(Via Zerohedge)
Silicon Valley – the promised land of innovation, venture capital, and exorbitant costs of living. And many of the most valuable companies from the region, such as Square, Stripe, Airbnb, Uber are all based in the city of San Francisco.
Increasingly, however, it’s hard for startups to compete in the market for talent in the infamously expensive city of San Francisco.
In March 2017, a blog post by Zapier CEO, Wade Foster, announced they would offer a $10,000 “De-Location Package” to employees that would move out of San Francisco. Fintech startup Varo Money announced in July that they plan to move their headquarters from San Francisco to Salt Lake City, citing high home prices among other reasons.
We decided to analyze whether startups based in San Francisco actually had offices elsewhere as well. Are companies located in the city for fundraising and marketing purposes, but also creating offices in other cities and countries? Is this phenomenon limited later stage companies only or are early stage companies saving costs this way too?
We took a look at the startups headquartered in San Francisco to determine if and when they expand to locations in other regions and where those regions are. Specifically, we pulled data on the 903 companies headquartered in San Francisco that have more than $5 million in funding from our Craft dataset of companies and their locations.
We found that 38% of San Francisco tech companies companies had locations elsewhere – with New York as the top U.S. city for an additional location and the U.K. as the top country for an additional location. Even for early stage startups (defined as raising $5-10MM in this analysis), 21% of San Francisco companies also had offices elsewhere.
For context, the table below shows the distribution of these startups in buckets based on total funding that we will use for this analysis.
As one might expect, there are far more startups in SF with less than $50 million in funding than there are those with more than $500 million in funding. While many startups aspire to be the next Uber or Airbnb, the distribution is heavily skewed towards those with lower amounts of funding.
To begin, we analyzed the distribution of companies that have solely their San Francisco location and those that have office locations outside of San Francisco. Of the 903 companies that fit our criteria, 339 startups (roughly 38%) have locations outside of San Francisco, which means that 564 of companies only have their primary SF office. See the companies with locations outside of San Francisco here.
We then categorized companies by funding amount to see if there is a relationship between the amount of funding a startup has received and whether they have expanded to office locations outside of San Francisco. Our hypothesis was that companies with more funding have more capabilities to expand into new and potentially lower cost locations but we wanted to see if smaller, earlier-stage companies also had offices elsewhere. The graphical display of these two distributions clearly show that as the funding amount increases, the percentage of companies that have office locations outside of San Francisco increases, while the inverse (companies with only their San Francisco location) decreases.
