Dear Startup Investor,
This week, tech giant Hewlett-Packard (HP) announced that they’re moving their headquarters from Silicon Valley to Houston, Texas.
The news was surprising, to say the least.
HP has been a Bay Area legacy since the 1930s, when its founders (Bill Hewlett and Dave Packard) launched the company out of a Palo Alto garage.
It was quite literally one of the companies that founded Silicon Valley as we know it. And while it’s planning on maintaining a smaller site in the Bay Area, HP’s big move to the Lone Star State will definitely alter the Silicon Valley landscape for good.
That such a big-name public company is packing their bags is one thing… but this is actually a trend we’ve been seeing in the startup world for a little while now.
In 2019, the Startup Genome – a research organization built to accelerate startup success – reported that around 8.2% of Silicon Valley-based tech founders plan to relocate to another city within the next 12 months. That’s around 1,240 startups – a significant number by any measure.
Already, some of the biggest names in the tech world have left:
- Charles Schwab relocated its headquarters from the Bay Area to Dallas.
- Palantir relocated from Silicon Valley to Denver.
- Elon Musk has been toying with the idea of moving Tesla’s headquarters to Nevada or Texas.
But what’s causing this massive tech exodus?
For starters, Silicon Valley is expensive. As of January 2020, the median rent price for a downtown one-bedroom apartment was a whopping $3,500… not the type of money a couple of bootstrapping early-stage entrepreneurs likely has.
On top of all of that, the COVID-19 crisis has proven that many (if not most) major companies are capable of performing their work remotely. In a remote work economy, companies simply may not need to remain in their Silicon Valley offices.
As companies seek to relocate or expand their operations elsewhere, many are choosing cities with lower costs of living that are quickly emerging as the country’s newest tech hubs.
Cities like Austin, Reno, Miami, and New Orleans are seeing massive influxes of relocations and satellite headquarter setups already.
I’ve had my eye on this trend for a while now… since before I even founded the Angels & Entrepreneurs Network.
Over at the Network, we’ve featured top-tier startups raising money from all corners of the country, including (but not limited to):
- A Maryland-based startup bringing clean energy to those who can’t access it…
- An Atlanta-based startup making buying and selling homes more efficient and cost-effective…
- A Florida-based company connecting children with their family members to read and draw while they’re not in the same place…
- And so many more.
The research team believes that each one of these companies has what it takes to make it to unicorn status. There are plenty more out there just like them… and the team and I will be working hard to scout the best ones.
(I highly suggest you catch A&E advisory board member David Weisburd’s secret for pinning down startups with the greatest unicorn potential. Click here to catch the event transcript.)
I believe the Silicon Valley tech exodus is great news for angel investors and entrepreneurs across the country.
The Bay Area (and New York and Boston and more) will always be compelling spots for tech entrepreneurs to settle and build their businesses.
Innovation is entrenched in their cultures, and I don’t think that’s going to change completely. (As of today, over 44% of venture capital investment in the United States happens there.)
But for entrepreneurs who can’t afford to move to Silicon Valley or who have established their businesses in other parts of the country, an exodus like this ultimately democratizes their ability to raise capital.
It means that wealth, opportunities to amass wealth, and opportunities to invest in the next up-and-coming tech names won’t be limited to just a few small circles in the country…
And that’s exactly what has me excited for the next generation of startup investing.
Ultimately, it’s very likely that the next biggest unicorns will not come from the major tech hubs we’ve always known. On our end, we’ll continue sourcing the best deal opportunities out there… no matter where they come from.
Until next time,