SAN JOSE, Calif. (KRON) — Despite recent reports of a mass exodus out of the Bay Area, the region continues to be the tech capital of the world, new data shows.
Most recently, Tesla CEO Elon Musk also made the decision to relocate to the Lone Star State.
Such departures are now driving questions over what the future of California’s tech powerhouse will look like.
“I think some of the media attention to a tech exodus is a bit overwrought,” said San Jose Mayor Sam Liccardo.
“They’re actually keeping the workforce largely here; they’re just moving their headquarters staff, which is a relatively small amount of their workforce, the talented folks who are driving innovation and engineering are staying right here in San Jose.”
Liccardo tells KRON4 News issues from housing, homelessness, regulations and taxes are what are causing a growing number of companies and investors to take their jobs and investments to other states.
Tech companies got bigger
Joint Venture Silicon Valley, a nonprofit that provides analysis and action on issues affecting the Silicon Valley economy and quality of life, recently released its annual Silicon Valley Index which details what actually happened in the region last year.
According to the report, 2020 was a record year for venture capital at $46 billion, fueling a record 67 megadeals in Silicon Valley and 41 in San Francisco.
“The index shows that Silicon Valley is a region that is on the one hand thriving, our tech economy, they turned in a banner year any way that you measure it,” said Russell Hancock, CEO of Joint Venture.
“The people that were working in the in-person economy were our lowest compensated workers and so they were the ones that were least able to withstand a shock of this kind,” Hancock added.
“So the pandemic has bifurcated our region, more than ever before.”
Total VC funding to Silicon Valley and San Francisco companies rose 8% year-over-year.
The regions number of extremely large ‘megadeals’ (over $100 million each) nearly doubled compared to the prior year, and the region was home to 114 Unicorn companies (representing 25% of all U.S. Unicorns, defined as private companies valued at more than $1 billion) and an elite-eight Decacorns (valued at more than $10 billion) at the end of the year with a combined valuation of $370 billion.
People are moving, but staying within the state
Despite fears of tech workers rushing to move out of the region as companies allowed remote work due to the pandemic, Silicon Valley’s population – which includes Santa Clara and San Mateo counties -remained stagnant growing by only a fraction of a percent (0.02%) in 2020.
In San Francisco, an overall out-migration was tracked by California Policy Lab’s new study, revealing a “dramatic” shift in population size in San Francisco for 2020, with the vast majority of those who left the city remaining in the state.
The index shows a similar trend as 59% of the people who left the region the past few years have stayed somewhere in California.
Pandemic highlights pre-existing conditions
Instead, what happened in the Bay Area in 2020 highlighted pre-existing realities, including the widening economic gap between low-income earners and the region’s highly-skilled workforce.
Silicon Valley lost more than 151,000 jobs by June 2020, while the tech sector remained nearly untouched with overall employment levels up two percent despite some layoffs.
According to the index, pandemic-related job losses drove the unemployment rate to an unprecedented 11.6 % in April of last year, higher than the Great Recession or dot-com bust.
Black and Latino workers filed initial unemployment insurance claims at rates 1.5 to two times higher than white workers.
The jobs lost were concentrated mostly in lower-income occupations, with losses of up to 31% by May).
The losses were most pronounced in the accommodation and food services sector (-41%), the arts, entertainment and recreation sectors (-54%), and personal services (-54%).
As a result, the pandemic only made certain matters worse as Silicon Valley’s income inequality has grown twice as quickly as that of the state or nation over the past decade.
According to the index, the wealth divide is even more stark, with the top 16 % of households holding 81% of the wealth; meanwhile, the bottom 53 % held a mere 2% of investable assets.
As of Friday, in Santa Clara alone, more than 112,000 COVID-19 cases have been reported and 1,835 residents have lost their lives due to the virus, disproportionately impacting Latinos the most among any other ethnic group (50.9% of total county cases).
However, there is some data from the index that shows concerns about a threat to the region’s status as tech capital of the world.
A years-long out-migration trend did continue, but the net out-migration in 2020 was about half that of the departures from the region after the dot-com bust.
According to the index, the employment growth rate of the top 15 largest tech employers in Denver (14.7%) and Sacramento were higher than the Bay Area’s 3.7%.
According to the Bay Area Council, representing the region’s companies as members and advocates for business-friendly policies has since launched a “business climate initiative” as it worries about companies leaving the region.
“Our vision of the Bay Area is a place anyone from anywhere can come here to build their dream or get their dream job,” said John Grubb, Bay Area Council Chief Operating Officer.
Other cities in Florida and Texas have now jumped on the recruiting train, claiming to be the next big tech hub as more companies and executives move to those states.
But despite such claims, the Bay Area continues to remain home for many employees.
Grubb tells KRON4 News what happens to big businesses, no matter if they stay, leave, or move to remote work — will impact every other facet of life in the region.
“There’s also small companies that have decided to just grow in other places,” said Grubb.
“And the converse isn’t happening, we’re not hearing about big companies that are moving from Texas to the Bay Area.”