[sonnyblarney]

It's definitely an 'intractable problem'.

A) The issue is specifically pay rates at 'BigCos' are rising quickly, making it harder and harder for startups to keep up. This is 'intractable' to the point where many simply stay away from the Valley, which was less the case before.

B) Companies with lofty margin increases over time are extremely rare and such inside wage inflation is totally unsustainable over any period - forget business cycles. Only at a rising Google, or the very rare lucky startup growing the customers is this not a problem. Very, very rare. And it creates the 'A' problem above for other companies.

[nradov]

I don't see anything intractable. There is abundant investment funding available to pay employee compensation at start-ups with the potential to scale up with increasing profit margins. That just means founders will have to recalibrate their expectations on early stage valuation.

On the other hand, for businesses without the potential for high margins it never made sense to locate in high cost areas. There are plenty of other suitable areas. For example Cleveland would be an excellent location for a health IT business. The tech industry as a whole would be healthier with more geographic diversity.

[sonnyblarney]

"There is abundant investment funding available to pay employee compensation at start-ups with the potential to scale up with increasing profit margins."

No, there is not an abundance of capital floating around to just pay developers ever increasing (above inflation) salaries commensurate with the massive profitability of other major companies in their immediate vicinity.

To the point wherein even Peter Thiel wants to opt for LA, with his statement: "I'm spending all of my money on Silicon Valley landlords"