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If the business world has learned one thing from this pandemicIt is so that their employees can work and innovate remotely. Employers who used to be limited to local talent and offices can now hire anyone and work from anywhere. In Silicon Valley, this redistributed workforce has disrupted the region’s longstanding business model, which has been based on employee proximity since it was founded.
The workers don’t have to live in the Bay Area anymore, so they aren’t. San Francisco Rentals of studios, one-bedroom and two-bedroom apartments saw the biggest year-over-year decline in September, declining 31%, 24.2% and 21.3%, respectively. Tech giants no longer need their massive employee locations, so they are considering other options. Dropbox is leaving its offices for “studios” to facilitate personal collaboration between the pockets of now distant workers across the country. Big Tech’s recruiting teams, which once focused on the self-selecting talent pool within a narrow and local tier of educated society, can now target talent from anywhere, potentially diversifying their workforce. Even venture capital businesses, the literal seeds of these tech giants, have moved from dinners and drinks down in the valley to Skypes and Zooms online.
Tech’s longstanding tradition of retaining, nurturing, and spreading talent in Silicon Valley has enabled the region to become and remain that Epicenter of US technology culture and innovation. In its 70 years, the area produced the giants who technologically put the United States on the map: Apple, Facebook, alphabet, Twitter, oracle, Hewlett Packard and Intel. With them, Santa Clara County has developed into a center of prosperity, generating a GDP of over $ 316 billion in 2018. Silicon Valley currently has 1.7 million jobs, and until now those jobs have been concentrated in San Francisco Bay.
Around the middle of 2020, just two months after the start of the coronavirus pandemic, Jack Dorsey announced that its almost 9,000 people on Twitter and Square were able to work from anywhere, forever. By the end of May, 95% were the FacebookThe more than 45,000 employees worked off campus. Now, in early November, all of Alphabet’s 200,000 contract and full-time employees around the world are currently working off campus and can do so through June 2021.
Although the move to remote working was accelerated by an unforeseen global health crisis, tech giants were considering a dispersed workforce as early as March this year. Jennifer Christie, Twitter’s chief HR officer, told CNBC that making Tweeps work from anywhere has been a major business goal for some time. Although some employees took advantage of Twitter’s flexible work program before the pandemic, more employees have now asked to work from home permanently. Also, with the Facebook offices reopening, 95% of employees currently working remotely are unlikely to return in full. Facebook told CNBC, “We have thought long and hard about the remote working option and our thinking about it has accelerated over that time.” Facebook is now working towards a 50% remote workforce for the next 10 years.
Big tech’s deliberate dispersion of talent can be part of a larger movement. According to the latest Joint Ventures Silicon Valley Index, the region’s regional GDP grew by $ 17 billion from 2018 to 2019, after sales and job creation were constant year over year. However, the report also tracks a trend in domestic emigration that has been consistent over the past three years. Population growth in Santa Clara and San Mateo counties will be as slow from 2015 to 2019 as it was in the years after the Dot-Com bankruptcy.
And, similar to after the Dot Com bankruptcy, the largest population movements in the region were caused by newly unemployed tenants who left their homes, according to real estate company Compass.
The large technical workforce is distributed, but it is anything but stagnant. Facebook expects 10,000 engineering and product hires worldwide for the year, many of which are distant. The giant accelerated hiring from permanently remote positions on July 1, focusing on hiring the US in expanded areas around Facebook’s existing offices. From there, Facebook expects to create hubs in geographically dispersed locations across North America.
The company told CNBC, “These hubs are not offices, they are physical spaces where people who work nearby can gather to attend important training and meetings – and to build a community.”
Twitter’s workforce is likely to grow too. CHRO Christie then saw a 10-fold increase in visits to the platform’s job portal Announcing CEO Jack Dorsey’s Remote Work Policy in May.
Despite plans for remote hiring and the churn trend, Facebook is one of several major tech companies that have continued to build commercial space in the Bay region. There is currently 18 million square feet of commercial space under construction in the region, according to the Silicon Valley Institute for Regional Studies, although delays in completing the project are expected in the second half of the year. Of these ongoing projects, four buildings with a total area of almost 770,000 square meters are planned for Facebook, others for Adobe, Microsoft, NVIDIAand JPMorgan’s new fintech headquarters. This month, Google signed an additional lease for 42,000 square feet in San Francisco.
Google completed a separate construction project on Moffett Place in the second quarter of 2020, one of ten major commercial space developments that were completed in the second quarter of 2020 in Silicon Valley. Two of the others were buildings pre-let by cybersecurity firm Proofpoint.
According to Cushman & Wakefield, while Silicon Valley has grown, so have other major tech hubs across the country. From 2010 to 2019, 58 of the Bay Bay-based tech and life science companies took extensive office space in cities outside of California. Austin, Seattle, New York, and Chicago top the list of tech office hotspots, though San Francisco still secured more space than all other US markets combined over the same period.
Robert Sammons, senior director of Bay Area Research at Cushman & Wakefield, says that while newer tech hubs will continue to grow over the long term, he expects Silicon Valley to remain relevant.
Even if Facebook, DropboxSammons expects office development to stay in the urban centers that Big Tech has already bet on – Austin, Dallas, Chicago, Seattle, and New York.
Before the pandemic, San Francisco was the tightest and most expensive market for office space, according to Sammons. However, the cost has not encouraged companies to look elsewhere. Instead, talent has been the biggest driver for technology companies that have been looking outside of Silicon Valley in the past ten years.
In the run-up to the pandemic, Big Tech expanded its presence in markets outside of Silicon Valley and with it its talent pool. However, these markets – like New York – still presented a huge barrier to the cost of living for lower-income talent they wanted to break into the industry. However, the move to virtual anything could open the door to this talent. Networking events, internships and training camps in the notoriously expensive Bay region are now held online, eliminating travel, living and ticket costs and expanding learning and networking opportunities beyond the disproportionately white, male, monetary and well-connected talent pool become the area.
For Twitter, Jennifer Christie emailed CNBC that having a decentralized workforce means building local teams to support a global talent pipeline. Facebook also hopes that its planned “hubs” beyond the main campus will “unlock distant talent and help us attract more talent that has historically been underrepresented in our workforce and industry.”
Twitter recently announced a target for 2025 for its workforce representation: The company plans to have 50% women and in the US at least 25% black, Latin American, multiracial and indigenous communities involved in technology are traditionally underrepresented.
Michael Ellison, founder of Coding Education Nonprofit Codepath, admits that the new, distant normal might provide a way to diversify talent pipelines, but ultimately it might not make that big of a difference. The attitude in Silicon Valley is broken, he says. A hiring model that has not changed dramatically since the area was founded in the 1970s will not produce a dramatically changed workforce. Tech giants must change the way they seek and evaluate talent if they are to disrupt the homogeneity cycle in the industry, according to Ellison.
In line with the rest of the Silicon Valley ecosystem, business has also shifted online. In venture capital, like everywhere else, introductory dinner, coffee and happy hour were suddenly held via Zoom. Networking, the unshakable and arguably impenetrable cornerstone of venture capital finance in Silicon Valley, became virtual overnight.
Without geographic complications, less-affiliated founders from across the country could theoretically connect with venture capitalists from Silicon Valley much more easily than before the pandemic. Fully virtual conferencing removes many of the networking barriers that founders have traditionally overcome. No venue, no catering, or no travel means much cheaper tickets for attendees, which opens the door a little wider for founders outside the Silicon Valley bubble.
Theresia Gouw, founding partner of the venture capital firm Acrew, says that without commuting or traveling time, she attends and actively participates in more virtual conferences herself, as do other investors. Nicole Quinn of Lightspeed Venture Partners looks forward to attending the annual Web Summit this winter. Instead of the usual three-day trip to and from Portugal, this year she has committed to spend less than an hour in front of her webcam. Quinn’s portfolio includes Goop, Rothy’s, Calm and Daily Harvest and spans London, Los Angeles, New York and San Francisco. “Now I could have board meetings for three of these companies in one day, whereas before it was basically two days, just one board meeting with all the travel … I’m a lot more efficient.”
Despite the convenience and efficiency of virtual work, for companies like Lightspeed and Acrew, personal connections are still critical to doing business. Even if every other part of the process is carried out virtually, a personal connection with her portfolio companies is important for Gouw. “If it’s a successful company and it goes public, it’s usually 8 to 10 years, so that’s a long partnership,” she said.
In Quinn’s most recent deal, she was co-director The lunch club’s $ 24 million funding round and helped raise the company’s valuation to $ 100 million. From start to finish, the deal was almost entirely closed through Zoom in less than a week. Quinn and Lunchclub CEO Vlad Novakovski met in person for a socially distant walk at the end of the process, after most of the care had been taken. Quinn was comfortable with virtual business, and emphasized that interpersonal connection was as crucial as thorough diligence. Without an extensive networking and advertising period, as is common with VC deals, Quinn says, “References are so much more important.”
Technicians who are no longer tied to their path to Silicon Valley can theoretically move anywhere while keeping their jobs.
According to Zillow Data and analysis from the Silicon Valley Institute for Regional Studies: San Francisco and San Jose residential real estate stocks increased 65% and 54%, respectively, from February to September 2020. Third quarter compass data shows that more home sales were made in the San Francisco area in the third quarter of 2020 than in any of the third quarters of 2016 through 2019.
While the National Association of Realtors has no data on where these sellers might have relocated, Realtor.com cross-market demand research shows that those in the Silicon Valley and San Francisco areas looking for homes outside their county in 2020 were predominant look elsewhere in California. Of those in San Jose, Sunnyvale, and Santa Clara who looked out of state, over 10% were looking at homes in Texas and over 6% were looking at Nevada.
However, without a visible end to the coronavirus pandemic, companies and employees in Silicon Valley are on hold when moving residential and commercial properties. Robert Sammons, Senior Director of Bay Area Research at Cushman & Wakefield, said, “We need to get to a place where we have a vaccine so we can be safe. Tenants have looked around, but very few have pulled the trigger . “
Wherever innovators move around, they are likely to expect a range of perks from their big tech employers that are similar to those on campus. Casey Newton from The Verge recently reported that A Facebook employee raised concerns about free food and drinks that are normally offered on campus and are no longer available in the remote working environment. Facebook told CNBC that remote working assistance includes childcare reimbursement, tutoring and homework assistance for parents who manage distance learning, and various forms of Covid-related vacation. Twitter offers its Tweeps wellness classes and encourages company-wide “rest days” in the face of the global health crisis.
However, the office perks for technical staff include more than free chips and tap water. Sammons emphasizes that despite Jack Dorsey, many executives want their employees to be back in the office at least temporarily. Even in a hybrid work environment or a hub-and-spoke model for the dispersion of offices, technicians who are younger are interested in staying in an urban setting.
Due to the pandemic, the high cost of living and the tight real estate market that once encouraged the brain drain from Silicon Valley are disappearing. In Cushman’s September study of the impact of the pandemic on office infrastructure, the company concluded that the structural effects of work-from-home trends are offset by economic growth and population growth, resulting in a steadily growing demand for offices in the country next 10 years means. “Now we have space, prices are down. On the streets … after the pandemic, we may see technology retreat,” says Sammons.
Even international recruits, an integral part of the tech workforce ecosystem in Silicon Valley, may still be moving to the US to do big tech jobs after the pandemic. However, the emerging tech hubs outside of San Francisco may be more appealing and support innovation in other cities.
Venture capitalist Alexa von Tobel says: “We play one of nine in the world of distributed work.” The brain drain from Silicon Valley, either part of an ongoing trend or triggered by the pandemic, will be difficult to reverse. Von Tobel originally insisted that innovations should turn away from Silicon Valley when she founded her fintech company LearnVest in New York in 2008. Twelve years later, she’s still incredibly optimistic on the east coast and the managing partner of Inspired Capital. “I would be betting on Silicon Valley in 10 years, but I would be betting on other tech hubs too.”