why tech companies are in San Francisco when they could have cheap offices and fast internet pretty much anywhere?
In: Technology
It’s where the whole ecosystem developed… research at universities like Stanford spun off companies who stayed in the area and recruited from those schools to get top talent. Other tech/programmers, etc. moved to the area because of the concentration of jobs. Investors/Venture Capital firms were also in the area, so it’s easier to seek out funding for new companies if you’re in the area.
Some tech companies are starting to move some operations out of Silicon Valley. Apple has offices in places like Austin. Hewlett-Packard, the original Silicon Valley company, recently announced it’s relocation to Texas. It will be interesting to see what happens as more workers work remote. I suspect companies will remain in the Valley but downsize their presence and perhaps set up small satellite offices in various cities for remote workers to occasionally use, hold meetings, etc.
I don’t work in Silicon Valley, but I did work for Silicon Valley-based company on a satellite campus on the other coast in an area semi-seriously called “Silicon Alley” in NYC. Personally… I think people like the energy of it all being in one place and a bit of a buzz of energy in the air. It’s sort of like living in an arts district, you see others and you are inspired or driven to compete harder, possibly both.
Plus, this industry (as others have pointed out) is incredibly incestuous, and people like to hop around companies without having to change where they live, friend groups, etc.
Finally, You aren’t going to convince the brightest minds in tech to move to the middle of no where (or have a long commute even from a suburb) to work for a single company that they may or may not like. Having a desirable location is a huge negotiating factor.
Source: I’ve been in that business for almost 15 years, as a tech innovation worker, also as an executive, and also working closely with VCs.
Fasten your seat belt, I love to tell this story.
Two high level reasons:
* Because that’s where the private funding money is. Executive teams have to be there to stay close to the investors that continuously keep them accountable; and those executives often (not always) prefer to hire teams close to them to in turn keep them accountable.
* Because that’s where modern innovation culture was invented for this current industrial revolution, and keeps being best implemented.
But why are those two things happening there? It’s actually no coincidence.
There was that dude called William Shockley, who was a bit of a genius jerk. He invented the modern transistor, patented and commercialized it, and won the Nobel Prize for it. Back in the 50s and 60s, he continuously refused the pressure from his East Coast investors to move closer to Wall Street money, because he just wanted to live in the San Francisco Bay Area, and was generally hard to convince about anything.
He started accumulating a trove of more junior talents around him, who had moved there to work with him. All of his management style was unwittingly very anti-innovation (top-down disempowerment of the builders, encouraging people’s own goals over helping each other, opacity over transparency, …), which led 8 of his most senior employees (look them up as “The Traitorous Eight”) to leave on the same day and found the company Fairchild Semiconductor (“the first trillion-dollar startup”), whose success indirectly funded all of the tech companies you know of today. Those people were all already in California with their lives and families, so they still didn’t want to move; so investors now had to compose with that.
Fairchild successfully established modern innovation practices by intentionally keeping as far away from Shockley’s paranoid micromanagement as they could. Eventually, they each left Fairchild pretty wealthy to found or invest in other tech companies (Intel, Amazon, Google, AOL, PayPal, …), which some affectionally call “Fairchildren” companies. They still didn’t want to move East, so that’s when Wall Street money gradually took the hint that they were the ones who had to move for anything tech innovation related.
It’s a fascinating story, that I encourage people to look up more about. The serendipity of it all in particular, should help shed light on why many places in the world are trying to imitate the Bay Area’s success, but the birth of an industrial revolution out of thin air is not something you can easily manufacture. All about it is a beautiful accident, down to its geography.
Cause they tend to hire folks out of colleges, and tech folks willing to work for you, often want to work in a metro… or did before the pandemic. Now? Lots of folks are re-evaluating their $4000 usd/mo shoeboxes.
Because young engineers don’t want to work in an office in the middle of Wyoming countryside.
This will change now with the pandemic making companies realize they are wasting money on offices when people can work remotely. The next crop of Silicon Valley workers will be living wherever they want, aka drastically cheaper places.
Many tech companies are branching out because of how extremely expensive silicone valley is. Phoenix is one of the cities growing in tech because there’s so much room on the outskirts of town, it’s inexpensive, and there are no natural disasters-just need to manage the heat
Most of the other posters have covered most points.
One thing that is unique to Tech companies is that top Talent has a very outsized impact on your company. Tech companies have some of the highest market cap to employee ratios. And since in theory Tech can exist anywhere, then being located in a place that is very desirable to these top talents is a must.
And one of those great advantages the SF Bay has is Diversity. The Bay Area is very accepting of all cultures. If you are an immigrating Indian or Chinese or Japanese CS Engineer. Knowing that you are going to a city with large communities of your background is a good feeling. Plus, knowing that racism is not going to be a major factor must also help.
Another factor is weather. I know SoCal people have this weird idea that SF is freezing half the year. But its really not. I’d actually argue that unless you like to surf a lot, SF weather is better than LA. Especially, the inland portions. (Although, as far as i’m concerned both are better than 95% of US cities).
You know how when you show up to your first day of first grade, and you get to pick a seat, and you really like to sit by your friends? Even though there might be a better seat by the window, and you’re not even supposed to talk to your friends while you’re sitting at your desk, it’s still fun to be nearby them so you can run to the lockers together and have little tiny side laughs during the day?
Thats why like-minded people who want to do some like-minded stuff end up living right by each other. Humans like being in a group that feels especially like them.
Talent attracts companies, and companies attract talent, but there is more. These reasons will persist with remote working.
Weather (and outdoors): Great weather for most of the year for outdoor activities, snow, forests, deserts, and oceans in driving distance.
Diversity friendly: Huge diversity, which is especially important if you are diverse yourself, from gender to nationality. Why would you want to live in a place where you are not welcome?
Innovation and Science friendly: The belief that technology will help us get out whatever mess we are in is widely spread in the Bay Area.
Infrastructure: World class health care (and health insurance is not really a problem for tech talent), good schools (possibly private, but again, not really a problem).
SFO: It’s not the greatest airport in the world, but it has direct flights to pretty much anywhere you might be coming from, including 50+ international destinations with other high tech hubs, like Israel or London, and Asia. etc. For domestic, you have three airports to choose from.
I am certainly not saying all of the above are universal, or even universally good things. But if you hate humid summer and freezing winters, if you don’t fit in whatever environment you are in, and if you like to solve problems through technology, the Bay Area is not a bad place to live or find talent to hire.
Other places have some of the above, but few have all of them.
People love that enough that they are willing to pay more for smaller housing. They pay more for gas, milk, pretty much anything than most other places in the US. Many get paid more, too.
Also, office space is cheap compared to salaries, so it matters not. If needed you squeeze more people into less space.
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