Why startups are looking beyond San Francisco for growing their business
The San Francisco Bay area has long been a hub for startups seeking funding and venture capital firms looking to invest in the next big thing. Because of the popularity of Silicon Valley for engineers and technology-based companies, rents and property prices have been skyrocketing. For many startups and workers, these costs have become almost prohibitive for moving to the area and taking advantage of the networking and conferences situated in the technology mecca.
While San Francisco remains the nation's most prolific source of new tech jobs, other metro areas have been attracting top talent away from the high rents and expensive cost of living in the Bay Area by offering something more affordable. The New York Times noted that although San Francisco experienced a 71.6 percent increase in technology jobs from 2010 to 2015 - by far the largest growth of any metro area - other cities still managed to see sizable rises in their tech job growth.
Raleigh, North Carolina, had a 38.5 percent rise in tech jobs between 2010 and 2015, while Austin, Texas, had 37.2 percent growth and Nashville saw a 30 percent uptick, among a raft of other cities across the country.
Speaking with the Times, Jackson Kitchen, an analyst at Moody's Analytics, explained why other cities are starting to see greater tech job growth.
"They are bidding up wages so high that companies are saying, 'Let's expand to Phoenix or Boise or Salt Lake City where wages and real estate are that much cheaper,'" explained Kitchen.
As noted by Bloomberg, with a median monthly rent of $4,547 in February and a home value of $1.1 million, San Francisco tops the 50 largest U.S. cities in these categories. A city like Phoenix, Arizona, boasts wages, taxes and energy costs that are about 25 percent less than in San Francisco, which has made it a very attractive market for tech company growth opportunities.
Further, the rate of growth in these areas is not as high, which allows for startups to find less expensive rates for office space and wages.
Many startups seeking funding will no doubt continue to flock to San Francisco, and the Bay Area at large, for networking and investment opportunities, and growth options can be severely limited in this region. This is why those companies seeking to scale operations and remain profitable are consulting their maps to see where it might be cheaper to do business.
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