[YS Learn] What does Elon Musk’s move to Texas mean for startup ecosystems around the world
Tech entrepreneur and Tesla CEO Elon Musk moved to Austin, Texas, last week. Musk, who is also the Founder, CEO, and chief designer of SpaceX, is one of the high-profile tech entrepreneurs to have moved out of California during the pandemic.
Similarly, in November 2020, Joe Lonsdale, a general partner at venture capital firm 8VC, had also moved his firm to Texas.
While Musk said the reason to relocate is to focus more on Tesla’s new electric car plant and his SpaceX venture, he also criticised California’s economic environment as another reason.
However, the obvious question arising here is - if Texas is becoming the new Silicon Valley? But the answer is not that simple.
The freedom to work from anywhere has pushed people back to their hometowns and work from anywhere they want. This holds true not just for the Silicon Valley but also for India. People from tech firms in Bengaluru moved back to their hometowns during the pandemic, and have been working remotely for a few months now.
According to an analyst, people shifting away and disbursing of talent has ensured that people across different parts of the country get work.
“When talent moves out, it also opens opportunity for more startups and more ideas coming out not just from Bengaluru, Mumbai, and Delhi, but across the country. And that is ideally how it should be,” says the analyst.
What do the numbers say?
A survey by Blind, a US-based anonymous professional community, states, 67 percent of professionals across all companies and industries think the technology power is dispersing from the Silicon Valley.
It also noted that 63 percent of FAANG - Facebook, Amazon, Apple, Netflix, and Google professionals think the technology power is dispersing from Silicon Valley. Of this, close to 74 percent of Facebook professionals think the tech power is dispersing from the Valley.
Elon Musk leaving Silicon Valley can also push more people to leave the Valley. Close to 50 percent of the professionals believe Musk leaving the valley will have a big influence on their decision to relocate.
Over 61 percent of professionals across all companies and industries say they will follow tech leaders to emerging tech hubs if they were to relocate. Of these, close to 58 percent of FAANG professionals and close to 69 percent of finance professionals say they will follow tech leaders to emerging tech hubs if they were to relocate.
Not just the Valley
Needless to say, the pandemic has removed geographical boundaries and constraints.
“The mental block to find people from cities like Mumbai, Delhi, and Bengaluru have reduced drastically. People across India are being hired now due to remote work,” explains Bhavik Rathod, Co-founder of edtech startup Kyt.
The cost of living is much higher in metros compared to smaller cities and towns. With salary cuts, furloughs, and even job losses, it only becomes easier to work from hometowns or cheaper locations.
“Over the past eight months, there has been an open-minded approach by founders to hire remotely and through a time-based approach, which means, try people and their work for a month or two before hiring them,” explains Alex Peter, Co-founder and CEO, The Quartile Company.
The pandemic has made it clear that smaller teams with a strong focus can achieve faster results.
Laks Srini, Co-founder and CTO of San Francisco-based real estate tech startup Zerodown, and Co-founder of payroll software startup Zenefits, adds, “We are open to part-time contract work now and are looking for smaller teams. That can bring maximum impact.”
The high cost of living
Joe Lonsdale, in his opinion - California, Love it and Leave it, in the Wall Street Journal, said, “The harsh truth is that California has fallen into disrepair. Bad policies discourage business and innovation, stifle opportunity and make life in major cities ugly and unpleasant”.
Apart from that, most companies are stating their employees need not come back to office until the latter half of 2021. Google said its employees will not return to work until the summer of 2021, giving its employees a chance to sign one-year leases at other locations.
The Wall Street Journal said, while the pandemic has slowed or stalled rental increase in cities nationwide, San Francisco still stands out, said Joshua Clark, an economist at real-estate search service Zillow. Rents in the city have fallen for the first time since the firm began tracking in 2014.
The scenario is also something similar back home. A marketing executive at one of the unicorns in India says, “It is easier to work away from a big city as the cost of living is higher. When we head back to our hometowns, it makes it easier to work with our monthly expenses. The cost is at least 30 percent lesser.”
The pandemic has also pushed people to look at work-life balance like never before. “We have moved to Goa for a while. There is a balance that you just don’t find in city life. There is a sense of mental peace and well-being,” said a startup founder requesting anonymity.
“It also means that many can look at revised salary options. It no longer is what you take home at the end of the month. It is how much time you get to spend with yourself, your family, and what can you do with your time other than work,” said an analyst. Whether the shift is permanent or not is yet to be seen. But it definitely displays a flatter world than before.