Why New Tech Startup Hubs Are Popping Up Around the Country
For years, Silicon Valley has been America’s cradle of tech innovation. Thanks to its history with military technology, its proximity to Stanford University, and early forerunners of modern tech from Shockley Semiconductor Laboratory, it’s a conceptually appropriate home and features a rich pool of talented employees and investors.
But while it might still be a good place for major, established companies like Google and Apple, fresh entrepreneurs looking to launch a tech startup are starting to gravitate toward alternative startup hubs. Take, for example, the Silicon Slopes of Utah, where lower-cost communities like Wildflower are springing up to support entrepreneurs and their families as they take advantage of the many opportunities in the surrounding area. Or take Silicon Prairie, a cluster of hot startup areas in the Midwest.
In each new area, there lies a combination of avid investors, resources like incubators and accelerators, and of course, an entrepreneurially-minded community constantly looking for new opportunities to innovate. So what pushed these entrepreneurs out of Silicon Valley, and how are they able to find new environments in which they can thrive?
The Silicon Valley Push
There are a handful of reasons why entrepreneurs are becoming less interested in the allure of being nested in the heart of Silicon Valley:
- Expense. Silicon Valley lies in the southern area of San Francisco Bay, where housing prices are practically out of control. The median price for a home is $830,000, making it one of the most expensive areas in the country. Of course, things are even more expensive for tech companies looking to set up an office or hire employees; because so many entrepreneurs are clamoring to get involved, rent and salary prices are exceptionally high and always climbing higher.
- Competition. There are already hundreds of major tech companies operating in Silicon Valley, and dozens more arise every year. Being involved in the tech world means you’ll be competing with national-level players no matter where you set up shop, but starting your business in the heart of Silicon Valley puts you in direct contention with many other businesses like yours. You’ll be competing against other new entrepreneurs when it comes time to pitch your business, and you’ll be competing against well-established businesses when it’s time to hire employees. For most entrepreneurs, it’s not worth the hassle.
- The hivemind. When working in the same place, in the same industry, while wooing the same influencers, entrepreneurs tend to think all alike. Starting a business in Silicon Valley may drive you to create a business that’s too similar to the businesses that came before, or force you to buy into political or philosophical ideas you may not have pursued on your own. This hivemind has been criticized as an obstacle to both diversity and innovation, causing both new and experienced entrepreneurs to look for opportunities elsewhere.
The Opportunity for New Areas
There are also some major pull factors from new areas:
- Lower costs. San Francisco and its surrounding areas come with nearly the highest cost of living in the nation, so literally any other area will be cheaper. Most new startup hubs emerge when housing, food, transportation, and other costs are low enough for them to operate reasonably.
- More support. Silicon Valley already has a ton of investors, and plenty of entrepreneurs eager to get involved, so they aren’t doing anything special to incentivize entrepreneurs to join their ranks. Other areas are enthusiastic, bordering on desperate, to get more entrepreneurs, since small businesses are such an important driver of economic development. Cities around the country are offering unique incentives for business owners, including special grants and loans, free resources to support startups as they grow, and better infrastructure for emerging businesses.
- Remote working opportunities. It’s also worth noting that the possibility of working remotely has improved dramatically in the past decade or so. Entrepreneurs have more portable devices, more cloud-based software tools, and more of an established precedent to operate a company remotely. This forgoes the need of having a centralized hub, and makes the location of your central headquarters somewhat arbitrary.
- Geographic opportunities. That said, there may be some richer opportunities in cities not already populated by hundreds of tech companies. Launching a startup in a city with minimal innovation can help you generate more attention for your brand early on, and attract some truly passionate new hires.
It’s likely we’ll continue to see a diversification of areas where tech startup entrepreneurs can call home across the United States, especially as Silicon Valley expenses continue to rise and remote work becomes even more convenient. If you live in a metropolitan area, keep watch for a startup hub to develop near you—or do your part to start one if you’re entrepreneurially minded.