(Not OP, but I'm currently founding a startup in the Bay Area.)
I don't have the perception that the Bay Area startup scene is dying, but it's perhaps true that the Bay Area startup scene is dying. Basically, you can't raise a $3M seed round on "I went to (Stanford|Ivy League|other top college) and have an idea for a mobile app" anymore, nor can you raise follow-on rounds off anything but revenue growth. That means that the days where a couple 20-somethings could found a company, hire 10 people, and code by day while partying late into the night are gone.
Good riddance, IMHO.
The startup scene is still healthy, but is very different demographically. Some observations:
Average founders skew older - it's more 30- and 40-somethings that worked for a big tech company and cashed out a million or so in stock options, or had a previous startup exit. (The exception is crypto, which is largely financed through ICO now.)
B2B is ascendant over B2C, and many startups are financing the company with pre-sales from paying customers.
Team sizes are smaller, and many companies are using outsourced labor where they either open an office abroad for engineering, or they use Upwork etc. to find contractors.
Startups in general have gotten cheaper and leaner and are more focused on doing the work rather than living the dream.
That's quite a positive take. When I see "lean" startups offshoring/using Upwork to build their offerings, I think the magic has left the bay and that people are trying to squeeze water from rocks. Partying all night might make investors and parents of 2.5 children wince, but that was part of what made unexpected, innovative software possible. It's ominous that startups are forced to outsource because cost of living has priced them out of local talent.
When I look at the bay now, I see a bunch of FANG drones measuring their RSU dicks. People caring more about buying a home and whining about NIMBYs than making cool shit with cool tech. Of course most startups are stodgy B2B and not moon shot B2C, you can't build B2C when your experience is so separate from a normal person's. But another JIRA/GitHub/Slack integration? Ooh, that's the good stuff we can relate to.
Maybe the bay got old, but I don't believe that when I see fresh grads falling over themselves to work at a FANG. Whatever happened, there's not much serendipity left. There will be a tipping point where enough cool stuff is coming out of Detroit/Atlanta/wherever that an investor would be a fool to fixate on the bay.
Typically the founders are building the core competencies of their businesses themselves and using Upwork to outsource programming tasks that have been commoditized, like mobile/web development or filling in the gaps once the product architecture has been built. The current funding & salary environment is not kind to non-technical founders, because the technical end of a new product now costs more than you can get in funding without a product, and because the type of ideas you can easily communicate to an outsourced dev team are the ones that have been well-commoditized over the last 8 years. (I still see a number of non-technical founders trying, but they've been struggling hard.)
I do think new startups face significant headwinds now, but they're not the ones you mention. I'm not worried about FANG drones, for example - the majority of people in Silicon Valley have always been employees of big companies, and often quite self-satisfied ones (do you remember how arrogant Netscape, Sun, and Cisco were when Google was still in the garage?).
Also, significant B2C startups usually come out of nowhere, from small teams that were toiling away in obscurity for years beforehand. Do you remember 2007-2010? I was part of the Web 2.0 boomlet, folded up my startup in '08, and proceeded to watch most of my peer companies die over the next 2 years. But while we were all folding up our social networks, AirBnB (founded '06, household name '11), DropBox ('07, '10), Uber ('08, '10), Instagram ('08, '12), WhatsApp ('07, '11), and Thumbtack ('07, '13) were continuing to work on their startups, many of them breaking a lot of common wisdom about what made for a successful startup. When the time was right these services exploded, but we had to go through a huge startup drought from 08-10 in the process.
The factors I'm more worried about are: 1) The average American consumer not having money, which makes B2C business models other than [advertisement, pyramid scheme, extortion, selling personal data] impractical 2) Attention being so focused on politics and tribalism that consumers are too fearful to try anything new and 3) Moore's Law disappearing. I'm not terribly worried about this last one because we can still get another factor of 10-100X out of better programming languages, OSes, and frameworks, and GPUs/TPUs continue to increase in power.
not the op- but I think what he's implying is that all the good engineers are in golden handcuffs with the FANG or unicorn startups making $300k. In the old days you could match the base salary and say my stock is better. Today its harder when MSFT is 3x or Netflix has 5x in the last few years. Your startup stock of 100K with 10% probability of becoming worth 10x in a few years just doesn't sound attractive enough to a good engineer. If all the good engineers are taken, it sucks the life out of other startups.
It’s not that all the good engineers are taken. It’s that the good engineers are doing mindless ad blasting to make a bigger buck.
There’s an opportunity cost of inventing things that actually make people’s lives considerably better.
The valley was the place where this would happen, now that culture and spirit is slowly dying.
Mostly because you can’t take those kinds of risks. Just the living expensive would kill you. VC money needs a quick buck so that kills those ideas in their infancy too.
Hit the nail on the head right here. You just can’t take the risks anymore. Everything is too expensive and it isn’t worth it anymore when Facebook dangles such a fat pay check in front of you. Entrepreneurship and free thinking has turned into copycat, quick bucks how to make quick money and complete group think. This is especially true in the sf start up scene
I don't have the perception that the Bay Area startup scene is dying, but it's perhaps true that the Bay Area startup scene is dying. Basically, you can't raise a $3M seed round on "I went to (Stanford|Ivy League|other top college) and have an idea for a mobile app" anymore, nor can you raise follow-on rounds off anything but revenue growth. That means that the days where a couple 20-somethings could found a company, hire 10 people, and code by day while partying late into the night are gone.
Good riddance, IMHO.
The startup scene is still healthy, but is very different demographically. Some observations:
Average founders skew older - it's more 30- and 40-somethings that worked for a big tech company and cashed out a million or so in stock options, or had a previous startup exit. (The exception is crypto, which is largely financed through ICO now.)
B2B is ascendant over B2C, and many startups are financing the company with pre-sales from paying customers.
Team sizes are smaller, and many companies are using outsourced labor where they either open an office abroad for engineering, or they use Upwork etc. to find contractors.
Startups in general have gotten cheaper and leaner and are more focused on doing the work rather than living the dream.