Tech Companies Are Leaving Bay Area In Droves – Where Are They Going?

Larry Alton

While Silicon Valley will certainly remain the tech/startup capital of the world for decades to come, it’s lost a bit of its luster and charm in the past couple of years. Many tech companies are on the way out, opting to move east.

Adios, Silicon Valley!

Silicon Valley isn’t what it used to be a decade and a half ago. Companies like Google and Apple, as well as hundreds of smaller tech ventures and startups, are choosing to move portions (or even all) of their operations east. They’re doing so for a variety of reasons, including:

  • Taxes. The corporate tax rate in California is 8.84% (for a cumulative total of 39.4%). Many other states have corporate tax rates in the four to six percent range. Business owners and executives are realizing they can save millions of dollars per year in taxes simply by moving a few hundred miles to the east.
  • High cost of living. On top of hefty taxes, California – and Silicon Valley in particular – has some of the highest costs of living in the entire country. Everything from housing to food is very expensive. Moving out of the area is like getting an instant pay raise.
  • Lack of diversity. Silicon Valley loves to pride itself on diversity, but many say it’s nothing more than a façade. While tech companies in the Valley hire lots of people who look diverse – i.e., different races, ethnicities, and genders – some employees claim they don’t appreciate diversity of thought (unless it aligns with their beliefs). Many business owners say they would prefer to escape to environments where free thought (of all kinds) is embraced.

There are plenty of other reasons for the split from Silicon Valley, but these three factors paint a picture of why entrepreneurs are leaving in droves.

4 popular destinations for tech companies

The question is: Where are all these entrepreneurs and their tech companies going? Some of the destinations are a bit surprising. Let’s take a look:

1. Salt Lake City, Utah

According to data from Cushman & Wakefield, a Chicago-based real estate services company, Salt Lake City has seen the second-most tech-related commercial leases in the country over the past year. It now claims the ninth-largest share of tech tenants in the nation. Tech companies accounted for more than 66% of all major commercial leases signed in 2018 (which is more than San Francisco).

The Salt Lake City area is also renowned for its lower than average cost of living (when compared to surrounding states). This is something local real estate developers regularly hear transplants comment on.

“Just in our master-planned community alone, we’ve already seen a number of families who are moving into the Salt Lake City area to enjoy a lower cost of living,” explains Wildflower, an active family community located south of the city. “When you combine that with strong job growth and beautiful surroundings, it’s a trend we anticipate continuing indefinitely.”

2. Austin, Texas

With companies like Apple, IBM, eBay, and Intel having major presences in the area, Austin has been dubbed “Silicon Hills.” It’s been a major player in the tech startup scene since the 1980s, and the low taxes, affordable cost of living, and pro-business environment have made it even more attractive in recent years.

3. Huntsville, Alabama

Huntsville is one of the best-kept gems of the South. Located in the northern portion of the state – just a short drive south of Nashville – Huntsville is home to a thriving engineering scene. It also has major government support, with Boeing, Northrop Grumman, and NASA all relying heavily on the city. With an extremely low cost of living, it’s the perfect place to start a business and raise a family.

4. Raleigh-Durham, North Carolina

Don’t look now, but the Raleigh-Durham and Charlotte areas are huge landing spots for large tech companies and small ventures alike. With so many medical research universities nearby, it’s a particularly compelling destination for entrepreneurs that are focused on the convergence of technology and healthcare.

The future of technological entrepreneurship

Nobody is suggesting that Silicon Valley will cease to be the tech capital of the world. However, it’s losing some of its shine. As tech companies become less geographically attached to the area, we’ll see more innovation in more places. And, at the very least, this is good for the larger society.

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About Larry Alton

Larry is a freelance marketing & technology consultant with a background in IT. Follow him on Twitter @LarryAlton3.