COVID and the Remote Work Trend Drive Silicon Valley Exodus
If given the choice, would you rather endure a vexing commute before sitting all day in a cubicle, or roll over and open your laptop under swaying coconut palms?
Would you prefer ludicrous housing costs in a place you don’t want to be anyway, or a higher standard of living somewhere that’s actually affordable?
Is your ideal work environment an “echo chamber” of tunnel vision and groupthink, or a vibrant community of voices as innovative as they are diverse?
These comparisons may sound exaggerated, but they represent precisely the shifts that a new generation of startups are making. In a post-COVID world of layoffs, recession and remote work, the incentive is stronger than ever to leave the stagnated conditions of the Bay Area in favor of up-and-coming tech hubs like Los Angeles, New York and Austin.
The more daring digital nomads are heading off to exotic global destinations that satisfy their thirst for adventure, even while furthering their careers.
On the other hand, some tech employees simply want to be home with friends and family rather than forced to move to Silicon Valley. The trend toward remote work has thrown wide the doors to either scenario.
The Draw of Silicon Valley
For almost a century, Silicon Valley has been a shining beacon of innovation of and entrepreneurial promise. A region with a concentration of elite educational institutions and flush with cash, it has drawn the bright and ambitious to come and create. One key characteristic of Silicon Valley and possibly it’s most underrated, is it’s high tolerance for failure.
“In other places, a failed venture can become this badge of shame that shadows you your entire life,” says Russell Hancock of Joint Venture Silicon Valley. “That’s just not the case here.”
Here, entrepreneurs succeed, fail, and succeed again. The environment is highly favorable for innovators to take risks with some level of security. However, somewhere along the way the region became saturated with some less desirable qualities pushing people away from it.
Goodbye Bay Area, Hello Los Angeles
Even before COVID, many in the industry noted that Silicon Valley was starting to collapse in on itself—a victim of its own dazzling success.
Astronomical living costs resulted in the Mercury News headline, “In Costly Bay Area, Even Six-Figure Salaries are Considered ‘Low Income.’” Operating costs have skyrocketed at a similar rate.
Problems such as market saturation and insular thinking that stifles innovation have become apparent. Folks are fleeing, and if you’ve been reading our newsletters you know that the number-one outbound destination is San Francisco’s sunny sister to the south: Los Angeles.
Relocation expert Ryan Carrigan of moveBuddha found that 90% of moving searches involving the San Francisco Bay Area were done by people looking to leave. Of those, 15% were headed to Los Angeles.
In 2018, the Boston Consulting Group teamed up with the Alliance for Southern California Innovation to determine SoCal’s potential as “the next major global tech ecosystem.”
They saw all the right ingredients: human capital, financial capital, a thriving university system, strong corporate environment, adequate infrastructure, and a culture conducive to innovation.
“We found a growing, surprisingly potent and robust region on the cusp of greater things,” wrote BCG in their study.
“Especially encouraging is the strength of the area’s eight entrepreneurial hubs, or nodes, which provide a firm base on which to build … If educators, executives, investors, government officials, and other stakeholders can muster the will and vision to work together, they can tap a multibillion-dollar opportunity.”
At M Accelerator, we didn’t need to mine stats to discover the trend. We had only to look at the applications we’ve been receiving for our programs, which have increased substantially over the past years.
A rising number of startups apply from the Bay Area, but there is also a growing contingent of international startups that choose Los Angeles.
The numbers point to a shift in California’s center of gravity, which may result in a tech explosion to rival even the brilliance of Hollywood stars.
One of the most attractive aspects of working from your computer is that you can do it at home, wherever that may be—or even have no home at all.
While the younger, road-ready set might thrive firing off emails from a different Starbucks every morning, some more established professionals may seek stability in a quiet place they can raise their family. Both are theoretically possible. But is it really that simple?
“Many cities fail to attract startup communities because governments, large corporations and universities don’t effectively collaborate with entrepreneurs—or with each other,”
write early-stage investors Brad Feld and Ian Hathaway in their recent book The Startup Community Way.
“All too often, these players control activity or impose their plans from the top-down, rather than supporting an experimental environment that is led from the bottom-up.”
Feld, based in Boulder, CO, is co-founder of the Foundry Group and has been an early stage investor and entrepreneur since 1987. He co-founded Mobius Venture Capital, Techstars and Intensity Ventures.
Hathaway, based in Santa Barbara, CA, is an analyst, strategic advisor, writer, and entrepreneur interested in startups and their impact. He helps organizations solve complex problems, produce data-driven insights, and develop new products.
In their book, Feld and Hathaway combine a wealth of experience to construct a framework for startup success beyond the boomtimes, which relies on a system of conducive factors present within a community.
To mitigate the seeming risks of leaving the Silicon cradle, one San Jose startup is offering a $10K incentive for tech workers to relocate. Three former Google employees created MainStreet to help companies hire remote workers in places like Sacramento and Salt Lake City.
They provide video-conference training, as well as a brick-and-mortar coworking space to combat the isolation that can often cause remote workers to quit.
With more and more people growing tired of Bay Area bummers like traffic snarls and long lines for your coffee, the MainStreet business model seems sound.
Digital Nomads Go Global
For adventurous sorts who aren’t particularly tied to the domestic scene, the pull to try life in new colors and flavors has never been so irresistible.
Low cost of living, balmy climes and exciting experiences are some of the perks of going abroad. But what are the downsides?
We asked several startup founders about where they live, advantages they have there, and challenges they face.
“I live in Brasilia, the capital of Brazil, and work out of a coworking space,”
says Brian Davis, cofounder of SparkRental, a company that helps middle-class Americans build rental income as a path to financial independence.
“Living abroad, my family and I have far lower living expenses than we did in our high-tax, high-cost-of-living home state of Maryland.
We enjoy free housing through my wife’s employer, excellent health insurance with full coverage, and we don’t even have a car because our neighborhood and city are so walkable and bikeable.”
Davis credits his low living expenses with enabling him to get through the initial phase of his business, when he was feeding time and money into it while receiving little back in the way of returns and profits.
His co-founder, Deni Supplee (who lives outside Philadelphia), similarly structured her life to have extremely low living expenses so that they were able to survive until profitability.
They both worked side gigs to earn extra income throughout those early days, which further extended their runway.
“Today, my greatest personal expense is food, followed by entertainment and travel,” explains Davis.
“My wife and I have a savings rate of 50-60% of our income, funneling the majority of our income into investments. And, of course, back into growing SparkRental.”
On the other side of the world, Jack Choros, founder of IronMonk, has fallen in love with Thailand.
His multi-faceted agency provides a wide range of online marketing and content production services for clients worldwide, but its inception took place in New York City.
Choros later moved to Chang Mai, where he enjoys the low cost of living, a beautiful co-working space, and the allure of Thai culture.
“One thing I’ve underestimated is how great the tech startup scene is here,” says Choros.
“Admittedly, most North American entrepreneurs living here are doing so to bootstrap their business. They are not necessarily venture capital funded with millions of dollars of runway, but they are ex-patriots, which means I can still do business with people who relate to North American culture and the North American way of doing business.”
Having said that, Choros also appreciates the influence local culture has had on him and the way he does business.
“I’ve met many great Thai entrepreneurs as I learn to speak the language,” he says,
“and I’ve incorporated them into my business as well. I love the fact that I made this decision. I always enjoyed the co-working philosophy in general, but doing it abroad is something that really opened my eyes and made me a better businessperson.”
Creighton Wong is a digital nomad who has done remote work both domestically and abroad.
He’s spent time in places like Chicago, Austin and Oakland, as well as Vietnam, Bali, Indonesia and Thailand. While the Covid pandemic has him living a “no fly” lifestyle, he seems happy to hunker down in Ho Chi Minh City with his beautiful wife, who he met in Da Nang, Vietnam.
“The first thing to understand about working remotely is that it’s work,” emphasizes Wong, who founded a digital marketing agency called Exponential Clients.
“Deliverables still need to be pushed out and deadlines still need to be met. And there are some additional challenges to overcome.
The time difference makes for some late nights (I recorded a podcast at 4:00 am the other night); the language barrier can cause massive inefficiencies; and the internet can betray you at any time (the Vietnamese love to tell me “the shark ate the cable.”)
Needless to say, patience is more than a virtue—it’s a necessity.”
On the flip side, Wong says, if you have a genuine love and curiosity for traveling, then working remotely is an amazing experience.
“Get to know a new culture, a new country, a new city!” he encourages.
“Establish some roots and relationships. I miss lunch with my Fried Chicken Lady from Chiang Mai! Uncover the amazing experiences that take time and patience to discover, the stuff you can’t find on Trip Advisor. Eat what the locals eat! But mostly, gain a greater understanding of the world we live in, and grow as a human being by having incredible human experiences!”
One startup has been designed specifically to help other professionals find the remote work experience of their dreams. Hacker Paradise, founded in 2014, curates exotic travel for entrepreneurs, freelancers and remote employees who want to explore the world with like-minded peers, while still advancing their careers.
HP runs up to 24 trips per year to unusual destinations around the globe, bringing together a diverse group of professionals who share not only wanderlust, but common values like kindness and inclusivity.
“Although COVID has caused us to pause our trips for the past few months, we see tremendous opportunity ahead,” affirms Bryan Stewart, the USA CEO of Hacker Paradise.
“Hundreds of millions are finally becoming free from the office, and will soon be transitioning from ‘Work From Home’ to ‘Work From Anywhere.’ We make it easy for you to leave the cubicle life behind and advance your career while working remotely.”
For those who can’t or don’t want to actually board that flight, there is always virtual travel.
A unique startup called Hoppin’, co-founded by Jean-Nicolas Vandelac and Joaquim Miro, uses virtual reality and 360° videos to offer group teleportation.
The concept is allowing friends, family and colleagues to “meet” in amazing locations around the world, connecting with each other and with new places. What’s next, doing the deal on the moon? The sky is the limit post-Covid.
Feb 09, 2021 – Section update from Rocket Homes.
- 66% of the people leaving Silicon Valley are still remaining in California
- Relocation out of the Valley has increased 79% since 2012
- Listings for condos in the Valley are up 62% year over year
- Condo sales in the Valley have only increased 6%
With the pandemic changing the way the world does business—or perhaps just accelerating existing trends—there is no reason to remain tethered to a cubicle, or even to a certain city or country.
The field is wide open for those who choose to explore. But you have to be bold enough to take the leap, and smart enough to arm yourself with the skills you’ll need on the other side.
The pace of change is staggering, so strategies must evolve rapidly as well. For those who can crest each successive wave and come out standing up, the rewards speak for themselves.