Startups are not concentrated in any one place any longer, but just sort of diffused everywhere.
When Sam Altman says it, it must be true. Silicon Valley is changing and it’s no longer the obvious place for startups.
The president of seed accelerator Y Combinator and co-chairman of non-profit artificial intelligence research firm OpenAI has recently took to Twitter to talk about how San Francisco and the Bay Area are changing.
“I think 2017 was around when it stopped being an obviously good idea for startups to be in the Bay Area, but it’s been somewhat obscured by a massive surge in availability of cheap seed funding,” Altman elaborated on a Twitter thread.
He continued: “The incredibly high cost of living, power of Facebook/Google/etc, and a few cultural issues (e.g., short tenure for people at most jobs), have finally become a counterbalance to the Bay Area’s incredibly strong network effects. There are still some things — e.g great startup executive talent, particular kinds of engineering talent — that are much harder to find outside the Bay Area.”
Altman still expects “a significant % of the $10B+ startups will get created here, so it makes sense for investors to still focus here. But I bet a lot of the ~$100M startups will happen elsewhere.”
According to the entrepreneur and investor, new trends show that startups are not concentrated in any one place any longer, “but just sort of diffused everywhere.”
And Altman goes even further by forecasting a future in which no other American city “will eclipse SF for concentration of software startups.”
Other founders and entrepreneurs agree.
Matthew Prince, CEO and co-founder of Cloudflare, said on Twitter that Silicon Valley “has become to expensive and too hostile relative to other cities willing to bend over backward for innovation and high-paying jobs.”
Money and networking, however, seem to still be prevalent in the Bay Area. “We’ve noticed more and more YC companies coming here for the program, raising money and building a network, and then going somewhere else,” Altman said. “Which makes sense — the fundraising environment and network of the bay area remain unparalleled.”
Investor and entrepreneur Tod Sacerdoti, founder and CEO of video advertising network BrightRoll, responded to Altman tweet: “One of the rarely discussed benefits of both being in the Bay Area and/or being in YC is the ability to quickly access and onboard a network of early customers. This is hard to do in many cities without some sort of tie to a network of companies open to working with a startup.”
In fact, for some startuppers, Silicon Valley still is the place to be. Xavier Amatriain, co-founder and CTO of Curai, pointed out in his response to Altman that while he agrees, “talent density + network effect + money availability still trump everything else.” Amatriain added: “Saying as a co-founder in the Bay who advises several startups not in the Bay.”
But there are pros and cons. In a recent Medium article, Googler Gloria Liou described Silicon Valley as “a place of opportunity.”
This is Silicon Valley_I am privileged to live in Silicon Valley. I was born here, I grew up here, and now I work here as a product manager at…_medium.com
But she also warns about the repercussions of the wealth the area has brought and the physical and mental effects of the tech bubble in the Bay Area.
“I feel myself being influenced by the Silicon Valley bubble,” Liou explains. “I feel myself shifting my focus to money and career trajectory rather than serving those in need locally and worldwide, and I see myself being applauded and fitting in because of it. I feel myself becoming part of the machine. Living here, I reflect on my high school experiences and am filled with misery and anger. The mental health crisis among Silicon Valley high schoolers is getting worse. I think about the negative impacts of social media on mental health that my friends and I suffered in high school and how ironic it is that those same friends now work at Facebook.”
Some say that tech startups and investors are looking internationally.
Robert Gaal, founder of Cooper, said that “It’s really great to see most seed funds in the Bay Area taking international founders more seriously because of this.”
International markets seem a focus also for Altman and Y Combinator, about to start a program in China, “ as soon as next summer,” according to Fortune. The firm — which has seeded companies including Airbnb, Stripe, Reddit, Dropbox, and many others — announced in August last year that former Baidu executive and Microsoft veteran Qi Lu was joining the team as head of Y Combinator China, marking the American startup incubator’s first full-fledged international effort.
“How to help American companies land well in China has been a common struggle,” Lu told reporters during Y Combination China’s launch in Beijing. “There’s structural reasons, there’s a lot of reasons for these companies having difficulties.”
Lu “will be able to take what works with YC in the U.S. and adapt it for China,” said Altman. “My best guess is that a significant portion of tech companies in the next decade will be in China or the U.S. Adding Chinese founders to the community will be exciting.”
According to Emily Warna, Campus Editor at LinkedIn in London and tech blogger, “it might seem like China’s science and tech scene continues to go from strength to strength. And to some extent, it does.” She recently wrote, “China has rolled out plans to become a global leader in artificial intelligence (AI), autonomous vehicles, and robotics as part of its Made in China 2025 program. In short, China is a tech superpower worth following.”
But she warned: “Though we speak about the US tech scene on a daily basis thanks to our precious Facebook, should we perhaps be focusing on the rise of a model that combines the features of authoritarian control with corporatism and mass surveillance instead? Though I still don’t know what the answer is, I _will_say that the idea of a system with almost zero distinction between government and tech — and thus minimal accountability — is pretty frightening.”