The Bi-Coastal Startup Model is Broken

By Bryn Gelbart and Thierry Godard, FUELED Media

San Francisco and Silicon Valley have long been the stars of the tech boom. But in the last quarter of 2017 over 15,000 San Francisco residents left the city — more than any other metro area in the US.

Startup founders and tech moguls no longer have to work in a Silicon Valley incubator or rent a tiny room in Manhattan. In many cases, these cities are pushing people away due to overcrowding, high cost of living, and the emergence of alternative communities throughout the country. Cities like Salt Lake City, Detroit, Denver, Nashville, Charlotte, Pittsburgh, Austin, and Atlanta are proving you don’t need to live in an coastal mega-city to build a company that can stand toe to toe with established players.

NYC, LA, and San Francisco Housing Prices Keep Rising

Cost of living in major coastal cities is becoming a larger barrier to entry each year.

New York, Brooklyn, San Francisco and San Jose are consistently in the top five most expensive cities to live and work in the US, with LA not far behind. As of March 2018, the average rent in SF was the highest nationwide at $3,400 per room, and median home price was $750,000. The average yearly cost to rent an office space is highest in NYC, at $14,800 per employee, followed closely by $13,032 in SF.

When tech job salaries are adjusted for cost of living, NYC and the Bay Area barely creep their way into the top 10 highest paying. Housing prices are only going up, and higher salaries already aren’t enough to make up the difference in a substantial way.

This explains why many investors, founders, and programmers are leaving these cities, but the matter at hand is not so much one of migration. It’s more viable to leave Silicon Valley, sure, but the question is becoming ‘why even start your company there in the first place?’

It’s Not Hard to Raise Funds Anymore

When a startup is looking to establish a home base, they used to look to California for investors. But since 2016, the number of California deals has shrunk by 16%. Venture capitalists are increasingly looking to Colorado, D.C, Massachusetts, and other states to find new investments.

As more startups are popping up outside of coastal cities, smart investors are moving to smaller cities to find the next. Mark Kvamme is just one of many top venture capitalist in Silicon Valley that left the west coast world to uncover midwest talent.

Every industry is becoming a tech industry. From commerce and sciences to health care, sports, and culinary arts, tech is becoming the backbone of our economy. This means every city will need tech experts, entrepreneurs, and programmers. These are the jobs of the future, and a global economy is creating more financial growth opportunity in smaller urban environments throughout the US.

Pittsburgh is Proof That The Gold Rush on the Coasts is Over

In 2017, Pittsburgh startups raised over $300 million in funding from venture capital, twice as much as the previous year and the most since the year 2000. A rich history of industry-leading organizations has created a home for scrappy, innovative companies who are finding cheap housing and easy access to talent and funding.

Pittsburgh app developers are in a position of growth and influence. Internationally recognized names in tech like Duolingo and Showclix have built their brand over the course of years. Duolingo is valued at around $700 million, while Showclix recently received a multi-million dollar investment from Providence Strategic Growth, an affiliate of the multi-billion-dollar firm Providence Equity.

Uber notably loves working in Pittsburgh. They have been testing self-driving cars in the greater Pittsburgh area for years. The city is one of the first places they are making this tech available for public use.

As the potential of alternatives to the bi-coastal model continue to grow year over year, this model begins to break down. If you want to start a new company, you don’t need to pack up and move to San Francisco or NYC to find the proper funding and talent. Nowadays you just need to have a good idea and be able to create an excellent product. You can do it anywhere, and Pittsburgh is one of the best places to start.