have been possible in San Francisco.”
A recent study pointed out that the bulk of Portland’s newest arrivals were aged 25-34 and more than half of those with a college degree had studied medicine, technology, or natural sciences, according to the Oregon Office of Economic Analysis. It’s also one of the closest cities to San Francisco, with a reputation for being the biggest city in a sparse region.
With top schools like Oregon Health and Science University in the city and companies such as Intel and Google opening offices to catch some of that fleeting talent, the city is rising.
“It doesn’t surprise me. I think that Portland’s really attractive to people in the STEM field, “Dominic Moore, president of HR company Flux Resources, told the Oregonian. “You’ve got OHSU, you’ve got Intel, you’ve got a vibrant incubating tech community here.”
2. Austin, Texas
Cost of living compared to San Francisco: 43.1% lower ($45,538 for same standard of living)
Typical Salary at Work compared to SF: 21.8% lower ($62,521)
Disposable income net change: $16,983
Austin gets more attention than any other city in Texas for good reason: it’s the 14th best startup ecosystem in the world according to the 2015 rankings published by Compass. The city is second only to Silicon Valley in terms of previous startup experience and 5th in the world for access to talent. When the report was published, the city and its environs was home to somewhere between 1,600 and 2,200 startups.
Looked at another way, the Austin Chamber of Commerce counts over 5,400 technology companies, with $911 million exchanged across 151 deals in 2015. The city is home to 46 incubators, accelerators, marker spaces and co-working spaces.
“It’s increasingly difficult for seed-stage funded startups to compete with tech giants like Google and Facebook for the best talent in Silicon Valley,” Tom Hadfield, CEO at Message.io, told CNBC last year. “The lack of affordable housing and the cost-of-living crisis in Silicon Valley makes it prohibitively expensive for anyone except the most affluent to own a home.”
Austin startup growth rate is 81.23% in 2016 according to the Kauffman Growth Entrepreneurship Index, third in the US behind Silicon Valley and Washington D.C. It has the potential to grow further and is a perfect place to go to both save money and hone talent.
3. Dallas, Texas
Cost of living compared to San Francisco: -37.4% ($50,068 for same standard of living)
Typical Salary at Work compared to SF: -19.9% ($64,103)
Disposable income net change: $14,035
All of Texas is an option when leaving the San Francisco Bay Area.
“Between 2009 and 2012, as the recession was winding down and the second tech boom was revving up, the region lost about 1,430 households to Texas, and nearly $390 million in taxable income,” says Joaquin Palomino of the San Francisco Chronicle. Those movers aren’t just landing in Austin, but all the Texan metros. Dallas and Ft. Worth are favorite search targets for people researching new homesteads, 7th according to one list.
It’s hard to argue with the allure of one of the biggest cities in the country. With four major sports teams there is always a game to go see (even the high school football is a past time here). But the prices of operating a business are also unbeatable.
“Here I can get three developers for the price of one in San Francisco, because it’s so expensive to live and work in those kinds of cities, you have to pay workers more, and that means you have less [funding] left over,” Aireal founder Kevin Hart claimed to the US Chamber of Commerce. “You can accomplish whatever you want if you have the right amount of hustle, and because Dallas is cheaper than a lot of other startup cities, with less competition, you can hustle your way to success faster and quicker here.”
4. Phoenix, Arizona
Cost of living compared to San Francisco: -25.9% ($59,274 maintains SF standard of living)
Typical Salary at Work compared to SF: -19.7% ($64,257)
Disposable income net change: $4,984
Arizona has plenty of urban centers, but Phoenix is by far the largest and grabbing the most new arrivals. It’s considered close to Cali, and has attracted entrepreneurs like Daehee Park & JT Marino, the founders of Tuft & Needle.
“In cities that have less tech and density—ahem, Phoenix—journalists are eager for tech and business stories. We can make a phone call and land meetings. The same goes for politicians, city leaders, other business figures, investors, heck, even the mayor. People want Phoenix-based businesses to succeed, and they aren’t inundated with countless other people vying for their time,” Park and Marino write. They add the cost of doing business totally blows the Valley away.
“For the price of a beautiful home here in Arizona, you’d live in a cardboard box essentially up in Silicon Valley,” Steven G. Zylstra, president and CEO of the Arizona Technology Council (ATC), told the Arizona Republic last year. The ATC knows Phoenix has more comfortable environs than San Fran, and that is helping them bring people to the desert. “You have a lot of California companies in general leading an exodus including in the tech sector.”
5. Oklahoma City, Oklahoma
Cost of living compared to San Francisco: -44.4% ($44,505 maintains SF standard of living)
Typical Salary at Work compared to SF: -21.6% ($62,684)
Disposable income net change: $18,180
The look on your face might mirror the shock basketball fans had when the Seattle Sonics moved there a decade ago, but Oklahoma has slowly but surely overcome the idea it is the quintessential flyover state.
“We don’t believe in raising a lot of cash early on and then throwing all that money at the problem of not having a business model until somehow everything starts to work.” says Tailwind Founder and CEO Danny Maloney, who moved out to OKC to launch the business. He had to fight back against investor doubts about their location before getting funding. He did just that. “They said we had to prove it to them we could be successful from here.”
CityLab ranks OKC 4th among most affordable housing markets and NerdWallet places it 9th for job seekers. The city is also experiencing positive net migration helped along by former residents like Pat Fitzgerald moving back to the city after long careers in California working for companies like Apple. Now he is helping to build up the local technology ecosystem with coding courses and mentoring as the founder of Pie In The Sky Oklahoma.
“There are opportunities in Oklahoma that if they had been here before, I wouldn’t have left,” Fitzgerald told local non-profit business center i2e. “Whether you want to be in health care or aerospace, engineering or a tech start up, you can do it.”
6. Seattle, Washington
Cost of living compared to San Francisco: -26.9% ($58,486 to maintain standard of living)
Typical Salary at Work compared to SF: -12.4% ($70,090)
Disposable income net change: $11,604
As the center of Microsoft and Amazon, you would think that Seattle has its own overflow of housing demands, but the city has taken a backseat to Frisco for years. Growth has been steady over that period of time, and with the exception of the Mariners, people seem to be making it in the city with a more acceptable cost of living. And Seattle is no slouch. It ranked 8th in the world for top startup ecosystem in the 2015 Compass report, including 3rd in startup experience and 4th in talent.
“From a competitive and talent availability perspective, Seattle is definitely winning,” Victor Wong, CEO of adtech company Thunder, told Quartz. “We had to go from having a satellite office to it being an equal.”
And it’s not just the lowly tech worker who is leaving. The companies and investors are moving around, too. The city also saw 100% growth in venture capital investments from 2013 to 2015 according to Compass. Lyft set up a new engineering team in Seattle at the end of 2015 rather than expand in the Bay Area, then saying it would hire 60 new engineers by the end of 2016.
“We’ve seen that there’s more interest now than before for people in the Bay Area to move out,” Tara Sinclair, chief economist of Indeed, told SF Gate. “One thing that really surprised me is how focused job seekers are on a very small number of cities in the US. Seattle is one of those cities.”
7. San Diego, California
Cost of living compared to San Francisco: -14.7% ($68,234 maintains SF standard of living)
Typical Salary at Work compared to SF: -14% ($68,831)
Disposable income net change: $598
We might be talking about the Chargers’ big mistake in the next few years, because they might be able to miss out on a massive boom. San Diego has always been an afterthought to Los Angeles and San Francisco, but the city already has a share of engineers and is always on the minds of Californians looking to balance the need to live in the city with the realism of paying for it.
Salary.com’s numbers reflect a lot of similarity between the two ecosystems, but many companies are making the move down south and reporting it has saved them money running their businesses.
“Our rapid momentum was eventually slowed by San Francisco’s saturation, which prevented us from securing the A-players we needed to continue trending upward. Plus, the thought of signing a five- or 10-year lease was less than ideal,” Andrew Gazdecki of BizApps wrote in TechCrunch in March 2016. In a somewhat counter-intuitive argument, Gazdecki says that there is less pressure to have major VC backing in San Diego, which can undercut your reputation attracting talent.
“Being funded by bigshot partners like Sequoia and Accell is attractive to top candidates. By moving, we can focus on continuing to build out sustainable operations and bring on people who will help us do that, venture or no venture.”
San Diego’s ecosystem leaders recognize the inevitability that some of their locally educated engineers are going to go to San Francisco. They have taken to a strategy more akin to a feint on the battlefield: let them go, then grab them later.
“How do we stop all of our grads from getting on the first plane and going to Silicon Valley?,” Mike Krenn, president of the San Diego Venture Group rhetorically asked the San Diego Union Tribune in 2016, explaining SD is banking on the inevitable exhaustion or lack of options some San Diegans will encounter up in the Valley.
“These kids are 21 years old; there’s too many public companies up in the Valley; there’s more than 1,000 venture-backed companies; they’re going to go. They’re going to go chase that dream.”
That resembles the notion that for smaller ecosystems to grow and achieve exits, successful founders have to recruit top money and attention in San Francisco if they will have any hope of building their own angel investment scenes and thus a new generation of startup companies.
“If you want access to great talent and big investors, you need to be in a big ecosystem because small ecosystems won’t attract those people,” JF Gauthier explained in a special report on the Waterloo ecosystem back in 2015. They live in Toronto, New York and SV. Bigger is better.”
8. Salt Lake City (Silicon Slopes)
Cost of living compared to San Francisco: -49.1% ($40,714 maintains SF standard of living)
Typical Salary at Work compared to SF: -21.6% ($62,735)
Disposable income net change: $22,022
Salt Lake and Utah have never gotten a fair shake, but the city is a cultural and religious epicenter. It’s also a hotspot for millennials thanks its many schools, scenic beauty, and reasonable prices. Nearby Provo is itself burgeoning with technology companies filled with local graduates from Brigham Young University.
Venture capital grew 250% in Utah between 2013 ($299 million over 34 business deals) and 2015 ($732 million in 55 investments according to the NCVA). Jet.com, eBay, Adobe, Reddit and Netflix have all opened offices there.
“My big fear was that when I moved away from Silicon Valley, I would lose my industry cache, my value in the tech marketing and innovations, and the connection to my surroundings that inspire my disruptive business approach. Would I be isolated and deprived of the essence that attracts those amazing people to Silicon Valley?” wondered Tara Spalding of Hen House Ventures back in 2014. In the end the move helped her improve her work-home balancing act.
In the first nine months of 2014, Utah’s Provo and Salt Lake metros ranked 8th and 12th respectively in terms of venture investments. Combined, their $737 million (according to Inc) comes in sixth by Los Angeles and Long Beach.
“If you are contemplating to change your environment, and are concerned that you will not thrive outside of Silicon Valley – my experience says otherwise,” Spalding adds. “Silicon Valley will always be there. Relocating to other cities that are home to innovative people and technology is totally doable. And as for Silicon Slopes, it’s given my professional and personal growth a tremendous uplift.”
9. Denver, Colorado
Cost of living compared to San Francisco: -35% ($52,037 maintains SF standard of living)
Typical Salary at Work compared to SF: -18.2% ($65,429)
Disposable income net change: $13,393.
Along with Colorado Springs and Boulder, Denver is anchoring the most important city in the Midwest. Once the pit stop for people traversing the Rocky Mountains, the state of Colorado have become a bellwether politically, economically, and socially. Denver has been a magnet for Americans for many of the same reasons Salt Lake City has, but the city is significantly larger in population and more wealthy.
“They wanted a place where people care deeply about being socially responsible and supporting small businesses,” the founders of former Palo Alto company Gusto wrote in December 2015. “Denver was the ideal second location for Gusto because of its quality of life, innovative culture, ideal economic environment, and wealth of top talent.”
Denver also has some other major advantages. Again, the city’s prices easily eclipse the advantages of Silicon Valley for people who have the option to launch a new startup with a fresh canvas.
“The prices of everything have skyrocketed. The regulations. The pension deficit. The traffic. It’s just not a fun place to go start.” Sun Microsystems Co-Foudner Scott McNealy said of SV to the Denver Post, explaining why he chose Colorado’s capital for his new startup Wayin.
Denver’s local government has played on those frustrations to lure companies and workers away from the Valley and other cities to the Rockies.
“Denver has earned a reputation as a center of innovation,” Paul Washington, executive director of the Denver Office of Economic Development, has told Mashable. “The administration is viewed as true partner — not only of entrepreneurship but of the technology scene, in everything from consistent tax policies to removing regulatory barriers where they’re unnecessary.”
10. Los Angeles, California (Silicon Beach)
Cost of living compared to San Francisco: -12.2% ($70,203 maintains your standard of living)
Typical Salary at Work compared to SF: -10.5% ($71,562)
Disposable income net change: $1,359
Yes, even La La Land is considered a realistic option relative to the cost of living in San Francisco and the rest of the Bay Area. The city has no shortage of tech jobs, or any jobs for that matter. And with major players from SpaceX to Snap located between Hawthorne and Venice, the traditional big city of the west is regaining its title.
“Los Angeles is actually more affordable to live in than San Francisco. I’m able to live in Santa Monica, close to the beach, in a much larger, nicer place for the same amount of money. While I never prioritized this before, I’ve noticed that these extra amenities have given me a better quality of life which I appreciate,” wrote Marcus Hanson, head of engineering at MobCrush, about his move from Frisco. “The tech community is smaller but there are big opportunities to have an impact.”
A common theme in local tech leaders’ argument for the city is the entertainment industry’s reliance on graphic design, advanced visual techniques, and media distribution. Demand is constant. Counter-intuitively, it’s possible to find renovated office space at lower rates in the city compared to SV.
“It is cheaper to find housing and office space in LA than in SF,” wrote Nanxi Liu, the CEO of Enplug, in a Quora thread on about switching cities. “For example, Koreatown in LA is a pretty affordable area to live in. We rented an apartment in Koreatown to share among 5 people when we first started Enplug for $1,350/month, granted it was a very small.”
Terrence Yang, the founder and CEO of SF-based Precelerator, voiced his preference for Hollywood in the same thread. He was even more to the point, saying “The Valley is better overall, but everything’s more expensive, more competitive, more arrogant, more delusional and less loyal there.”
Represent.LA maps 1,145 startups, 33 accelerators, 45 incubators, and 58 co-working spaces in the city. Their count might be an understatement
Where should you go?
Many used to think leaving Silicon Valley was company or career suicide, but these 10 cities have proven that ridiculous. New Angelenos, Denverites, Utes, Texans, Seattleites, and Burqueños have managed to build their careers, companies, and disposable incomes outside of technology’s would-be holy city.
While pilgrimages to the Valley’s tech mecca still seem obligatory over the lifetime of a startup, living there shouldn’t be. Engineers and developers are voting with their feet. Venture capitalists have begun to relent and seek out new portfolio companies beyond the Bay. Maybe you should join them?