The people look the same. Yet the place feels different
Save time by listening to our audio articles as you multitask. Your guest columnist, who is heading to Berlin after spending a total of 12 years, including all of the pandemic, in San Francisco over the past three decades, suspects that many returnees will feel like strangers in a strange land. Not because everyone seems suddenly obsessed with the decentralised “web3” or because the valley has peaked . Silicon Valley has changed, and not just as a result of the pandemic.
When this stand-in Schumpeter moved there in the mid-1990s, even some top venture capitalists drove lumbering clunkers. Now a zippy Tesla is. Similarly, the hub’s business metabolism, which few places could match to begin with, has sped up. In the pandemic job-hopping became even more rampant and rapid. Many firms offer six-figure cash bonuses and pay rises of 25% to retain talent. Promising startups can raise money in days rather than weeks.
All that money pouring into a limited number of deals helped raise late-stage startups’ median valuation to $115m in 2021, nearly double the level in 2020. Outside investors, including hedge funds such as Tiger Global and Coatue Management that used to invest mainly in public markets, have piled in. These newcomers bring a new philosophy, in which a firm’s performance and its fit in the overall portfolio trump conventionalValuations may already have suffered as a result of rising interest rates.
Some of this dispersion may slow or even reverse. As covid-19 fades into endemicity, even Zoom-hardened venture capitalists would rather interrogate a startup founder over a bottle of a Napa cabernet than over a video call. They may also become more discerning about where to put their capital now that it is becoming costlier. This could favour nearby startups on which it is easier to keep an eye.Will all this make Silicon Valley more parochial, and less relevant? Don’t bet on it.
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