Regardless of studies of an exodus, Silicon Valley stays the tech capital of the world, with new knowledge exhibiting continued file funding within the trade in 2020 and no general declines in jobs and inhabitants within the area.
Whereas the high-profile departures of rich executives and investors like Elon Musk and companies like Oracle Corp.
and Hewlett Packard Enterprise Corp.
have raised questions on the way forward for California’s tech powerhouse, an annual report out this week discovered little proof of a development. As an alternative, the key impact of the COVID-19 pandemic on the San Francisco Bay Space in 2020 was the widening of the divide between the haves and have-nots, because of all the cash nonetheless flowing into just some pockets because the coronavirus ravages poorer communities.
“Immediately, we should frankly admit that the pandemic has made the wealthy richer whereas the poor are dying,” mentioned Russell Hancock, chief govt of Joint Enterprise Silicon Valley, which revealed its annual Silicon Valley Index this week detailing what occurred within the area final yr.
The report confirmed file enterprise capital funding in Bay Space startups, together with booming market capitalizations for public tech firms and standard-setting preliminary public choices. Amid fears of a tech-worker stampede out of the Golden State as firms allowed distant work, the inhabitants in Silicon Valley — outlined as Santa Clara and San Mateo counties — was largely flat for the yr, rising 0.02%.
Whereas an general out-migration was tracked in San Francisco, the overwhelming majority of those that left probably the most distinguished metropolis within the area final yr remained in the state, in keeping with U.S. Postal Service knowledge crunched by the San Francisco Chronicle this week. That’s according to what the Silicon Valley Index exhibits: 59% of the individuals who have left the valley previously few years have stayed in California, shifting up or down the state.
“I believe we will all settle down,” mentioned Rachel Massaro, Joint Enterprise’s director of analysis, throughout a information briefing concerning the index. “We’re a spot of innovation. We’re a spot that homes these impactful firms. We’ve got not seen any important losses amongst them.”
In brief, the area’s greatest firms and highest-paid individuals fared drastically higher and in lots of circumstances thrived — white-collar employees, who earn greater than 3 times as these in service occupations, set to work remotely and defend themselves from a lethal virus — whereas low-wage employees misplaced jobs and fell in poor health, their lack of a security web shining a harsher mild on inequality.
“It’s a story of two economies,” Hancock mentioned. “There are two tales.”
The tech story
Silicon Valley and San Francisco firms’ market capitalization climbed 37% to $10.5 trillion final yr, in keeping with the report, thanks to very large spikes from firms equivalent to Tesla Inc.
which noticed its market cap skyrocket greater than 700% in 2020; Apple Inc.
which noticed a 77% enhance, whereas Fb Inc.
grew 30% and Google
skilled a 28% enhance.
Huge Tech saved getting greater in different methods as properly. The highest 15 tech employers within the space — which incorporates the above plus different giant firms like Intel Corp.
and Cisco Programs Inc.
— ended the yr with a 3.7% enhance in jobs even whereas the area noticed a pair hundred thousand jobs disappear general. And regardless of nagging questions concerning the results of a work-from-home shift on industrial actual property, the most important firms within the area continued building on current initiatives, equivalent to Google’s deliberate large improvement in San Jose, Calif.
The subsequent era additionally obtained file funding totals. Snowflake Inc.
and Airbnb Inc. ABNB , all based mostly within the Bay Space, had been the three greatest U.S. preliminary public choices of 2020, not together with special-purpose acquisition firms. And even in a booming yr for IPOs, Silicon Valley outperformed the remainder: 2020 IPOs from the valley grew 117% and S.F. issuances grew 101%, whereas IPOs normally returned 80% final yr, in keeping with the Silicon Valley Index.
It was additionally a file yr for enterprise capital, with funding to Silicon Valley and San Francisco firms rising 8% from 2019, the report mentioned. Of the $123.6 billion in U.S. VC funding in 2020, $26.four billion went to Silicon Valley, $20 billion to San Francisco and $67 billion to California. A whole lot of that funding went into well-known startups together with Bay Space decacorns (personal firms price a minimum of $10 billion) like Stripe, Instacart and Robinhood.
The opposite, much less optimistic story
Whereas Huge Tech flourished and cash continued to pour into potential additions to that group, the hole between these flourishing from that efficiency and Silicon Valley’s poorer residents is wider than ever, the index exhibits.
As of final Friday, 2,069 individuals within the area had died of COVID-19, Hancock mentioned. Demise charges had been highest amongst Native Hawaiians/Pacific Islanders, Black/African Individuals and Hispanic or Latinos, respectively. A report by the Mercury News confirmed that dying charges had been far larger in poorer neighborhoods than wealthier ones, equivalent to within the largely Latino neighborhoods of East San Jose.
Decrease-wage employees misplaced their jobs or needed to put their well being in danger to hold onto their positions.
“The pandemic worn out our service sector and in-person financial system,” Hancock mentioned. “There’s actual carnage on the market. Individuals have misplaced their livelihoods.”
The area’s group infrastructure and repair jobs declined 54% by midyear 2020. Hispanic individuals had been 1.5 instances extra prone to file unemployment claims as white individuals, Hancock mentioned. And in December, greater than 626,000 households within the Bay Space, together with almost 200,000 households in Silicon Valley, had been prone to eviction or mortgage nonpayment, in keeping with the index.
Shuttle drivers who drove tech staff to varied places of work across the Bay Space for firms equivalent to Salesforce Inc.
and others — which have instructed their staff they will work remotely completely or more often than not — have been laid off or furloughed, mentioned Stacy Murphy, enterprise consultant for Teamsters Native 853, which represents about 800 shuttle drivers within the Bay Space. Some drivers are nonetheless on paid furlough, however others are now not receiving wages and most don’t know once they can return to work.
“We’re all patiently ready,” mentioned Murphy, who has mentioned the union is in fixed discussions and is advocating for the drivers to maintain getting paid.
The murky future
Some knowledge from the index exhibits that considerations a few risk to the area’s reign as a tech middle should not unfounded. Though Silicon Valley’s inhabitants didn’t decline in 2020, a yearslong out-migration development did proceed. Nonetheless, the index exhibits that the web out-migration in 2020 was about half that of the departures from the area in 2001, after the dot-com bubble burst.
The index additionally exhibits that the employment development charge of the highest 15 largest tech employers in Denver (14.7%) and Sacramento (14.5%) had been almost 4 instances that of the Bay Space’s 3.7%. And the Bay Space’s share of those self same firms’ U.S. workforces fell from 26.1% in January 2020 to 23.9% in December. Whereas the share positive aspects had been smaller, the Bay Space nonetheless added extra tech jobs in complete than the opposite metropolitan areas.
Metro areas in Florida, Texas and elsewhere are touting themselves as the subsequent huge tech hubs as firms and executives transfer to locations like Texas, the place Oracle and Hewlett Packard Enterprise Co.
have moved their headquarters — whilst many Oracle staff stay within the Bay Space, Hancock identified.
As different firms transfer or make selections about whether or not their staff ought to return to the workplace, it is going to have an effect on the development initiatives which were placed on maintain or the office-space rental charges which have largely held regular.
The Bay Space Council, which incorporates the area’s firms as members and advocates for business-friendly insurance policies, has launched a “enterprise local weather” initiative because it worries about firms leaving the area.
“It’s not going to be a direct change,” mentioned Patrick Kallerman, analysis director for the Bay Space Council Financial Institute. “The Bay Space isn’t going to be a ghost city in six months. We’re asking ourselves if that is going to be a long-term, important change.”
These adjustments will have an effect on the standard of life within the Bay Space as municipalities discover themselves with price range shortfalls. Silicon Valley metropolis revenues are anticipated to say no by a median of 5% largely because of the pandemic’s results, in keeping with the SV Index. San Francisco noticed gross sales tax income decline 43% within the second quarter of 2020 in contrast with the prior yr, in keeping with the San Francisco Chronicle, which appeared on the results of the pandemic on town’s once-bustling downtown.
What occurs to the large companies — whether or not they depart, keep, change their work-from-home insurance policies — will have an effect on the small ones, too.
Alicia Villanueva, who owns Alicia’s Tamales Los Mayas, a tamale manufacturing unit in Hayward, Calif., and Lynna Martinez, proprietor of Cuban Kitchen, a restaurant in San Mateo, Calif., each mentioned that regardless of devastating drops of their income, they prevented shedding any staff due to the Paycheck Safety Program (PPP) and different loans.
Each companies relied closely on catering to tech and different firms within the Bay Space.
“We had lots of of shoppers, together with Oracle, Fb, Google and Comcast
” Martinez mentioned. “We might do anyplace between 100 to 300 orders earlier than we opened our doorways at 11 a.m. Then in March and April, growth, 50% of our enterprise was gone.”
The 2 ladies mentioned they’ve needed to alter and make up the misplaced enterprise nonetheless they will. Martinez mentioned her catering enterprise might be a tenth of what it as soon as was. Villanueva’s son is delivering tamales to a faculty district that’s greater than 60 miles away.
“He’s waking up at 2 a.m. to prepare and ship to Vacaville at 5 a.m.,” mentioned Villanueva, who has 21 staff.
Martinez and her eight staff are relying extra on referrals, and he or she’s now contemplating franchising.
“The pandemic pressured us to focus on a wider, extra dispersed base,” she mentioned. “In some methods, this was problem for me as a enterprise proprietor who wished to pursue the concept of getting a franchise.”