Ignoring all the risk-tolerant VCs and angels, with billions (trillion?) of capital in the silicon valley ecosystem for a sec. If one simply looks at the big non-US tech companies development offices and hiring activities
Rakuten: San Mateo having most job openings outside Japan, next closest is Toronto
samsung: US having 1100 opening, next is india with 26. in US, there's 114 jobs in california, next is texas with 81
Tencent: only offices outside China is Palo Alto and Seattle
It's clear that most tech companies are aware that all the talents are in Silicon Valley - and because of chicken and egg effects, all the talents come to and stay in Silicon Valley. And when one forms a network in silicon valley, she would be bombarded with job requests with silicon valley companies every day, and if she chooses a better job, it would be still in silicon valley.
Maybe true if you’re targeting the senior talent who got in early enough to buy houses and have kids, but all the 20-somethings I know (myself included) plan to get out within 5 years, barring a drastic increase in compensation. I suspect there is a large, untapped market of disaffected young engineers who moved here to start their careers but would move to a second-tier city for the right job.
And the largest job growth recently has been East Bay, around Pleasanton.
If you are young and starting out, making $110-140k, try living in east bay or san jose and rent a room for $1k - 1.5k, you should be able to save enough money for a down payment for a house soon enough. The stories I've heard for people that couldn't afford their rent, are people living in $3k apartments in SF.
Sure, you can always trade off privacy and commute time to make the numbers work out. But not having to do that is an incredibly compelling form of compensation that companies can provide at minimal cost by offering work elsewhere. This is not a thing for white collar workers almost anywhere else in the US.
First, I submit that $430,000 is still expensive. Instead of buying the median home in Pittsburg and commuting 60+ minutes on BART to downtown SF, I could add an h and buy a huge home in my favorite neighborhood in Pittsburgh PA for about the same price and have a chill bicycle commute: https://www.zillow.com/homes/for_sale/Pittsburgh-PA/pmf,pf_p... (Obvious and legitimate objections: fewer job options, snow.) This is just me trying to say, $430k for that arrangement does not strike me as "cheap" given alternatives in other metros.
I agree that with a tech salary it's possible to save up for a down payment and buy in the Bay Area. But the risk seems unacceptable to me. Paying ~$1M for a house is a big bet that the Bay Area housing market stays hot. I don't want my wealth to be so tied up in a hyperlocal bet like that. I see things going one of two ways (and this is probably over-simplistic).
Option 1: A $1M starter home is the new normal. Prices stay flat or keep rising over the long haul. In that case my investment is sound. But I don't want to live in that kind of place. Where will my kids' teachers live? How will I cope with the moral ickiness of living in a place where housing costs create extreme spatial segregation of the professional class from the service class?
Option 2: The vision painted above is unsustainable. Something has to give (maybe a big financial crash; maybe just state-mandated upzoning that quickly increases housing supply) and the value of my investment drops by a lot.
Either way, I'm planning to save up on the West Coast and use my nest egg back in the Rust Belt.
You make compelling arguments. For me, a house isn't an investment but it's a place where I house my family. (sure, houses in silicon valley have gone up 1.5-2X in a few years. However, stocks have gone up 2-10X). If you're young, there's no point of getting a house. If you are close to have a family, one of the most important thing is KEEPING your job. If you are remote in Pittsburg, and you have to get a new job, it might take a few months of interviewing and flying in for interviews to find a remote job that pays your old salary. Do you want to risk that even to your family? most likely you wouldn't. You have 18 years of mortgage and college tuitions to pay for.
> For me, a house isn't an investment but it's a place where I house my family.
I really want to view the world this way :) I wish housing were a boring commodity that depreciates in value over time like a car. With prices being what they are, I am _forced_ to think of housing as an investment because of how much of my net worth will be tied up in it.
A house _is_ an investment, regardless of how someone wants to think about it.
Buying a house involves a significant opportunity cost over renting since it requires locking up capital (a down payment, or the entire value of the house if buying in cash) in an illiquid asset that could have been invested in liquid assets like stocks (that have historically performed better than real estate over longer time horizons for most housing markets, and often more than makes up for the fixed costs of renting once maintenance costs, taxes, and mortgage interest rates are taken into account, but that's only tangential to the point I'm trying to make).
Also, most people buy their houses on mortgages, so they're investing with 5-10x leverage over the down payment and paying interest for that leverage. This level of leverage would be considered outright insane for any other long term investment, but most people won't even think twice before locking a large majority of their net worth behind a down payment. This puts their financial well-being at the mercy of the whims of the local real estate market due to the 5-10x amplified gains/losses, and practically removes their ability to meaningfully diversify and de-risk their portfolio.
Now of course I'm not saying buying a house can never make sense financially or otherwise, just that refusing to think of it as an investment can be dangerous because it can blind you to the nuanced risk/reward calculations involved in one of the most impactful financial decisions you can make in your lifetime.
For myself, the right time to buy a house would likely have to be when I've saved up enough money that the upfront investment for the purchase of the house is about 30% of my net worth if I'm buying with cash, or less than 10% of my net worth if I'm buying with a mortgage, to counteract the extra exposure to real-estate from the 5-10x leverage. That may mean that the time to buy a house in the Bay Area may never come for me, but I'm perfectly fine with that because the alternative would compromise my ability to keep my investments reasonably liquid and diversified, which could prove to be disastrous in these uncertain financial times ahead of us.
Small point: the risk calculus changes a bit if you buy after housing market deleveraging (e.g. 2009).
You can never know when things are over-valued, but you can get a good sense when things are undervalued.
And since the housing market has both momentum (nearby sales affect comps, more inventory than sales, some substitutability) and adjusts slowly, there's time to buy after it bottoms.
Stock market timing doesn't work for many reasons, but a lot of those don't hold for the real estate market.
Liquidity also plummets during a deleveraging. Homeowners wait for the recovery to sell; lenders wait for the recovery to underwrite. Home values crossing into your price range doesn't mean you can actually buy one, unless it's for cash at a foreclosure auction.
+1. Between unicorn RSUs and salary, I have more than enough long exposure to the Bay Area tech industry’s fortunes. I’m not sure that my anxiety about homeownership even makes sense.
Your view on this broadly aligns with mine (33-year old, live in Oakland).
We bought a cheap (for the area, about 670k) condo just off of BART. It's a pure consumption expense in that I expect to get 1-2% appreciation/year while carrying a manageable debt load. It might go up a bit but that's not the point. We're right off a train line, not paying too much in interest, and building equity. Plus it's a great place to live, lots of young people moving in and we're doing a lot to improve it (lots of deferred maintenance we're working through). Worst-case scenario, we'll rent it our or sell if we move somewhere else; there will always be demand as it's a small, convenient unit in a renter-friendly building, just off of transit.
I share your negative view of the Option 1 dystopia. I have absolutely zero interest in living somewhere on the peninsula like Belmont, Atherton, or even most of San Mateo at this point, where you're basically walled off from anyone of lower socioeconomic class who's your age. Not sure "moral ickiness" is the world I'd choose (maybe just bland? do you really want all your neighbors to have the same job as you?) but it does indeed suck.
I think people who are banking on tons of appreciation buying today in the SFBA really need a reality check. There's just not much higher these prices can go. The common perception is that everyone in tech makes like $300k, which is so far from reality to be laughable.
Depends what is driving the housing appreciation. You can end up like Toronto & Vancouver where it keeps on going up anyway despite local incomes being far far away from those purchase prices, for a decade+
Yea, even if the local working population can’t afford them, the bay area can still be viewed as a hot spot to be causing housing to go up because they represent scarce investments/stores-of-value. Pressure could then push salaries higher into a positive feedback loop.
This might only apply to white collar jobs in tech. People in the service industries and public servants don't receive the same sort of rising pay bumps that engineers and managers do.
Another feedback loop in action: SV & SF unaffordability pushes out service workers and causes the area to become a prime location for the deployment of service work automation technology, which may result in better chances for the startups in this field starting out here.
It is still unclear how economical this sort of automation will be in other parts of the world though. If it does turn out big, Silicon Valley will have a first shot at it.
I think people dramatically overstate the case for automation.
It may be that certain jobs get automated. But look at what Tesla is going through; they're using more people, not less, and basically admitted they screwed up trying to automate so much assembly work from day 1.
On the other hand, the electorate here (SF) seems to want to push minimum wages to $20/hr, so maybe you'll end up right.
I think there's some truth to this, but the big story is simpler.
Prices have doubled in the past 5 years. Because of Prop 13, if you've been an owner through this, you just stay where you are.
Then the whole question becomes making sure things don't change. I think it's just a bunch of lucky owners who bought here 20-30 years ago with no intention or ability to sell, and not much interest in building new stuff.
As far as stores of value, housing is a pretty bad one. It falls apart, is heavily taxed, and is relatively illiquid. I think you'd do a lot better with stocks, or bars of gold.
> there will always be demand as it's a small, convenient unit in a renter-friendly building, just off of transit.
I hope you're right, but those are famous last words! Look at a city like Chicago, with huge sections that are just like you described, but where even well-maintained properties command a fraction of their peak value, and others are almost unsellable at any price. Oakland hasn't exactly experienced uninterrupted prosperity, so it's not an unreasonable risk to consider.
I think Oakland has something going for it, though. SF increasingly feels like a museum: the whole place is so preservation-focused and static. Whereas Oakland has always seen itself as a place where anyone can live and doesn't have its nose quite as high in the air about "preserving the character of the city".
I live in west oakland right next to the BART and the transformation of the city is pretty cool to watch. Tons of vacant lots are being built out into usable real estate and places with broken windows are getting rehabbed into usable commercial space. It's neat to watch this on-the-ground transformation take place. And I'm happy we're building because, as I keep saying, if you want affordable housing, "just build luxury units today and wait 20 years". The BA's problem is that there's been all but zero development and now such a huge surge of people moving here, it's pushing the lower income tiers further and further out as Googlers making $250k are competing with teachers to live in whatever they can find.
I don't buy into the "let's blame everything on tech" narrative though. Between prop 13, rent control, zoning, and a lot of other regulatory action, the SFBA has made this problem more extreme than it is in other areas. There are plenty of regions--DC comes to mind--that went through huge waves of gentrification without nearly the price swings we're seeing here in SF.
>I live in west oakland right next to the BART and the transformation of the city is pretty cool to watch. Tons of vacant lots are being built out into usable real estate and places with broken windows are getting rehabbed into usable commercial space. It's neat to watch this on-the-ground transformation take place
I'm as YIMBY as they come, but I have to bristle at these words coming from tech people - to the marginalized communities on the ground, it's a human tragedy. We can at least recognize that, even if it's the best available option, this kind of transformation is not without downside.
There's a lot of conflation going on here. For one, cost-burdened households are up everywhere in the country, not just here -- housing being unaffordable is a national phenomenon, not just due to "techies". Second, the Bay Area does this to itself: developer impact fees, "preserve everything at all costs" mentality, insistence on using union labor for everything, aggressive rent control, height limits, etc.
I'm not just making this up. Both of the above are rigorously-researched publications backed up by extensive study and review, not just random bullshit someone made up. My wife is an architect who deals with this stuff daily. Housing affordability is nowhere near being a priority in this region. If it was, prop 13 would be repealed, it wouldn't take 2-3 years to get an ADU permitted, the review process would be easier, environmental restrictions would be looser, and we wouldn't use union labor for everything.
Bottom line: time to get honest about where the priorities are. Affordability is nowhere close to the top.
From a policy perspective I agree. The regulations that Bay Area homeowners institute to ensure that this remains an exclusive and premium place are effective and ought to be reversed.
We can still talk about the issue in a way that empathizes with the tragedy of poor communities losing their homes, and avoids framing gentrification as an unmitigated good.
Very true. I'm just tired of being called the bad guy.
We might not see eye-to-eye on this issue. I think it's about 90% the fault of those who've lived here for decades and 10% the fault of new people like me (7 years here so far).
I think this is reflective of a more general problem with policymaking in the Bay Area, namely, people do what feels good, and ignore what actually works. I'm somewhere in the middle politically but this puts me way right of most bay area people. And what upsets me is that people just think they can make up their own outcomes here. There are certain issues like rent control, where every mainstream economist agrees it makes the problem worse (stifles development and divides an area into a two-tiered systems of "haves" and "have nots" for the controlled units) and yet we just ignore them here, preferring to vote with our hearts, or as you put it "empathize".
I'm trying to empathize but I'm also trying to solve the problem, you know?
Socioeconomic integration sounded great from afar, but I don't know how how much more sidewalk urine/feces I can take. I'm learning that I'd much rather deal with traffic and drab suburbia than in-your-face extreme poverty every time I try to take advantage of walkability and transit.
Have you ever tried commuting from Pittsburg/Bay Point?
Have you seen what $680k will buy you in San Jose?
These are not at all practical suggestions. The outlook for a 20 something engineer in the Bay Area is absolutely brutal. The people who got in 10 years ago are doing ok so long as the housing market keeps up. But there's nothing left here for anyone trying to start a life.
The goal is shifting from “large suburban house” to “central urban condo,” I suppose, but is there evidence for decline in desire to have kids? Actual both rate can be explained by people delaying gratification for economic reasons.
This was the same "millennials don't want to do X" argument you heard a few years ago. That started to stop once millennials got enough cash to do X.
A major, major confounding issue is simply not having the money. Of course you'll see a trend of fewer people buying homes if home prices are so high that fewer people can afford them.
I think some smart companies in "third tier" cities are tapping this. There are some hilarious targeted ads I see for an Austin company (HomeAway) that prominently shows the median home price in Austin and a link to their open jobs. Similarly, Duolingo (Pittsburgh-based) put up a billboard in SF advertising the prospect of working in tech AND owning a home: https://venturebeat.com/2018/03/23/duolingo-to-silicon-valle...
The problem with second-tier cities, as I see them, is that you have to move every time you get a new job, if you are maximizing your income/career. (I mean, not doing that is totally valid, but it's important to factor in the "I took a worse job because it was closer to the house that it would be expensive for me to abandon" thing into your expense/utility calculations. keep in mind that reduced job choice can mean increased stress and unpleasantness as much or more than it can mean simply getting less money.)
I think if you work in tech, silicon valley is pretty unique in that there are so many really desirable employers within a short distance. I'd be comfortable buying a house here even if it meant that it makes it really expensive if I want a job more than 15 miles out.
The novelty of eye-popping direct deposits has worn off; the rate at which I shovel money from venture capital to real estate brings me no particular joy. Maximizing income can only inch me closer to the quality of living situation I'd have elsewhere. The point at which I'd be done increasing housing budget, and actually free to increase other investments or luxury consumption, does not appear attainable. (Consider savings for a down payment as part of housing budget here. And if I could buy a starter home, my next priority would be fixing either the commute time or neighborhood safety compromise that made it a starter home).
I'm not sure why maximizing income in the Bay Area is worthwhile. The pay here, while much higher in nominal terms, seems to level off well below my level of comfort for standard of living (and my parents who got me accustomed to it were in much less lucrative fields).
I stay becuase I like the work and the company, because why not take this opportunity while I'm young? But it's an indulgent youthful adventure, not a sustainable long-term plan.
>I'm not sure why maximizing income in the Bay Area is worthwhile. The pay here, while much higher in nominal terms, seems to level off well below my level of comfort for standard of living
so, assuming you are a medium density type and can stomach an apartment with reasonable soundproofing, you are spending $3000/month on rent here, for a reasonably okay 1 bedroom apartment. (if you are willing to take a hit in quality, you can get more bedrooms or even a bad single family home for about that price)
So you move to a second-tier city and you get the same thing for $1500/month. Now, I don't make twice here what I would in a second-tier city, but I do make rather more than an extra $1500 a month.
Yep, that's about what I'm doing, and it's fine. Good, even.
But a similar unit in condo form would require a $200k downpayment (save $2000/mo for 9 years) and then $5500/mo through the 30-year mortgage term. That's assuming prices stay flat for 9 years, which would be extraordinary. I don't see any part of my company's SWE job ladder supporting those numbers. But if I want to try, I can't allow my lifestyle to inflate at all under future raises. They all need to be shoveled into that gaping hole.
Paysa claims the median SWE in mountain view makes around $190K total comp, with like $65K of that being bonus and stock. (that's lower than I would think from talking with people, but a lot of my friends are mid to late career and working at the more desirable companies, so I guess that makes sense.)
Note, a lot of companies pay more. according to paysa, the mean Facebook SWE makes like $230k in Sunnyvale (the closest location to mountain view that paysa has information on facebook for.)
Trulia claims that the median 1 bedroom in mountain view is $860K, which is higher than I thought; (santa clara, where I live, it's $622K) 20% of that is $172K... so four and a half years of living off your base salary would be required (three and a half if you commute in from santa clara) I mean, depending on your tax bracket, of course.
And all this is looking at the median, and in the comment I'm responding to, you were talking about the best SWE jobs at your company. I can tell you that it's not at all unusual for individual contributors who are pretty good but not famous or anything to do rather better than the paysa numbers, salary wise.
All that said, I personally don't plan on buying at these prices; (and I'm a sysadmin and have no degree; I'm gonna make maybe 15-20% less than a SWE with a degree at my level) I think right now, landlords are willing to lose money on the actual rent in order to make money on the appreciation. I dunno if this is a good idea long-term, just 'cause if this is the new normal, if housing prices keep rising, I might actually price myself out of desirable metros, and be forced to move to a second-tier city, which I would find unpleasant... but I see no reason to hurry to those second tier cities. Certainly, rent seems to be limited by what people can pay, and as someone SWE-ajacent, I make more than most people, even here in the bay area, so something would have to go wrong with my career to the point where I wasn't making more money than most people locally for me to get priced out of the local rental market.
I mean, if there were smaller, cheaper places available, I'd drop a quarter-million on a "plan b" just so I could continue to live around here if my own career went south... but I probably have much stronger social reasons to stay than you do.
Some of my friends and I have been considering investing in real-estate in a second tier city, just to hedge against the case where real-estate continues to climb globally, but paying half what a house costs here seems high for that. A buddy of mine has been talking about Cleveland (one of his value functions is functional public transit) Cleveland is a lot more than half cheaper than the bay area... but I don't think I'd want to live there.
Bonus and stock are inherently volatile. It's totally reasonable to use them towards initial savings, but seems crazy to rely on them for ongoing housing costs. If you're relying on bonus + equity and we enter a downturn, even if you manage to stay employed, you're screwed: employer stock will be worth far less, and bonuses tend to get curtailed when things are tight.
While there's definitely a lot of wiggle room in negotiating equity compensation or earning bonus, the base salary range feels pretty narrow.
That's why I was suggesting that you live on (pay rent from) your base salary, which is quite doable, and invest or save for a down payment out of your bonus and stock.
I've lived in numerous locations outside SV. They all have talent, they all have recruiters bombarding you, and when you take a new job, is would be still wherever you live. I'm not denying that SV has a strong presence in this industry -- to do so would be silly. But denying that other places also have talent and jobs is equally silly.
I have lived in LA, New York, and Tokyo. They all have talents. However, it isn't created equal. The companies outside silicon valley aren't using the best technologies, don't have the best processes, don't use the best softwares, which in turn affects the talents. The talents aren't attending the latest tech meetups in SV, aren't using the best tools, aren't doing the best coding practices, using the best frameworks, etc.
IMO, there's a 10X difference currently between tech startups in SF and tech startups in LA or New York; I've worked with teams inside and outside silicon valley. The calibur of talent/progress difference is just insane.
And Google uses Java and Facebook uses PHP. The idea that SF startups are so much more advanced from a tech standpoint than other cities is just ridiculous
It's not ridiculous at all. I've worked outside the Bay Area and in it the last several years. There is a huge difference in culture and approach to solving problems. Lots of startups are boring CRUD trying to look more advanced, but plenty are actually trying new things and exploring tech in ways that most other places just can't or won't support.
Given what comes out of the majority of those startups, SV ones included, it's not a very compelling argument that the people that brought us such glorious advanced technologies as Theranos, Juicero, or MongoDB are somehow better at technology than people who get stuff done somewhere in the middle of the Corn Belt.
Yea there is a huge network effect here. I just recently wrapped up a job search after moving back here from Chicago, and the difference in depth was night and day. I kept my marketing job pipeline full and I did not come close to bottoming out all relevant opportunities. In Chicago, there were maybe 10 relevant opportunities for me at a tech startup.
Well-known corporations like Samsung and Tencent should be able to recruit most junior talent they need from their own country or a lower-cost location. The major reason they set up offices in the US is to recruit top talent who are not willing to move and sometimes more senior than those they can recruit from elsewhere.
In other words, they have little incentives to set up offices in other US locations which are not lower cost than their home base and have too few talent at the level they cannot get elsewhere.
The needs of many startups could be different from them.
Bay Area startup scene is dying as is. With few exceptions no small startup can hire talent here anymore. IMO it’s a good thing that other cities will have a chance.
not the op- but I think what he's implying is that all the good engineers are in golden handcuffs with the FANG or unicorn startups making $300k. In the old days you could match the base salary and say my stock is better. Today its harder when MSFT is 3x or Netflix has 5x in the last few years. Your startup stock of 100K with 10% probability of becoming worth 10x in a few years just doesn't sound attractive enough to a good engineer. If all the good engineers are taken, it sucks the life out of other startups.
It’s not that all the good engineers are taken. It’s that the good engineers are doing mindless ad blasting to make a bigger buck.
There’s an opportunity cost of inventing things that actually make people’s lives considerably better.
The valley was the place where this would happen, now that culture and spirit is slowly dying.
Mostly because you can’t take those kinds of risks. Just the living expensive would kill you. VC money needs a quick buck so that kills those ideas in their infancy too.
Hit the nail on the head right here. You just can’t take the risks anymore. Everything is too expensive and it isn’t worth it anymore when Facebook dangles such a fat pay check in front of you. Entrepreneurship and free thinking has turned into copycat, quick bucks how to make quick money and complete group think. This is especially true in the sf start up scene
(Not OP, but I'm currently founding a startup in the Bay Area.)
I don't have the perception that the Bay Area startup scene is dying, but it's perhaps true that the Bay Area startup scene is dying. Basically, you can't raise a $3M seed round on "I went to (Stanford|Ivy League|other top college) and have an idea for a mobile app" anymore, nor can you raise follow-on rounds off anything but revenue growth. That means that the days where a couple 20-somethings could found a company, hire 10 people, and code by day while partying late into the night are gone.
Good riddance, IMHO.
The startup scene is still healthy, but is very different demographically. Some observations:
Average founders skew older - it's more 30- and 40-somethings that worked for a big tech company and cashed out a million or so in stock options, or had a previous startup exit. (The exception is crypto, which is largely financed through ICO now.)
B2B is ascendant over B2C, and many startups are financing the company with pre-sales from paying customers.
Team sizes are smaller, and many companies are using outsourced labor where they either open an office abroad for engineering, or they use Upwork etc. to find contractors.
Startups in general have gotten cheaper and leaner and are more focused on doing the work rather than living the dream.
That's quite a positive take. When I see "lean" startups offshoring/using Upwork to build their offerings, I think the magic has left the bay and that people are trying to squeeze water from rocks. Partying all night might make investors and parents of 2.5 children wince, but that was part of what made unexpected, innovative software possible. It's ominous that startups are forced to outsource because cost of living has priced them out of local talent.
When I look at the bay now, I see a bunch of FANG drones measuring their RSU dicks. People caring more about buying a home and whining about NIMBYs than making cool shit with cool tech. Of course most startups are stodgy B2B and not moon shot B2C, you can't build B2C when your experience is so separate from a normal person's. But another JIRA/GitHub/Slack integration? Ooh, that's the good stuff we can relate to.
Maybe the bay got old, but I don't believe that when I see fresh grads falling over themselves to work at a FANG. Whatever happened, there's not much serendipity left. There will be a tipping point where enough cool stuff is coming out of Detroit/Atlanta/wherever that an investor would be a fool to fixate on the bay.
Typically the founders are building the core competencies of their businesses themselves and using Upwork to outsource programming tasks that have been commoditized, like mobile/web development or filling in the gaps once the product architecture has been built. The current funding & salary environment is not kind to non-technical founders, because the technical end of a new product now costs more than you can get in funding without a product, and because the type of ideas you can easily communicate to an outsourced dev team are the ones that have been well-commoditized over the last 8 years. (I still see a number of non-technical founders trying, but they've been struggling hard.)
I do think new startups face significant headwinds now, but they're not the ones you mention. I'm not worried about FANG drones, for example - the majority of people in Silicon Valley have always been employees of big companies, and often quite self-satisfied ones (do you remember how arrogant Netscape, Sun, and Cisco were when Google was still in the garage?).
Also, significant B2C startups usually come out of nowhere, from small teams that were toiling away in obscurity for years beforehand. Do you remember 2007-2010? I was part of the Web 2.0 boomlet, folded up my startup in '08, and proceeded to watch most of my peer companies die over the next 2 years. But while we were all folding up our social networks, AirBnB (founded '06, household name '11), DropBox ('07, '10), Uber ('08, '10), Instagram ('08, '12), WhatsApp ('07, '11), and Thumbtack ('07, '13) were continuing to work on their startups, many of them breaking a lot of common wisdom about what made for a successful startup. When the time was right these services exploded, but we had to go through a huge startup drought from 08-10 in the process.
The factors I'm more worried about are: 1) The average American consumer not having money, which makes B2C business models other than [advertisement, pyramid scheme, extortion, selling personal data] impractical 2) Attention being so focused on politics and tribalism that consumers are too fearful to try anything new and 3) Moore's Law disappearing. I'm not terribly worried about this last one because we can still get another factor of 10-100X out of better programming languages, OSes, and frameworks, and GPUs/TPUs continue to increase in power.
I didn’t say anything about lack of funding. This funding is increasingly going to a few growth stage startups (SoftBank model) in larger amounts.
I’m saying the tiny 2 person startup working out of a shared apartment in Soma has some serious headwinds nowadays to hiring and growing in SF these days.
> Redfin, the Seattle-based home buying site/app, has been beating this drum for years, recently stating that we will see “mass migration” from the Bay Area based on housing. The CEO writes “Silicon Valley is going to leave Silicon Valley… the technology companies… they’re chasing talent, and talent is chasing affordable housing.” Redfin specifically identifies Denver, San Antonio, and Houston as the next hubs newer generations will seek out.
Rather odd choice of Texas cities in my opinion. If you're going to go with Texas, I'd think Dallas and Austin are more obvious choices for technical people.
Not to my knowledge. To be more specific, roles are being moved, not people. New roles only in target market, old roles slowly attritioned out as people leave or retire. No one has been forced to move yet. That day may come, but it’s a long ways off.
I don't think the price differential between San Antonio and Austin housing is high enough to offset the level of talent and appeal that Austin (or even Dallas for that matter) currently provides for the tech scene.
Depends on your vertical. There are a number of O&G related startups. And (oddly) San Antonio rates just behind San Diego and Boston for Medical Device innovation (not software, but still, big tech business)
> Rather odd choice of Texas cities in my opinion. If you're going to go with Texas, I'd think Dallas and Austin are more obvious choices for technical people.
Why?
Dallas is too expensive, and imho the only good thing about Dallas is the Stars and Mark Cuban. Austin is good but also small and saturated but also Austin is 2.5 hours away from Houston and 1 hour from San Antonio, so it's not hard to poach talent if needed.
San Antonio has a similar military–industrial complex to SV with it being a major area for bases for the Air Force. It also has the infrastructure scaffold from when ATT was headquartered there. They've got 5-6 F500s headquartered there. So, there's plenty of engineering talent for all types.
Houston is #2 in the USA for F500 HQs following NYC with 19 based here. [0] Houston is massive, 11k sq miles for the metro area. There is plenty of space and Cost of Living is low. You have a major DOD/NASA source of engineering talent plus all the F500s. You've also got massive medial research with the largest medical center in the world while UTMB-Galveston runs one of the most important labs in the country for biocon. It's a major shipping port(s) and the port of Houston is #2 in trade. However, I will yield that the traffic sucks and parts are worst than LA; It's very hot during the summers, particularly August; and, that hurricanes suck. We also don't have earthquakes.
Overall with Texas is you've got the Texas Triangle, it's also a safe bet infrastructure wise because the state has it's own power grid. There's tons of link points for data/bandwith.
If you have reached the age of 30, you should already own your home. If not, buy a home immediately. NOW. If you can't afford anything decent close to your place of employment, quit your job and move somewhere where homes are more affordable. Your future happiness depends on it.
The longer you wait, the more you’re priced out of the market and reliant on the whims of a landlord.
Now, one could argue we’re at the peak of the current business cycle and asset prices are overly inflated. And there might be merit to that. In that case, look for real estate bargains where you’ll have equity on day one (short sales, foreclosures, assets priced below their fair market value).
Yes, moved every two years. Not ideal, but couldn't have afforded the places I moved into two years earlier and moving produces high quality of life gain.
> Not ideal, but couldn't have afforded the places I moved into two years earlier and moving produces high quality of life gain.
Maybe it's years living in substandard student housing, or years in "not-in-the-US" housing, or even a couple of years being effectively homeless, but anytime I get more situated than living out of one suitcase and one computer bag, I find moving to be a burden that (generally) outweighs what you call the quality-of-life gain. That's me, and I'm probably inertia oriented in everything except the companies I start/assist/work-for. I love tuning the business to be better. But I often just go home, maybe to a dump or dive, and open a can of tuna fish for dinner. (My kids don't seem to understand that either - so I'm guessing this isn't normal)
EDIT: My (now) ex-wife lives in a nice house, with a fair number of upgrades, in a nice neighborhood. And my kids get to live there too - nice schools too. So, that's nice. But I don't think it is anything I would have ever invested in or developed for myself without her prodding. (Which might be why she divorced me, but I suspect it was probably slightly more complicated than that. But, still, it probably should have been enough!)
Sure. I rented for many years in Cupertino and Los Altos while I worked at Apple. Now I realize that that was a serious mistake. I want to encourage young professionals in Silicon Valley to avoid making the same mistake. Rather than attract more downvotes, I'm happy to discuss this offline. My email is chmaynard@gmail.com.
I agree that age 30 is an arbitrary choice. Here's why I chose that age. My view is that, at least from the perspective of young professionals, employment in Silicon Valley is similar to graduate education. In terms of your earning potential, the skills and experience you will gain is equivalent to a Ph.D. By age 30 or so, your "graduate education" should be complete and it's time to transition to adulthood. Part of being an adult is owning a home and gaining all the advantages, both financial and psychological, that home ownership offers.
> Part of being an adult is owning a home and gaining all the advantages, both financial and psychological, that home ownership offers.
Becoming intensely in debt (thereby forcing myself to work more) by buying into a ridiculously overpriced housing market, locking me to a single physical location that is destroying itself through disgustingly selfish infrastructure planning is not my idea of an advantage, financially or psychologically. I've never lived or visited anywhere in my life that has screwed itself up as much as the Bay Area has - they'll be lucky to be growing as well as Gary, Indiana at the rate things are going. The prices are not justified by wage increases (wages aren't matching price increases) or increasing population (the bay area is now starting to lose population), and combined with the idiotic local and federal politics + trade war economics, have nowhere to go but down.
On the contrary, I contend anyone that depends on the current prices for survival is a bag holder making an extremely risky bet. The evidence is already there that the bet is not going to pay off. My advice: unless you're very wealthy and don't care, or your plan is to go underwater in the world's most expensive retirement community, get out, now. If things go south, liquidity will be far more important for your financial and psychological soundness than debt on a sinking asset in a shrinking regional economy will be.
Couldn't disagree more. I am 32, have a kid, a diverse portfolio, and no desire to own a home. We have excellent mobility, I don't have to spend a moment thinking about unexpected housing expenditures, and I got a great deal on rent. I am optimizing for flexibility and am very happy in doing so.
Don't buy a house because you feel like it's what you are supposed to do!
I've never understood the view of owning a home to live in, it doesn't make sense to me financially. Perhaps because I didn't grow up here in the US. I'd rather buy a home and rent it, or buy a duplex somewhere else and rent units.
- cost of living somewhere other than SFBA but generally "equivalent" in the sense that living there wouldn't be seen as a negative
- a average-ish amount of VC funds that must be invested in a company before capital is returned.
- average amount of capital raise that goes to salary
- what amount of salary is due to cost of living.
It is getting a little bit convoluted, but that would allow you to approximate how much VC money is going to SFBA landlords due to the chokehold on housing supply.
We're seeing a shade of this in the Amazon HQ2 process, but if you have actual physical mobility as an organization over different real estate markets and political jurisdictions it will shift the balance of power in terms of rents and taxation. I don't think it applies to small companies for various reasons, but the motive is there.
As a note, make sure cost of living is determined in real terms, not percentages. Oftentimes places with a 80% cost of living will also pay 80% the other wage, which is a bad deal for an engineer because cost of living is not the total of all expenses- so savings and discretionary income actually goes down quite a bit.
Yeah, my thinking is if you just eliminate the component of salary that is purely dependent on cost of living, and not the part that is due to the extremely high demand for tech skills generally at the globally competitive level -- because that is all that you can eliminate by moving. Both of these factors push salaries up but you only eliminate one of them by moving.
There is also the fact that moving costs time and energy, and an engineer in the Bay Area will have a lot more options for employment if they stay in the Bay Area- they can walk between interviews for large multinational tech companies in a lot of cases.
Moving from a hub like that has the implicit cost that you may have to move back at some point to find work, or accept the lesser options and negotiating position.
This. I split time between the Bay and up in north eastern Ca. Reality is, aside from housing, day to day costs are really no different - gas, food, utilities. I’m fortunate to have that flexibility, but percentages mask a number of things.
I was talking to someone recently - with all the “tech” going into the Reno area, housing is getting more and more expensive. The average salary is still in the mid 30k range, however.
California is expensive overall. However, other places are cheaper. I lived in Central/Eastern WA (Pasco) for a postdoc before moving to the bay and it was astronomically cheaper across the board even if you ignore housing (1800sqft house on 1/2 acre was $280k in 2014).
Biggest non-housing difference was no state income tax, so save 7-10%, then pretty much all car/gas/insurance were about half. Food was a bit cheaper but not enough to make a big difference. We didn't go out much since restaurants weren't good but thats not really a far comparison.
Where do you live in NE California? I love it up there (and SE Oregon)
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[ 3.1 ms ] story [ 95.0 ms ] threadRakuten: San Mateo having most job openings outside Japan, next closest is Toronto
samsung: US having 1100 opening, next is india with 26. in US, there's 114 jobs in california, next is texas with 81
Tencent: only offices outside China is Palo Alto and Seattle
It's clear that most tech companies are aware that all the talents are in Silicon Valley - and because of chicken and egg effects, all the talents come to and stay in Silicon Valley. And when one forms a network in silicon valley, she would be bombarded with job requests with silicon valley companies every day, and if she chooses a better job, it would be still in silicon valley.
https://www.estately.com/bay-area-home-affordability-transit...
Pittsburg/Bay Point $430,000
Blossom Hill $657,000
San Jose $680,000
And the largest job growth recently has been East Bay, around Pleasanton.
If you are young and starting out, making $110-140k, try living in east bay or san jose and rent a room for $1k - 1.5k, you should be able to save enough money for a down payment for a house soon enough. The stories I've heard for people that couldn't afford their rent, are people living in $3k apartments in SF.
First, I submit that $430,000 is still expensive. Instead of buying the median home in Pittsburg and commuting 60+ minutes on BART to downtown SF, I could add an h and buy a huge home in my favorite neighborhood in Pittsburgh PA for about the same price and have a chill bicycle commute: https://www.zillow.com/homes/for_sale/Pittsburgh-PA/pmf,pf_p... (Obvious and legitimate objections: fewer job options, snow.) This is just me trying to say, $430k for that arrangement does not strike me as "cheap" given alternatives in other metros.
I agree that with a tech salary it's possible to save up for a down payment and buy in the Bay Area. But the risk seems unacceptable to me. Paying ~$1M for a house is a big bet that the Bay Area housing market stays hot. I don't want my wealth to be so tied up in a hyperlocal bet like that. I see things going one of two ways (and this is probably over-simplistic).
Option 1: A $1M starter home is the new normal. Prices stay flat or keep rising over the long haul. In that case my investment is sound. But I don't want to live in that kind of place. Where will my kids' teachers live? How will I cope with the moral ickiness of living in a place where housing costs create extreme spatial segregation of the professional class from the service class?
Option 2: The vision painted above is unsustainable. Something has to give (maybe a big financial crash; maybe just state-mandated upzoning that quickly increases housing supply) and the value of my investment drops by a lot.
Either way, I'm planning to save up on the West Coast and use my nest egg back in the Rust Belt.
> For me, a house isn't an investment but it's a place where I house my family.
I really want to view the world this way :) I wish housing were a boring commodity that depreciates in value over time like a car. With prices being what they are, I am _forced_ to think of housing as an investment because of how much of my net worth will be tied up in it.
A house _is_ an investment, regardless of how someone wants to think about it.
Buying a house involves a significant opportunity cost over renting since it requires locking up capital (a down payment, or the entire value of the house if buying in cash) in an illiquid asset that could have been invested in liquid assets like stocks (that have historically performed better than real estate over longer time horizons for most housing markets, and often more than makes up for the fixed costs of renting once maintenance costs, taxes, and mortgage interest rates are taken into account, but that's only tangential to the point I'm trying to make).
Also, most people buy their houses on mortgages, so they're investing with 5-10x leverage over the down payment and paying interest for that leverage. This level of leverage would be considered outright insane for any other long term investment, but most people won't even think twice before locking a large majority of their net worth behind a down payment. This puts their financial well-being at the mercy of the whims of the local real estate market due to the 5-10x amplified gains/losses, and practically removes their ability to meaningfully diversify and de-risk their portfolio.
Now of course I'm not saying buying a house can never make sense financially or otherwise, just that refusing to think of it as an investment can be dangerous because it can blind you to the nuanced risk/reward calculations involved in one of the most impactful financial decisions you can make in your lifetime.
For myself, the right time to buy a house would likely have to be when I've saved up enough money that the upfront investment for the purchase of the house is about 30% of my net worth if I'm buying with cash, or less than 10% of my net worth if I'm buying with a mortgage, to counteract the extra exposure to real-estate from the 5-10x leverage. That may mean that the time to buy a house in the Bay Area may never come for me, but I'm perfectly fine with that because the alternative would compromise my ability to keep my investments reasonably liquid and diversified, which could prove to be disastrous in these uncertain financial times ahead of us.
You can never know when things are over-valued, but you can get a good sense when things are undervalued.
And since the housing market has both momentum (nearby sales affect comps, more inventory than sales, some substitutability) and adjusts slowly, there's time to buy after it bottoms.
Stock market timing doesn't work for many reasons, but a lot of those don't hold for the real estate market.
We bought a cheap (for the area, about 670k) condo just off of BART. It's a pure consumption expense in that I expect to get 1-2% appreciation/year while carrying a manageable debt load. It might go up a bit but that's not the point. We're right off a train line, not paying too much in interest, and building equity. Plus it's a great place to live, lots of young people moving in and we're doing a lot to improve it (lots of deferred maintenance we're working through). Worst-case scenario, we'll rent it our or sell if we move somewhere else; there will always be demand as it's a small, convenient unit in a renter-friendly building, just off of transit.
I share your negative view of the Option 1 dystopia. I have absolutely zero interest in living somewhere on the peninsula like Belmont, Atherton, or even most of San Mateo at this point, where you're basically walled off from anyone of lower socioeconomic class who's your age. Not sure "moral ickiness" is the world I'd choose (maybe just bland? do you really want all your neighbors to have the same job as you?) but it does indeed suck.
I think people who are banking on tons of appreciation buying today in the SFBA really need a reality check. There's just not much higher these prices can go. The common perception is that everyone in tech makes like $300k, which is so far from reality to be laughable.
It is still unclear how economical this sort of automation will be in other parts of the world though. If it does turn out big, Silicon Valley will have a first shot at it.
It may be that certain jobs get automated. But look at what Tesla is going through; they're using more people, not less, and basically admitted they screwed up trying to automate so much assembly work from day 1.
On the other hand, the electorate here (SF) seems to want to push minimum wages to $20/hr, so maybe you'll end up right.
Prices have doubled in the past 5 years. Because of Prop 13, if you've been an owner through this, you just stay where you are.
Then the whole question becomes making sure things don't change. I think it's just a bunch of lucky owners who bought here 20-30 years ago with no intention or ability to sell, and not much interest in building new stuff.
As far as stores of value, housing is a pretty bad one. It falls apart, is heavily taxed, and is relatively illiquid. I think you'd do a lot better with stocks, or bars of gold.
I hope you're right, but those are famous last words! Look at a city like Chicago, with huge sections that are just like you described, but where even well-maintained properties command a fraction of their peak value, and others are almost unsellable at any price. Oakland hasn't exactly experienced uninterrupted prosperity, so it's not an unreasonable risk to consider.
I think Oakland has something going for it, though. SF increasingly feels like a museum: the whole place is so preservation-focused and static. Whereas Oakland has always seen itself as a place where anyone can live and doesn't have its nose quite as high in the air about "preserving the character of the city".
I live in west oakland right next to the BART and the transformation of the city is pretty cool to watch. Tons of vacant lots are being built out into usable real estate and places with broken windows are getting rehabbed into usable commercial space. It's neat to watch this on-the-ground transformation take place. And I'm happy we're building because, as I keep saying, if you want affordable housing, "just build luxury units today and wait 20 years". The BA's problem is that there's been all but zero development and now such a huge surge of people moving here, it's pushing the lower income tiers further and further out as Googlers making $250k are competing with teachers to live in whatever they can find.
I don't buy into the "let's blame everything on tech" narrative though. Between prop 13, rent control, zoning, and a lot of other regulatory action, the SFBA has made this problem more extreme than it is in other areas. There are plenty of regions--DC comes to mind--that went through huge waves of gentrification without nearly the price swings we're seeing here in SF.
P.S. I'm from Chicago.
I'm as YIMBY as they come, but I have to bristle at these words coming from tech people - to the marginalized communities on the ground, it's a human tragedy. We can at least recognize that, even if it's the best available option, this kind of transformation is not without downside.
And this: http://www.jchs.harvard.edu/research-areas/affordability
There's a lot of conflation going on here. For one, cost-burdened households are up everywhere in the country, not just here -- housing being unaffordable is a national phenomenon, not just due to "techies". Second, the Bay Area does this to itself: developer impact fees, "preserve everything at all costs" mentality, insistence on using union labor for everything, aggressive rent control, height limits, etc.
I'm not just making this up. Both of the above are rigorously-researched publications backed up by extensive study and review, not just random bullshit someone made up. My wife is an architect who deals with this stuff daily. Housing affordability is nowhere near being a priority in this region. If it was, prop 13 would be repealed, it wouldn't take 2-3 years to get an ADU permitted, the review process would be easier, environmental restrictions would be looser, and we wouldn't use union labor for everything.
Bottom line: time to get honest about where the priorities are. Affordability is nowhere close to the top.
We can still talk about the issue in a way that empathizes with the tragedy of poor communities losing their homes, and avoids framing gentrification as an unmitigated good.
We might not see eye-to-eye on this issue. I think it's about 90% the fault of those who've lived here for decades and 10% the fault of new people like me (7 years here so far).
I think this is reflective of a more general problem with policymaking in the Bay Area, namely, people do what feels good, and ignore what actually works. I'm somewhere in the middle politically but this puts me way right of most bay area people. And what upsets me is that people just think they can make up their own outcomes here. There are certain issues like rent control, where every mainstream economist agrees it makes the problem worse (stifles development and divides an area into a two-tiered systems of "haves" and "have nots" for the controlled units) and yet we just ignore them here, preferring to vote with our hearts, or as you put it "empathize".
I'm trying to empathize but I'm also trying to solve the problem, you know?
Really no middle ground here, huh?
Have you seen what $680k will buy you in San Jose?
These are not at all practical suggestions. The outlook for a 20 something engineer in the Bay Area is absolutely brutal. The people who got in 10 years ago are doing ok so long as the housing market keeps up. But there's nothing left here for anyone trying to start a life.
As I mentioned, the biggest job growth recently have been in east bay. You'll likely have good chances finding jobs closeby.
> $680k will buy you in San Jose
Google is heavily investing in downtown San Jose, buying up lands. There's also the transbay joinup of BART and caltrain.
Looking at trendlines and extrapolating is a pretty good way to see the future.
A major, major confounding issue is simply not having the money. Of course you'll see a trend of fewer people buying homes if home prices are so high that fewer people can afford them.
I think if you work in tech, silicon valley is pretty unique in that there are so many really desirable employers within a short distance. I'd be comfortable buying a house here even if it meant that it makes it really expensive if I want a job more than 15 miles out.
I'm not sure why maximizing income in the Bay Area is worthwhile. The pay here, while much higher in nominal terms, seems to level off well below my level of comfort for standard of living (and my parents who got me accustomed to it were in much less lucrative fields).
I stay becuase I like the work and the company, because why not take this opportunity while I'm young? But it's an indulgent youthful adventure, not a sustainable long-term plan.
so, assuming you are a medium density type and can stomach an apartment with reasonable soundproofing, you are spending $3000/month on rent here, for a reasonably okay 1 bedroom apartment. (if you are willing to take a hit in quality, you can get more bedrooms or even a bad single family home for about that price)
So you move to a second-tier city and you get the same thing for $1500/month. Now, I don't make twice here what I would in a second-tier city, but I do make rather more than an extra $1500 a month.
But a similar unit in condo form would require a $200k downpayment (save $2000/mo for 9 years) and then $5500/mo through the 30-year mortgage term. That's assuming prices stay flat for 9 years, which would be extraordinary. I don't see any part of my company's SWE job ladder supporting those numbers. But if I want to try, I can't allow my lifestyle to inflate at all under future raises. They all need to be shoveled into that gaping hole.
Note, a lot of companies pay more. according to paysa, the mean Facebook SWE makes like $230k in Sunnyvale (the closest location to mountain view that paysa has information on facebook for.)
Trulia claims that the median 1 bedroom in mountain view is $860K, which is higher than I thought; (santa clara, where I live, it's $622K) 20% of that is $172K... so four and a half years of living off your base salary would be required (three and a half if you commute in from santa clara) I mean, depending on your tax bracket, of course.
And all this is looking at the median, and in the comment I'm responding to, you were talking about the best SWE jobs at your company. I can tell you that it's not at all unusual for individual contributors who are pretty good but not famous or anything to do rather better than the paysa numbers, salary wise.
All that said, I personally don't plan on buying at these prices; (and I'm a sysadmin and have no degree; I'm gonna make maybe 15-20% less than a SWE with a degree at my level) I think right now, landlords are willing to lose money on the actual rent in order to make money on the appreciation. I dunno if this is a good idea long-term, just 'cause if this is the new normal, if housing prices keep rising, I might actually price myself out of desirable metros, and be forced to move to a second-tier city, which I would find unpleasant... but I see no reason to hurry to those second tier cities. Certainly, rent seems to be limited by what people can pay, and as someone SWE-ajacent, I make more than most people, even here in the bay area, so something would have to go wrong with my career to the point where I wasn't making more money than most people locally for me to get priced out of the local rental market.
I mean, if there were smaller, cheaper places available, I'd drop a quarter-million on a "plan b" just so I could continue to live around here if my own career went south... but I probably have much stronger social reasons to stay than you do.
Some of my friends and I have been considering investing in real-estate in a second tier city, just to hedge against the case where real-estate continues to climb globally, but paying half what a house costs here seems high for that. A buddy of mine has been talking about Cleveland (one of his value functions is functional public transit) Cleveland is a lot more than half cheaper than the bay area... but I don't think I'd want to live there.
While there's definitely a lot of wiggle room in negotiating equity compensation or earning bonus, the base salary range feels pretty narrow.
IMO, there's a 10X difference currently between tech startups in SF and tech startups in LA or New York; I've worked with teams inside and outside silicon valley. The calibur of talent/progress difference is just insane.
In other words, they have little incentives to set up offices in other US locations which are not lower cost than their home base and have too few talent at the level they cannot get elsewhere.
The needs of many startups could be different from them.
There’s an opportunity cost of inventing things that actually make people’s lives considerably better.
The valley was the place where this would happen, now that culture and spirit is slowly dying.
Mostly because you can’t take those kinds of risks. Just the living expensive would kill you. VC money needs a quick buck so that kills those ideas in their infancy too.
Innovation is hard!
I don't have the perception that the Bay Area startup scene is dying, but it's perhaps true that the Bay Area startup scene is dying. Basically, you can't raise a $3M seed round on "I went to (Stanford|Ivy League|other top college) and have an idea for a mobile app" anymore, nor can you raise follow-on rounds off anything but revenue growth. That means that the days where a couple 20-somethings could found a company, hire 10 people, and code by day while partying late into the night are gone.
Good riddance, IMHO.
The startup scene is still healthy, but is very different demographically. Some observations:
Average founders skew older - it's more 30- and 40-somethings that worked for a big tech company and cashed out a million or so in stock options, or had a previous startup exit. (The exception is crypto, which is largely financed through ICO now.)
B2B is ascendant over B2C, and many startups are financing the company with pre-sales from paying customers.
Team sizes are smaller, and many companies are using outsourced labor where they either open an office abroad for engineering, or they use Upwork etc. to find contractors.
Startups in general have gotten cheaper and leaner and are more focused on doing the work rather than living the dream.
I know several startups doing Berlin offices. Also, contracting work seems pretty easy to come by over here.
When I look at the bay now, I see a bunch of FANG drones measuring their RSU dicks. People caring more about buying a home and whining about NIMBYs than making cool shit with cool tech. Of course most startups are stodgy B2B and not moon shot B2C, you can't build B2C when your experience is so separate from a normal person's. But another JIRA/GitHub/Slack integration? Ooh, that's the good stuff we can relate to.
Maybe the bay got old, but I don't believe that when I see fresh grads falling over themselves to work at a FANG. Whatever happened, there's not much serendipity left. There will be a tipping point where enough cool stuff is coming out of Detroit/Atlanta/wherever that an investor would be a fool to fixate on the bay.
I do think new startups face significant headwinds now, but they're not the ones you mention. I'm not worried about FANG drones, for example - the majority of people in Silicon Valley have always been employees of big companies, and often quite self-satisfied ones (do you remember how arrogant Netscape, Sun, and Cisco were when Google was still in the garage?).
Also, significant B2C startups usually come out of nowhere, from small teams that were toiling away in obscurity for years beforehand. Do you remember 2007-2010? I was part of the Web 2.0 boomlet, folded up my startup in '08, and proceeded to watch most of my peer companies die over the next 2 years. But while we were all folding up our social networks, AirBnB (founded '06, household name '11), DropBox ('07, '10), Uber ('08, '10), Instagram ('08, '12), WhatsApp ('07, '11), and Thumbtack ('07, '13) were continuing to work on their startups, many of them breaking a lot of common wisdom about what made for a successful startup. When the time was right these services exploded, but we had to go through a huge startup drought from 08-10 in the process.
The factors I'm more worried about are: 1) The average American consumer not having money, which makes B2C business models other than [advertisement, pyramid scheme, extortion, selling personal data] impractical 2) Attention being so focused on politics and tribalism that consumers are too fearful to try anything new and 3) Moore's Law disappearing. I'm not terribly worried about this last one because we can still get another factor of 10-100X out of better programming languages, OSes, and frameworks, and GPUs/TPUs continue to increase in power.
Source for the first part: https://venturebeat.com/2018/01/08/vcs-invested-the-most-cap...
I’m saying the tiny 2 person startup working out of a shared apartment in Soma has some serious headwinds nowadays to hiring and growing in SF these days.
Rather odd choice of Texas cities in my opinion. If you're going to go with Texas, I'd think Dallas and Austin are more obvious choices for technical people.
My financial services firm is slowly moving everyone from NYC to Texas and Florida, for obvious reasons.
Why?
Dallas is too expensive, and imho the only good thing about Dallas is the Stars and Mark Cuban. Austin is good but also small and saturated but also Austin is 2.5 hours away from Houston and 1 hour from San Antonio, so it's not hard to poach talent if needed.
San Antonio has a similar military–industrial complex to SV with it being a major area for bases for the Air Force. It also has the infrastructure scaffold from when ATT was headquartered there. They've got 5-6 F500s headquartered there. So, there's plenty of engineering talent for all types.
Houston is #2 in the USA for F500 HQs following NYC with 19 based here. [0] Houston is massive, 11k sq miles for the metro area. There is plenty of space and Cost of Living is low. You have a major DOD/NASA source of engineering talent plus all the F500s. You've also got massive medial research with the largest medical center in the world while UTMB-Galveston runs one of the most important labs in the country for biocon. It's a major shipping port(s) and the port of Houston is #2 in trade. However, I will yield that the traffic sucks and parts are worst than LA; It's very hot during the summers, particularly August; and, that hurricanes suck. We also don't have earthquakes.
Overall with Texas is you've got the Texas Triangle, it's also a safe bet infrastructure wise because the state has it's own power grid. There's tons of link points for data/bandwith.
[0] https://en.wikipedia.org/wiki/List_of_companies_in_Houston
If you have reached the age of 30, you should already own your home. If not, buy a home immediately. NOW. If you can't afford anything decent close to your place of employment, quit your job and move somewhere where homes are more affordable. Your future happiness depends on it.
Now, one could argue we’re at the peak of the current business cycle and asset prices are overly inflated. And there might be merit to that. In that case, look for real estate bargains where you’ll have equity on day one (short sales, foreclosures, assets priced below their fair market value).
That's only true if the value of your portfolio or salary aren't increasing faster than the market.
I've personally teared up in housing about every other year. It would have been much more difficult to do this is I owned rather than rented.
What does this mean? Moved? Every two years? Sounds horrible. Don't you have any hobbies to fill your time?
Yes, moved every two years. Not ideal, but couldn't have afforded the places I moved into two years earlier and moving produces high quality of life gain.
Maybe it's years living in substandard student housing, or years in "not-in-the-US" housing, or even a couple of years being effectively homeless, but anytime I get more situated than living out of one suitcase and one computer bag, I find moving to be a burden that (generally) outweighs what you call the quality-of-life gain. That's me, and I'm probably inertia oriented in everything except the companies I start/assist/work-for. I love tuning the business to be better. But I often just go home, maybe to a dump or dive, and open a can of tuna fish for dinner. (My kids don't seem to understand that either - so I'm guessing this isn't normal)
EDIT: My (now) ex-wife lives in a nice house, with a fair number of upgrades, in a nice neighborhood. And my kids get to live there too - nice schools too. So, that's nice. But I don't think it is anything I would have ever invested in or developed for myself without her prodding. (Which might be why she divorced me, but I suspect it was probably slightly more complicated than that. But, still, it probably should have been enough!)
It’s ridiculous to say that happiness depends on home ownership, and equally ridiculous to pick an arbitrary age like 30 to serve as a benchmark.
Becoming intensely in debt (thereby forcing myself to work more) by buying into a ridiculously overpriced housing market, locking me to a single physical location that is destroying itself through disgustingly selfish infrastructure planning is not my idea of an advantage, financially or psychologically. I've never lived or visited anywhere in my life that has screwed itself up as much as the Bay Area has - they'll be lucky to be growing as well as Gary, Indiana at the rate things are going. The prices are not justified by wage increases (wages aren't matching price increases) or increasing population (the bay area is now starting to lose population), and combined with the idiotic local and federal politics + trade war economics, have nowhere to go but down.
On the contrary, I contend anyone that depends on the current prices for survival is a bag holder making an extremely risky bet. The evidence is already there that the bet is not going to pay off. My advice: unless you're very wealthy and don't care, or your plan is to go underwater in the world's most expensive retirement community, get out, now. If things go south, liquidity will be far more important for your financial and psychological soundness than debt on a sinking asset in a shrinking regional economy will be.
http://www.erica.biz/2018/cockroach/
Don't buy a house because you feel like it's what you are supposed to do!
- cost of living in the SFBA
- cost of living somewhere other than SFBA but generally "equivalent" in the sense that living there wouldn't be seen as a negative
- a average-ish amount of VC funds that must be invested in a company before capital is returned.
- average amount of capital raise that goes to salary
- what amount of salary is due to cost of living.
It is getting a little bit convoluted, but that would allow you to approximate how much VC money is going to SFBA landlords due to the chokehold on housing supply.
We're seeing a shade of this in the Amazon HQ2 process, but if you have actual physical mobility as an organization over different real estate markets and political jurisdictions it will shift the balance of power in terms of rents and taxation. I don't think it applies to small companies for various reasons, but the motive is there.
Moving from a hub like that has the implicit cost that you may have to move back at some point to find work, or accept the lesser options and negotiating position.
I was talking to someone recently - with all the “tech” going into the Reno area, housing is getting more and more expensive. The average salary is still in the mid 30k range, however.
Biggest non-housing difference was no state income tax, so save 7-10%, then pretty much all car/gas/insurance were about half. Food was a bit cheaper but not enough to make a big difference. We didn't go out much since restaurants weren't good but thats not really a far comparison.
Where do you live in NE California? I love it up there (and SE Oregon)