It’s a combination of factors:

  • We’ve all learned to work as distributed teams now. All of us. And what we’re learning is that not only do many employees want to work and live in cheaper parts of the U.S. (and the world), but a lot of them want to work somewhere warm. Many tech employees have moved somewhere warmer than the SF Bay Area.
  • Corporate taxes. Many mature tech companies are moving to Austin or other parts of Texas. Why? State corporate tax there is 0%. Versus 9% in California. That’s a quick way to be much more profitable — if you are profitable and can move.
  • Employee taxes. California taxes on employees are up to over 13% at the very high end, and about 10% on average for a tech employee. Versus 0% in Miami or Austin or Seattle.
  • State capital gains taxes. A subtler point, but many states do not tax capital gains at all.  California taxes them at the maximum amount, as ordinary income.  Leave California for the “right” state well before you sell your startup and you make 13.3% more.  That’s a lot.
  • Cheaper to be almost anywhere else.  Not only is housing extremely expensive in the Bay Area, so is office space, even now.  SF proper has come down a little bit, but the rest of the Bay Area really hasn’t.
  • They never really wanted to be in SF Bay Area anyway. This is common with many startups where the founders didn’t really want to be in SF Bay Area — they just felt they had to to be competitive. They often don’t feel that way anymore, post-Covid.
  • The CEO has left. For tax reasons or otherwise, many CEOs have now left. The CEOs of Snowflake, Dropbox, Oracle, Tesla etc. no longer reside in California. So why should the company? More here.

Most importantly, you now can.  You now can move.  We aren’t chained to the SF Bay Area.  We all know how to work from anywhere after all this.  Should you move?  That’s more complicated.

The SF Bay Area is still the HQ of SaaS. It’s just, things are a lot more distributed now.

A related post here.

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