Many are fleeing cities like San Francisco and New York. Where are all the founders going?
Location is the topic of conversation on seemingly every Zoom call these days. Sometimes, I feel like I’m playing a game: “Where in the world are you today?”. Since most people [in tech] are remote, they can be anywhere (at least right now). As such, it’s impossible not to wonder whether this change will stick. And it got me thinking: are founders thinking of moving their HQs?
Not everyone is moving, of course. Some people still see great value in the Bay Area, and uprooting families and companies isn’t easy. But still, in my conversations with founders, many are making the call to jet out of the major tech hubs — or they’re at least considering the pros and cons of doing so. Founders have a unique obligation to think about personal life and also what is best for their company. Instead of picking the office space in the biggest city closest to the public transportation hub, founders/CEOs have more options to consider now. Where you decide to set up HQ has big implications on the type of culture you are building and the talent you are attracting, both of which lead to the trajectory for success of the company.
If there’s a founder flight, what does this mean for the next generation of companies? Will we see new tech hubs emerge in the Midwest, South, or somewhere else? In interviewing founders, here’s what I found out.
1. Lifestyle and Talent
COVID-19 has shifted company mindsets to really listen to employees and what they want or need. People have become so used to working from home, companies now need to be extra-conscious of this and — literally — entice employees back to the office. Based on discussions, employee expectations are changing and now include lifestyle and cost of living. Sometimes, for employees, living in the suburbs (and working nearby) makes vastly more sense.
This is a change in mindset that will have an impact on attracting talent and building culture for the company. Reflecting has helped people learn more about themselves, what they need and what makes them feel balanced. Companies need to be open to these changes in order to retain or attract talent going forward. How will each generation respond to this new choice?
2. Oh, Canada
Now more than ever, the country you decide to reside in can impact the team you can attract, and potentially the funding you can receive. One Bay Area founder I talked to is rethinking America altogether, depending on the outcome of the election.
One location that has come up as an attractive market is Canada, due to preferential immigration rules and government support. One example is the SR&ED tax credit program where companies get tax credits on qualified expenditures, which helps companies conserve their cash. According to Liana Hovakimyan, Director at Toronto Global, a Canadian agency funded by the government that facilitates international business expansion to the Toronto Region, “interest in the Toronto Region has remained resilient and strong” through the pandemic. Combined with lower costs than the Bay Area or New York, free healthcare, solid immigration policies, and a stable political environment, Canada is looking like a strong candidate to place a startup everyday.
I may be biased, being Canadian, but there is governmental support and strong ecosystems to build companies and investors realize it as well; more and more US-based venture funds are investing in Canadian-based companies.
3. New tech hubs
Based on an informal LinkedIn poll, “If you founded your company today, where would you pick for HQ?” Toronto was the most common pick at 56%, Other was 29%, Bay Area was 9% and New York was 6%. Based on conversations the past few months, this isn’t surprising. The decision about where to HQ your company is no longer straightforward. For some, fully remote is now a contender and the Bay Area isn’t as obvious.
Movement of people and technology investment can also lead to the emergence of new tech hubs. Taxes are a factor in the decision, but it ultimately comes down to where the talent is. For early-stage companies, it matters where the early-adopters are located, and an indicator of where these hubs are heading, I discovered, could be where influential leaders are going.
One founder pointed out that Bill Gates announced plans to build a smart city in Arizona a few years ago, which could create a hub of talent — and this founder was interested. Texas is also a contender, especially as it relates to taxes; Tesla is a building a new factory in Texas and well-known podcaster Joe Rogan also recently relocated to Texas, which caused a stir. Other locations that have come up as contenders during my discussions include San Diego and Nashville. This pandemic may be the beginning of new tech hubs.
4. Alternative living
Instead of picking an HQ, why not make the HQ mobile? In a time where some companies are decoupling where you live and where you work, another option is to merge them. Sprout, a start-up that provides in-home autism care, has a fascinating set up called the “hacker house.” The company has a core team that lives together in HQ, with the rest of the employees working remote or in satellite offices. Since March 2020, the house has been on the move going from New York to Florida to the Bay Area.
According to Yury Yakubchyk, the CEO of Sprout, “many of our key decision-makers are based in our mobile Sprout House HQ, where we work, live, and play together. Our mobile hacker house model is a significant traction accelerant for our company. In a post-COVID world, I still anticipate growing companies out of hacker houses and moving from city to city as we scale operations nationally. Our model is deliberately designed for hyper-fast geographic expansion, keeping our leadership tightly-synced, and quickly learning about local market nuances.”
Other alternative living situations that have come up revolve around a mobile lifestyle. Whether it is Airbnb-hopping or working from an RV, people are making the best of the location-agnostic workplace.
5. Remote forever
From my conversations, there are varying beliefs around being remote forever. Some people see the value in a physical HQ, whereas others think remote will continue and have given up their office space. Based on discussions with early stage company founders, they still recognize the value in having a hub or HQ. According to Natalia Karayaneva, CEO of Propy, a real estate transaction automation platform, remote work is effective. But missing out on in-person brainstorming is especially hard for early stages companies (sub-20 employees). When I asked Natalia where she would place her company HQ if she started it today, she still said Silicon Valley for the community surrounding it. “If I go to a birthday party, I know I will meet some other crazy techies,” she said. This is a high bar to meet when thinking about new locations.
Onboarding is difficult in a remote world, as well, and until this is solved — by technology, most likely — there will still be real benefits to in-person work. In my opinion, this is especially critical for people entering the workforce right out of school. Will we see a generational divide based on company stage and employee life stage related to preferences around remote work?
It’s that saying: “Location, location, location”
There are real reasons to consider locations outside of traditional tech cities like San Francisco and New York. Where a founder chooses for HQ and location (or none at all) sets the tone of the company. The decisions founders make now will have lasting impact on the company’s values and the talent it attracts. At the end of the day, it comes down to people; the pandemic time period has shown us how unique we all are, whether we prefer working from the office, working from home, living in cities or the suburbs, or hanging in a “hacker house.” Where to set up HQ will be a key consideration for the next generation of founders, and may be less obvious than it was nine months ago — and also, a bellwether of where the startup world is heading.
