Tech

Rani Molla is a Bloomberg Gadfly columnist using data visualizations to cover corporations and markets. She previously worked for the Wall Street Journal.

Shira Ovide is a Bloomberg Gadfly columnist covering technology. She previously was a reporter for the Wall Street Journal.

The Bay Area has long been the center of the technology world, and it remains the undisputed king of startups. But lower wattage tech hubs are popping up as hospitable homes for the next Facebook or Google.

VC-funding-by-city

The bloom of more silicon cities has spread tech jobs into some unlikely places such as Florida and Utah, but it has also brought some of the attendant annoyances familiar to Northern California, including rising costs for office space. 

U.S. venture capital firms -- the financiers seeking to find and fund the next Google or Facebook -- wrote $12.1 billion worth of checks for U.S. startups in the first quarter of 2016, according to a PwC and NVCA MoneyTree report based on data from Thomson Reuters. About 40 percent of that sum went to young companies in the Bay Area, a share of startup financing that has increased from a decade ago. 

But some of the biggest deals in the first quarter of 2016 went to companies outside of the Bay Area. Magic Leap -- a Dania, Fla., startup that is working on technology to mix virtual images with the real world -- collected $794 million from investors. Domo, a business software startup based in American Fork, Utah, added $131 million to its coffers so far this year, and it is laying the groundwork for an initial public offering.  

The spread of startup money outside the Bay Area has helped those cities take advantage of growth in high-tech jobs, which has far outpaced that of office jobs overall.

Technically Employed
Annual average employment growth by industry, indexed to 100
Source: CBRE Research

And while Silicon Valley continues to lead the pack, Phoenix, Austin, Nashville, Indianapolis, Charlotte and Salt Lake City all made the top 10 list for growth in high-tech jobs, according to the latest available citywide data from real estate services firm CBRE, which analyzed U.S. Bureau of Labor Statistics data. 

Getting Paid
Cities with the greatest high-tech job growth from 2012 to 2014
Source: CBRE Research
Note: 2015 city data comes out in June.

The trend of startup money and jobs flowing beyond the Bay Area is no accident. Startup founders say pay for employees in other tech hubs such as Seattle, Salt Lake City and Birmingham, Ala., tends to be lower than it is in the Bay Area. Startup workers outside Silicon Valley also tend to job-hop less often and demand fewer perks like free burritos and hammocks in the office.

Investors say they like those non-Bay Area startups, too, because valuations tend to be a bit lower, which means each dollar of investment buys them a larger piece of a startup. For example, PayPal co-founder and venture capitalist Peter Thiel recently mentioned he was hunting for investments outside of Silicon Valley

Becoming a tech hub has downsides, too. The emergence of spots like Silicon Slopes (Salt Lake City), Silicon Beach (in the Los Angeles area) and Silicon Mountain (Denver) has also coincided with big jumps in office rental costs in some spots. 

rent-price-growth-absorption

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
Rani Molla in New York at rmolla2@bloomberg.net
Shira Ovide in New York at sovide@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net