Alex Valaitis, who, as a computer science student in the United States, idolised Silicon Valley, as narrated by an April 2023 report by The Washington Post. However, after working in his dream arena for five years, Valaitis left San Francisco in 2021 and made Austin, the state capital of Texas, his new base. He now runs a Web3 product studio and a newsletter about artificial intelligence.
“Silicon Valley has reigned for decades as America’s innovation capital, home to tech giants like Apple, Google and Facebook; unicorns like Uber, DoorDash and Instacart; and start-ups fuelled by the venture capitalists that populate Sand Hill Road. But the region’s dominance has declined since the pandemic, as lenient remote work policies and a spate of layoffs have fuelled the departures of workers and cleared the way for rising investment in other tech hubs across the United States, notably Austin and Miami,” the Washington Post commented further.
Is the iconic ‘Silicon Valley’ losing its status as the hub of innovation in the United States? Is there a reverse migration happening? We will shed a light on the topic.
Alternative tech hubs rising
Silicon Valley still ranked first in 2022 in terms of venture capital investments and the number of deals, as per the PitchBook data. However, funding for companies based in Miami has nearly quadrupled since 2020, totalling $5.39 billion in 2022, while deal volume jumped 81%.
Also, venture capital (VC) investments in Austin rose 77% to $4.95 billion with the number of deals jumping 23%. New York, Seattle, Philadelphia, Chicago, Denver and Houston also witnessed relatively large increases in VC investment and deals.
However, these regions are still far from matching Silicon Valley, which in 2022 drew $74.9 billion in investments across 3,206 VC deals.
Despite the 2022 dominance, Silicon Valley’s share of the total value of venture capital investments in the United States was at its lowest since 2012. And nearly 250,000 people left the Silicon Valley region during the COVID-19 pandemic, according to census data from April 1, 2020, to July 1, 2022.
There is a reverse migration underway from Silicon Valley and regions like Miami and Austin are gaining from the trend. As per PitchBook, while cryptocurrency and Web3 are the major drivers of Miami’s growth, Seattle has benefited from the presence of Amazon and Microsoft in its jurisdiction.
Brianne Kimmel, founder of investment firm Worklife Ventures, noted the ‘change’ in Silicon Valley, with tech workers moving out of San Francisco to other places like Austin or Seattle.
“That’s really created room for young, very technical, traditional hacker types to come to San Francisco. It’s giving the city a personality it may have lost in years prior,” she said.
To justify her stance, Kimmel pointed to ‘Cerebral Valley’, an area in San Francisco’s Hayes Valley neighbourhood where AI-based start-ups are popping up.
A more realistic view
As per the investment firm Index Ventures, tech workers looking for the ‘quintessential start-up experience’ are still arriving at Silicon Valley, but the number is less, since the ecosystem has been decentralising itself across other American cities.
While Seattle is producing start-ups focused on cloud infrastructure and developer tools, New York is also becoming a hotbed for AI, noted Bryan Offutt, partner at Index Ventures focused on investments in software infrastructure and AI.
“Five years ago, 90% of companies would’ve been founded in San Francisco. Now it might be more like 70%, with others starting in places like Seattle and New York,” he remarked.
Backing Offutt, Erin Price-Wright, an Index partner focused on AI and machine learning investments, told The Washington Post that once these start-ups mature, they will find it useful to look for workers outside Silicon Valley as it widens the pool of prospective hires.
Atli Thorkelsson, vice-president of talent network at Redpoint Ventures, pointed out that Austin has grown as a hub for marketing, sales and customer teams for tech companies, while New York is capitalising on a mixed base of talent including those in financial tech, health tech and insurance tech.
Dropping the stats
As per a January 2024 report from the job and internship platform ‘Handshake’, Columbia, Maryland, Boise, Idaho and Fairfax topped the list of places trending among college students and graduates with tech-related majors.
Handshake also found the number of applications submitted to tech jobs in California, Washington, and New York declining significantly in 2023. To be precise, the number of job applications in these cities dropped by over 30% between 2021 and 2023.
Also, cities like Columbia, Maryland and Boise “tend to be more affordable, having less stressful commutes, and starting to feature many of the elements people enjoy in larger coastal cities,” as per Christine Cruzvergara, Handshake’s chief education strategy officer.
However, some of the Gen Next tech workers told The Washington Post about the edge Silicon Valley provides, in terms of building companies and securing funding.
For Kai Koerber, founder of start-up Koer A.I., Silicon Valley is still the place to be as he works on building his company. However, after he’s done with some portions of the groundwork, the 22-year-old hopes to join his tech peers in New York.
Airbnb, which was one of the first tech companies to allow permanent remote work, saw some of its workers moving out of Silicon Valley.
Sofia Ruehle and Ian Demattei-Selby were two such professionals who relocated to Washington. They dubbed the idea as a diversification effort that allows the companies and workers to learn and exchange ideas from different regions.
Rori Jones, Airbnb’s diversity and belonging business partner, who moved to Denver during the COVID period, said in 2023 that six of her Silicon Valley friends joined her since she left.
The ‘Boise’ case study
Boise, which was once among the most isolated American cities, has now become home to a growing tech boom. Semiconductor giant Micron is building a $15 billion manufacturing facility here, and two home-grown companies Kount and TSheets have been acquired by Equifax and Intuit in 2021 and 2017 respectively.
Boise’s population has grown to 235,000, up 30,000 since 2010. Boise’s advantage is its affordable living costs, along with a blend of nature, city life, and work-life balance, which are all drawing tech workers towards the city.
Some of the Boise boom will be driven by Micron. As the semiconductor giant expands further its operations in the city, it will create 17,000 jobs by 2030, predicts Scott Gatzemeier, Micron’s corporate vice-president of frontend US expansion.
Clark Krause, executive director of the Boise Valley Economic Partnership, also spotted the presence of a start-up and entrepreneurial culture, which is driving Boise’s growth further.
Krause feels that Boise is becoming like Nashville or Austin two or three decades ago. Also, a one-bedroom apartment rents for an average of $1,300 a month, scoring high on the affordability Quotient.
However, Boise is feeling the ‘Migration Strain’ as well. Housing prices in the city have jumped by over 50% since 2019.
“The city is investing $340 million to make its downtown more walkable, and also announced plans to redevelop hundreds of affordable housing units last year. But it will need to build around 2,700 new housing units each year to keep up with demand, a 2021 analysis from the city found. Construction in Boise fell some 4,000 units behind that goal over a three-year period preceding the report,” WIRED noted.
Christine Cruzvergara, chief education strategy officer at Handshake, said, “When you’re thinking about stability, and then you see headlines about layoffs, that doesn’t read stability.”
The fact remains that recent graduates and established techies are moving to affordable, non-coastal America as they don’t want to suffer under loan debt and rising housing costs.
“As long as housing continues to skyrocket in some of the major cities, some of these secondary cities that are a little bit smaller, a little bit more manageable, will continue to see a bit of an increase in the number of young professionals that are willing to go there,” Christine concluded.