• February 4, 2023

Silicon Valley is not suffering a tech exodus, and money is flowing in at record rate — for a fortunate few

Despite reports of an exodus, Silicon Valley remains the technology capital of the world. New data shows that record investments in the industry continued in 2020 and jobs and population in the region as a whole have not declined.

While the top-class descents from rich executives and investors like Elon Musk and Companies like Oracle Corp.
ORCL, -1.51%
and Hewlett Packard Enterprise Corp.
HPE + 1.36%
I raised questions about the future of California’s technology powerhouse. An annual report released this week found little evidence of a trend. Instead, the main impact of the COVID-19 pandemic on the San Francisco Bay Area in 2020 has been to widen the divide between owners and non-owners as all the money is still going into few pockets as the coronavirus gets poorer communities.

“Today we have to openly admit that the pandemic made the rich richer while the poor die,” said Russell Hancock, executive director of the Silicon Valley joint venture, which released its annual Silicon Valley Index this week, detailing what was recently in the region happened year.

The report revealed record venture capital investments in startups in the Bay Area, as well as booming market caps for public tech companies and standard initial public offerings. Amid fears that a technician might leave the Golden State because companies allowed remote working, the population in Silicon Valley – defined as the counties of Santa Clara and San Mateo – was mostly flat for the year, rising 0.02%.

While widespread exodus was tracked in San Francisco, the vast majority of those who left the area’s most iconic city in the past year were stayed in the stateAccording to US Postal Service data released this week by the San Francisco Chronicle. This is in line with what the Silicon Valley Index shows: 59% of people who have left the valley in recent years have stayed in California and moved up and down the state.

For more: Big Tech is swallowing the rest of Silicon Valley

Opinion: Some technicians leave San Francisco. You will not be missed

“I think we can all calm down,” said Rachel Massaro, director of research for the joint venture, during a press conference on the index. “We are a place of innovation. We are a place where these high impact businesses are housed. We did not see any significant losses among them. “

In short, the largest businesses and highest paid people in the area fared drastically better and flourished in many cases – employees earning more than three times what they did in service professions had to work remotely and protect themselves from a deadly virus – while low-wage workers Lost jobs and got sick, the lack of a safety net throws a harder light on inequality.

“It’s a story of two economies,” said Hancock. “There are two stories.”

The tech story

The market capitalization of companies based in Silicon Valley and San Francisco rose 37% to $ 10.5 trillion last year, thanks to the huge tops of companies like Tesla Inc.
TSLA, -0.77%,
market capitalization increased more than 700% in 2020; Apple Inc.
AAPL, + 0.12%,
that increased by 77%, while Facebook Inc.
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grew 30% and Google
TogetL, -0.81%
experienced a 28% increase.

Big tech kept getting bigger in other ways too. Top 15 Tech Employers In The Region – Including The Above As Well As Other Big Companies Like Intel Corp.
INTC, + 2.27%,
Salesforce Inc.
CRM, -0.18%
and Cisco Systems Inc.
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– ended the year with a 3.7% increase in jobs, although several hundred thousand jobs disappeared in the region as a whole. And despite sensitive questions about the impact of moving from home to commercial real estate, the largest companies in the region continued to build on existing projects like Google’s planned massive development in San Jose, California.

The next generation also received record investments. Snowflake Inc.
SNOW, + 0.08%,
DoorDash Inc.
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and Airbnb Inc. ABNB All three Bay Area-based companies were the three largest IPOs in the US in 2020, excluding specialty acquisition firms. And even in a booming year for IPOs, Silicon Valley outperformed the rest: In 2020, Valley IPOs rose 117% and SF emissions rose 101%, while IPOs generally fell 80% last year, according to the Silicon Valley Index.

IPOs in 2021: After a year of impressive pandemic deals, these tech companies expect it to continue

It was also a record year for venture capital. Funding for Silicon Valley and San Francisco companies rose 8% from 2019, the report said. Of the $ 123.6 billion in VC funding in 2020, $ 26.4 billion went to Silicon Valley, $ 20 billion to San Francisco, and $ 67 billion to California. Much of that investment went into well-known startups like Bay Area Decacorns (private companies valued at at least $ 10 billion) like Stripe, Instacart, and Robinhood.

The other, less positive story

While big tech has flourished and money has continued to pour into potential additions to this group, the gap between those who emerged from that feat and the poorer Silicon Valley residents is wider than ever, the index shows.

As of last Friday, 2,069 people in the area had died of COVID-19, Hancock said. Mortality rates were highest among Native Hawaiians / Pacific Islanders, Black / African American Americans, and Hispanics and Latinos, respectively. A report from Mercury News showed that poorer areas had far higher death rates than more affluent ones, such as the largely Latin American neighborhoods of East San Jose.

Low-wage workers lost their jobs or had to compromise their health in order to maintain their positions.

“The pandemic has wiped out our services sector and our personal economy,” Hancock said. “There is real carnage out there. People have lost their livelihood. “

Municipal infrastructure and service jobs in the region fell by 54% by mid-2020. Hispanic Americans were 1.5 times more likely than whites to report jobless claims, Hancock said. And in December, more than 626,000 households in the Bay Area, including nearly 200,000 households in Silicon Valley, were at risk of eviction or non-payment of mortgages, according to the Index.

See: How long are Silicon Valley employees who cannot work from home paid?

Shuttle drivers who drove technical staff to various offices in the Bay Area for companies like Salesforce Inc.
CRM, -0.18%,
Twitter Inc.
TWTR, + 0.03%
and others – who have told their employees that they can work remotely permanently or most of the time – have been laid off or on leave, said Stacy Murphy, corporate agent for Teamsters Local 853, which represents approximately 800 shuttle drivers in the Bay Area. Some drivers still have paid leave, others are no longer paid and most have no idea when they will be able to return to work.

“We’re all waiting patiently,” said Murphy, who said the union is in constant discussion and advocates that drivers continue to be paid.

The bleak future

Some data from the index shows that concerns about threats to the region’s reign as a technology hub are not unfounded. Although the population in Silicon Valley did not decline in 2020, a year-long exodus trend continued. However, the index shows that net churn in 2020 was about half the rate of churn from the region in 2001 after the dot-com bubble burst.

The index also shows that the top 15 tech employers in Denver (14.7%) and Sacramento (14.5%) had employment growth rates nearly four times that of the Bay Area’s 3.7%. The Bay Area’s share of the U.S. workforce at the same companies decreased from 26.1% in January 2020 to 23.9% in December. While the percentage increases were lower, more technical jobs were created in the Bay Area overall than in the other metropolitan areas.

Metropolitan areas in Florida, Texas, and elsewhere are touting themselves as the next big tech hubs as businesses and executives move to places like Texas, where Oracle and Hewlett Packard Enterprise Co.
HPE + 1.36%
have relocated their headquarters – even if many Oracle employees remain in the Bay Area, Hancock emphasized.

When other businesses move or make decisions about whether their employees should return to the office, it affects the construction projects being put on hold or office rental prices, which have largely remained stable.

The Bay Area Council, of which the region’s businesses are members and campaigns for business-friendly policies, has launched a “business climate” initiative because it is concerned that businesses will leave the region.

“It won’t be an immediate change,” said Patrick Kallerman, director of research for the Bay Area Council Economic Institute. “The Bay Area won’t be a ghost town in six months. We wonder if this will be a long-term, meaningful change. “

These changes will impact the quality of life in the Bay Area as communities face budget constraints. According to the SV Index, the city of Silicon Valley’s revenue is expected to decline by an average of 5%, largely due to the impact of the pandemic. In San Francisco, sales tax revenue declined 43% year over year in the second quarter of 2020 San Francisco Chroniclewho examined the impact of the pandemic on the city’s once busy downtown area.

What happens to the big companies – whether they go, stay, or change their work-from-home policies – affects the small ones too.

Alicia Villanueva, who owns Alicia’s Tamales Los Mayas, a tamale factory in Hayward, Calif., And Lynna Martinez, owner of Cuban Kitchen, a restaurant in San Mateo, Calif., Both said they are relocating despite a devastating loss of income Employees would have avoided due to the Paycheck Protection Program (PPP) and other loans.

Both companies relied heavily on supplies to technology companies and other businesses in the Bay Area.

“We had hundreds of customers including Oracle, Facebook, Google, and Comcast
CMCSA, -0.88%,
Said Martinez. “We placed between 100 and 300 orders before we opened our doors at 11 am. In March and April, the boom, 50% of our business was gone.”

The two women said they had to adjust and make up for lost business as much as they can. Martinez said her catering business is probably a tenth of what it used to be. Villanueva’s son delivers tamales to a school district more than 100 km away.

“He wakes up at 2am to get ready and deliver to Vacaville at 5am,” said Villanueva, who has 21 employees.

Martinez and her eight employees are relying more on referrals, and she is now considering franchising.

“The pandemic has forced us to target a wider, more dispersed base,” she said. “In some ways, this was a good challenge for me as a business owner who wanted to pursue the idea of ​​a franchise.”

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