San Francisco has a strong reputation for being one of the largest tech hubs in the world, but as housing prices continue to soar, startups are struggling to find affordable office space and pay their employees a livable wage. Additionally, small startups are forced to compete for the brightest talent against tech giants like Google and Facebook that can offer employees very lucrative compensation packages as well as generous perks ranging from free meals and dry cleaning to substantial vacation days.
This issue was brought to my attention last week when I was catching up with a friend who is a senior this year at BC. She was struggling to pick between accepting an existing job offer or entering into another round of unpredictable and stressful recruiting. The summer after her sophomore year, she interned at a small technology startup in San Francisco. Impressed with her work ethic and talent they gave her an offer to return as a full time employee after graduating from BC. She loved the company culture and enjoyed the work, but the company was unable to offer her a salary that would allow her to live in the Bay Area. Her other offer was to work in New York City at one of the largest investment management companies in the world. Given the scale of the company, they had the resources to offer a much higher salary. She was caught in the dilemma of choosing between a company that she loved but couldn’t afford to pay her and a company that she enjoyed less but provided financial security.
The offer deadline for the job in NYC expired last Friday, forcing her to quickly make a decision. She ended up accepting the position and turning down the offer from the San Francisco startup. She told me that the startup that had given her an offer could often be quoted saying:
“We can’t pay our employees what they’re worth, we pay them what we can afford.”
In order to combat this issue, some startups have begun to seek out other alternatives such as satellite operations in less expensive areas.
Median Home Values
San Francisco: $1,366,000
(according to Zillow)
Instead of fostering a traditional work environment where everyone gathers in the same space, some startups have begun to utilize video conference chat technology to help employees across locations communicate with one another.
Jelli, a San Mateo-based tech startup, has been forced to seek out other alternatives. The co-founder and CEO, Michael Dougherty, was able to cut costs by opening a satellite office in Boise, Idaho where average salaries are only two-thirds of those in the Bay Area. The startup Skymind also benefited by having remote employees and claimed it has saved millions annually by not having to pay all of their employees “Silicon Valley wages.” Many startups fail because they simply are unable to fund themselves, and therefore, being able to effectively save money can help to determine the fate of a startup.
The San-Francisco-based startup UrbanSitter had to adapt to having employees work remotely when one of their top engineers announced he was planning to move to Portland, Oregon because he couldn’t buy a home in San Francisco. A few years later, two more engineers from UrbanSitter followed his lead and went to Portland seeking more affordable housing. UrbanSitter embraced this change and opened a WeWork space in Portland for their engineers living there. They also attempted to maintain the startup culture by conducting lunches, happy hour drinks, and even in-office yoga all through video chat.
However, despite these conscious efforts, the remote employees still don’t feel as connected with the rest of the company.
“I would say there definitely is a small bit of longing. You feel like you’re missing out a little bit on things that are happening in San Francisco.” – Travis Dobbs, UrbanSitter lead engineer
UrbanSitter and Jelli are not anomalies as many startups resort to having remote workers. In fact, Toni Schneider, a partner at True Ventures, remarked that almost all of the companies his team invests in have remote workers. He is a first hand witness to the weight that housing prices in San Francisco put on fledging startups.
“We never had a problem finding people, whereas every single startup in San Francisco, we ask them what their biggest problem is, and it’s always hiring. And that’s directly related to the cost of living.” – Toni Schneider
Similar to San Francisco, the cost of living in New York City can also be exorbitant. As we visit various companies on the East Coast, I’m curious to see if they’ve had to incorporate non traditional work environments to help manage expenses. I had the opportunity to intern at a tech startup in Boston this summer and only a little over half of the employees actually worked out of the Boston office. Even within my short time there, I noticed some of the impacts this arrangement had. When a tech problem would come up, employees had to communicate with the remote tech team via email or phone. The office had poor reception which created issues given how much the team relied on wifi to communicate. Additionally, I was unable to easily build relationships with those outside of the office. There weren’t any conversations in the kitchen or lunches on the deck or hellos in the hallway. Although these were small interactions, they were what allowed me to become close to the people I worked with and made being at the office more enjoyable.
At the recent SSC Demo Day in Boston, Dan Nova, a partner at Highland Capital, noted that the two industries he believes need disruption are education and work. I agree that there is huge potential for the current mindset of what it means to “go to work” to be transformed. As new technologies continuously emerge and old ones are improved, I am excited to experience the impact they’ll have on everyday life.