Tech Companies Are Leaving California. Is Texas the Next Hub?

If you’ve followed tech news in 2020, there’s no doubt you’ve heard of the new hotspot: Texas. Brands like Telsa and Google are building campuses in the state, but they’re only a couple of the many companies expanding into the Lonestar State. Some companies already have a presence in Texas; Apple has an Austin headquarters where they are focusing their expansions. Without a doubt, Texas has become a tech hotspot.

It wasn’t always this way. A decade ago, Silicon Valley was the biggest name in tech. Google and Apple were stood out for their with their presence, and many more tech companies popped up. If you were chasing a career in technology, this is where you needed to be.

Times have changed, and work cultures are emphasizing different priorities. After 2020, many companies are reassessing the need to keep their workforce in a defined physical location. Even the companies that need in-person workers don’t necessarily need to be in the San Fransisco area. So, many companies are relocating. It just so happens that Texas, specifically the Austin area, is getting a lot of California transplants.

People are starting to wonder why are so many Californians are leaving. While Texas has its own benefits, it’s different than living in the Bay Area. Now that companies are giving their employees more options, the culture shift may change workers’ priorities.

How Silicon Valley Came to Be

Silicon Valley became a tech hub for two main reasons: its geographic location and its proximity to higher education. Early in the 1900s, the American government saw a need for wireless communication. Due to its proximity to San Francisco ports, Silicon Valley would be the home of a strong Navy presence. Then, wireless communication would be forever changed at Standford Univerity in 1909. Lee de Forrest was given a $500 grant to design an audion tube that would amplify electrical signals through the air. This served as a pivotal starting point for wireless radio communication.

Radio and telegraph industries would use the technology in Silicon Valley and establish a tech presence. To further the prevalence of technology, the US Navy purchased Moffett Field in 1933. This would become the home of aerospace research, further demanding a need for cutting-edge tech.

Perhaps the roots of modern Silicon Valley can be found in a man named William Shockley. In the 1940s scientists at AT&T in New Jersey developed “transistors” that could better amplify electrical signals. Shockley, who was an MIT graduate, decided to open a company producing transistors. This company would be in his home of Mountain Valley, CA, and he needed to rely on investors to secure funding. He also employed young, inexperienced engineers including a recent Standford grad. This engineering program at Stanford also has a place in Silicon Valley’s history. A professor named Frederick Terman would encourage his student to pursue personal endeavors. Through his encouragement, Hewlett-Packard was formed.

By the 70s, companies like Apple and Oracle would establish their presence in Silicon Valley. As the internet gained prominence, more companies would call Silicon Valley home. This is why Google, eBay, and Twitter can all be found within miles of each other.

Why Companies Are Leaving Silicon Valley

The turn of the millennium would see a rise in web-based companies in Silicon Valley, but their very platform may have started a downfall for the region. During the COVID-19 pandemic, millions of Americans were working remotely from their homes. This meant workers at tech employees didn’t need to leave their homes to start working. However, this alone isn’t shocking change. Tech companies are usually ahead of the curve in this regard. Rather, the pandemic highlighted all of the downsides of living in the most expensive part of the country.

The cost of living in California is one of the biggest reasons for companies and people to leave. Real estate is exceptionally expensive, making it difficult for employees to afford daily life and purchase homes. When employees are stuck working remotely, it can be hard to spend the days in a tiny space. The concept of moving to a cheaper location where homes are more affordable becomes more desirable. Plus, remote workers at a California-based company can enjoy higher wages while working in that new location.

Companies may also feel California imposes too many restrictions on businesses. This became apparent during the pandemic when Elon Musk defied state orders to resume operations at the Fremont Tesla factory. California has imposed many restrictions to prevent the spread of COVID, while states like Texas have notably fewer. By this point in time, there is no mask requirement in the state.

A change of location could be considered a longterm investment for the tech companies. Hiring employees outside of California means companies avoid the inconveniences from the state. With lower costs of living, it costs less to pay employees a livable wage. Beyond this, companies will be paying less in monthly expenses. The longterm benefit isn’t simply monetary. When employees can afford family life, they may be more inclined to give a company a longterm commitment. Silicon Valley is unlikely to have affordable housing for families.

Each company will have its own reason to leave Silicon Valley, but it’s clear multiple companies are seeing the benefits. Now, they need to find a new home.

Is Texas the Next Tech Hub?

The companies who have left Silicon Valley aren’t all heading to the same place. Still, many parts of the country are being heavily impacted by migrations. Texas may be the one place housing the most former-Californians, likely fueled by the migration of tech giants. Tesla and Oraclemade headlines in 2020 for their decision to move to Austin while Hewlett Packard is finding a new home in Houston.

In terms of affordability, Texas has California beat in almost every category. The only place where California may beat Texas is its lower property tax. However, this can be a deceiving statistic. Property costs in California are significantly higher, so Californians are still likely to have a greater bottom line than Texans.

To understand why Texas would be appealing to employees, you don’t need to dig very deep. The biggest selling point: there’s no income tax. This is one of the reasons why employers and employees are eyeing the state. Meanwhile, California has some of the highest income taxes in the country.

From a financial standpoint, Texas has many advantages over California, but there are reasons people would want to street clear of the Lonestar State. The two biggest reasons would be the weather and the political climate. Silicon Valley isn’t known for being particularly hot or cold; it’s fairly moderate when compared to other parts of the country. Texas is known for getting hot and has periods of sweltering heat. Californians might not escape the wildfires they’ve grown to fear, and they’ll also need to be prepared for hurricane seasons. This might be an unwelcome change for those who can spend the whole year in a hoodie and jeans.

The Bay Area, especially San Francisco, has gained a reputation for being one of the most liberal places in the country. On the other hand, Texas is a red state and much more conservative than California. While some people may find likeminded individuals in Austin, it’s impossible to complete escape the conservative influences in Texas. Depending on individual priorities, this may be a dealbreaker for people looking to head south.

Ultimately, the downsides have not deterred tech companies from setting up camp in Texas. For their employees, this might make relocation desirable. Other might not want to leave California or would rather relocate elsewhere. Remote work means many people can keep their jobs without any geographic restrictions, and this seems to be the trend among tech companies.

California or Texas: Where Will Tech Call Home?

There’s no denying the trend. Companies are leaving Silicon Valley; at the very least they’re expanding in new locations. This is going to write a new history for tech in America. Silicon Valley isn’t the “place to be” because there’s no reason to be in a specific place.

This gives companies the freedom to operate in different geographic areas. California is ranked the 49th best state for business operations according to the TaxFoundation, while Texas is the 11th. For this reason, companies want to establish presences in locations where they can operate at lower costs.

Business Tax Climate Index 2021 via Tax Foundation

Texas is going to be an appealing choice for many reasons. Despite the fact that it’s not the single best place for business operations, it also offers a lot of options. Apple already had a presence in the state, meaning tech workers already have reasons to consider the state. Employees can afford property, and it’s far easier to maintain a livable wage. Plus, there are major cities in Texas and a unique culture. Some may find this unappealing, but others will welcome the changes.

Still, we’re a long way away from Silicon Valley losing its title as the tech capital in the United States. Most likely, we will start to see more pockets of tech companies establishing themselves in different states. Florida and Georgia are also receiving former-Californians, and it wouldn’t be surprising to see a new, trendy location in the next few years. For now, Texas might become the biggest pocket of tech transplants.

The biggest shift in tech employment has been toward a remote workplace. This removes any need to stay in Silicon Valley, but that doesn’t mean everyone wants to leave. It may be the companies who have the biggest issue with Silicon Valley because the one thing you can’t find in California is affordable properties. This is going to drive companies out of the state, and Texas seems really appealing for companies looking to purchase space for warehouses. Some workers may want to move with their company, but others will just keep their offices rent-free in cyberspace.

Thank you for reading! I love connecting with other content creators, particularly in product design, branding, and finance. Beyond Medium, I can also be found on my website and LinkedIn.

User Analytics | Digital & Brand Marketing | Productivity … hoping to explore topics that interest me and find others with similar passions

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