History proves that disruptive companies emerge from crises. Some of the biggest players in tech, including Uber, Airbnb, and Square, were built in San Francisco during the last financial crisis. Coming out of the current economic downturn, we should expect to see (and are already seeing) an explosion of entrepreneurial activity–and not just in the Bay Area, but across the country. We can be sure that the next breakout tech company is being built today somewhere, and by most indications, it’s just as likely in the Heartland as Silicon Valley.
According to data from the U.S. Census, Americans set an all-time record of new business applications in 2021–specifically ones that were likely to employ others. But the surge doesn’t stop there. New data shows that business creation has been plateauing at a much higher level than pre-pandemic, with over 5 million businesses created in the US last year. On average, that’s almost 14,000 companies popping up every day in 2022!
As companies like Meta, Amazon, Google, and Microsoft lay off thousands of workers, their highly skilled alumni are flooding the market. Although Ex-Googlers weren’t happy with the “cold” way they were notified of layoffs, they may have been pleasantly surprised by their severance packages. For example, Google is paying 16 weeks of severance, plus 2022 bonuses, giving aspiring entrepreneurs runway to pursue business ideas and take risks.
With less urgency to find a new job and 3 years of remote work experience to draw from, these Big Tech alumni may be reevaluating their future. As remote flexibility, shorter workweeks, and a better quality of life take priority, many tech workers are joining smaller companies, freelancing, or even starting their own businesses. But where will new entrepreneurs choose to set up shop?
Funding and talent are on the move and, in some cases, even out of physical places altogether. One of Silicon Valley’s most prominent venture firms, Andreessen Horowitz, announced the location of its new headquarters: “the cloud.”
The pandemic significantly accelerated the shift of venture capital, a critical indicator of future success, as Silicon Valley’s share of VC count dropped below 20% in 2021. And according to Crunchbase, the rebalancing continued in 2022 with a 40% drop in venture in California, New York and Massachusetts and increased traction in emerging venture destinations of Texas, Florida and North Carolina.
This movement out of the traditional tech hubs combined with an increasingly remote workforce leads me to conclude that the next Uber, Airbnb and Square is likely being built today in one of the new tech cities around the country – in places like Austin, Atlanta, and Columbus.
Read more about the repositioning of tech in this edition of The Mid-Point.