Silicon Valley is known across the globe as the cradle of tech innovation. Currently, it’s home to startups and the establishment, from Apple and Google to Uber and Slack. More hopefuls beat a path to this locus in the hopes that the cluster effect will bolster their chances of success.
But analysts at Expert Market, a U.S.-based B2B marketplace, posit that Silicon Valley may not be the best place to live and work, even if your dream is to be in the tech industry. Turns out, they weren’t the only ones exploring alternatives.
“The world is full of people who aren’t realizing their potential, in large part because their cities don’t provide the opportunities and living conditions necessary for success,” wrote Adora Cheung, a partner at Y Combinator. In a blog post on the accelerator’s site, Cheung cites “untenable” housing prices in San Francisco, even for highly paid tech workers.
Apartment search startup RadPad mined its rental data and combined it with salary reports from Anthology’s tech jobs platform. They found that the current median price for a one-bedroom apartment within a half-mile radius of companies like Uber, Twitter, Google, and Airbnb in San Francisco is chewing up between 42% and 54% of software engineers’ salaries. The prevailing wisdom from the Census Bureau suggests that only 30% of income should be spent on housing in order for it to be considered affordable.
The analysts at Expert Market looked at the most recent ranking of cities in the global startup ecosystem as determined by Compass, a management reporting software company. Compass’s data was taken from polling 11,000 startups, investors, and other stakeholders.
Expert Market analysts pulled the top 20 global cities on the list and scored them according to eight factors:
- Time to start business
- Seed funding
- Startup output
- Average salary
- Cost of living
- Average rent
- Paid vacation
- Average commute
Scoring was on a scale from 1-20 (1 being best, 20 being worst) and all factors were weighted equally. Additional data was provided by World Bank and Numbeo’s cost of living index.
“Our idea was that often tech hubs are ranked based on purely economical factors, with people forgetting that you have to actually live in these cities,” Expert Market’s researcher Bobbi Brant tells Fast Company. “That is why we added in quality of life factors to find a more balanced ranking of the top 20 tech hubs.”
Compass rankings (based on startups’ performance, funding, market reach, and talent) show that Silicon Valley was the number one ecosystem in the world, followed by New York City (Silicon Alley), Los Angeles (Silicon Beach), Boston, and Tel Aviv.
In sharp contrast, Expert Market’s analysis put Berlin, Austin, and Toronto in the top three, respectively, thanks to their balance of business growth, affordable rent, and salary.
“San Francisco only makes it in at number four,” Brant notes, “as while the business opportunities and startup funding scores well, a high cost of living and costly rent makes it less appealing.”
Germany’s “Silicon Allee” tops the heap of Sili-clones, according to Expert Market. For the uninitiated, Berlin’s hub is relatively new. It was started in 2011 by entrepreneurs Schuyler Deerman and Travis J. Todd, who built a startup community through meetups, events, and an English-language blog. It quickly surpassed London as Europe’s startup capital, garnering more venture capital investments in 2014.
Expert Market found that Berlin offers the best tech hub relocation spot due to “massive startup opportunity combined with low living costs.” But Berlin’s best asset is its average commute time. At just 34 minutes, it beats the rising tide of time spent to and fro from less pricey outposts surrounding the San Francisco Bay area. Some commuters spend as much as three hours heading to work in San Francisco, which topped the list of metro areas with the worst commutes.
Ranking Austin’s “Silicon Hills” in second place shouldn’t come as too much of a surprise. SxSW’s tech conference has played a part in putting the Texas capital on the tech map. Brant cites Austin as the top American tech hub to live and work due to its “huge funding availability and lower living costs than its West Coast rival.”
That squares with Glassdoor findings that indicate Austin is one of the top U.S. cities for jobs this year and one of the friendliest to small businesses started by millennial entrepreneurs. Expert Market found that the average seed funding available to startups in Austin is between $900,000-$950,000.
Canada boasts “Silicon Valley North,” but depending on who you ask, that place could be either Vancouver, Montreal, or Toronto. The designation of the number three spot went to Toronto in this report, in part because of the quick turn to start a business. The city also earned high marks for the average paid vacation tech workers receive as well as average rental prices.
Graduates of Harvard and MIT make Boston a hub for pharmaceutical and research startups looking for skilled graduates. Tel Aviv, known by some as “Silicon Wadi” (valley in Hebrew) has become a cradle of fintech startups.
“Our philosophy is that if you are able to thrive in an area, either working in tech or building your own company,” notes Brant, “you need a balance between potential corporate success and an enjoyable lifestyle.”