Heading Back From San Francisco

We have been in the Bay Area all month.  It’s been nice, but it’s been chilly the past couple of weeks.  People had their down coats on!  It’s nice to have the sun out though.  We start driving back today.

It’s been great to really delve in and experience the daily life here.  We did two weeks in Silicon Valley and two weeks in Noe Valley.  We took public transportation.  We walked.  We drove.  We Ubered.  Sometimes we ate out but we shopped and cooked at home in both places.  We got reacquainted to old friends and met some new ones.  We saw some family.  If I didn’t get the chance to see you, I apologize.  There were a couple of people that read this blog who I tried to meet up with and I failed on my end to make it happen due to scheduling and just learning how to get around.

For those of you whom I asked a favor of to introduce me to people that followed through, thanks.  I appreciate it.  It is always better to meet in person than over the phone.  It was important to me to develop my personal network on this trip, not only for me but for other people and companies I know.  I didn’t have a good SV network prior to the trip but I have a much better one now.  I am certain some good things will happen because of it.  I open up my network in Chicago to people all the time because as Brad Feld says that is the way to get things going.  It’s important to be the grease in the gears if you want them to move.  If you give before you get, hopefully it comes back to you.  Many of the people I met out here were interested in getting connected to Chicagoans, so those introductions were made.

Some parts of San Francisco and the Bay Area are just totally charming to me.  I mean, walking around a neighborhood like the Pacific Heights on a sunny day was just great.  Hanging in Noe Valley was awesome.  The night time view at Twin Peaks was spectacular.  Walking through neighborhoods like the Castro was great.  Being one hour from some of the best wines in the world fit our lifestyle.  I checked in on both Yelp and Swarm to keep a record of where we went.  I highly recommend a walk through the Presidio which is not only beautiful but if you visit the national cemetery there, humbling.

Other parts aren’t charming at all.  San Francisco is super dirty.  There is human waste in the streets.  In some spots, it really is full of homeless people that are trashing the city.  It’s not just the Tenderloin.  It’s on Mission Street and Market Street. It’s at Fisherman’s Wharf and occasionally in Golden Gate Park.  It’s disgusting, especially for a city with the natural beauty of San Francisco.  They have a mayoral election in San Francisco and figuring out how to solve it should be a top issue.  Chicago has some similar issues but San Francisco’s homeless problem is really next level.

It’s expensive, but coming from a person that lives in an expensive city not shockingly expensive. It’s more expensive than Chicago for sure.  Real Estate is significantly more expensive.  However, if you were one of the maligned 1%, the all in costs between the Bay Area and Chicago are pretty close.  There is a Bay Area weather premium though.  As we know, property taxes in Chicago are going to go up significantly so it might actually become cheaper all in to live in California.  You get more space in Chicago, but you spend more time inside your home because of the weather.  Sales taxes are roughly equal.  Gas is more expensive in California but it’s not a massive difference for a 1% person.  Uber/Lyft is more expensive.  Public transportation is the same.  All that being said, if someone were to pay me to move to the Bay Area I’d consider it but because of the real estate costs I’d have to make a little more than I was making in Chicago.  In each case, you can see why people are leaving.  If I owned my house and had lived in Cali for 20 years I might stay depending on other factors.

Both areas are going to see people flee for opportunities in states elsewhere.  Almost everyone we spoke with in California that was a long time resident had at least considered leaving.  Or, they were doing the mental calculations inside their head.  It’s the same thing that is occurring in Illinois, New Jersey, New York, Connecticut and other high tax states.   My guess is places like Texas, Florida, Nevada, Tennessee and Wyoming are going to see a bit of tourism from high tax states.  Those people are going to be doing more than relaxing.  They will be kicking the tires.

But, Silicon Valley will be a draw until the politicians kill it.  They are trying to kill it.

There is another thing that is potentially very damaging to Silicon Valley and that is discrimination against conservatives.  It’s real.  They won’t just drive conservatives out.  They will drive center right and center left people out.  I have been seeing this happen for a few years now but the discrimination today is overt and permissioned by a lot of the leaders in both the entrepreneurial and venture capital community.  Peter Thiel announced he was leaving while we were out here.  Some people took notice.  Some said good riddance.  There were more that said good riddance.

The lifestyle in San Francisco proper feels more like NYC to me than anywhere else.  Not as close quarters, more open because the buildings aren’t as big and there are less people around.  But the feel of the city sort of felt like a slower paced NYC.  I knew I wasn’t in Chicago for sure.

The lifestyle in the Valley was interesting.  Going from Palo Alto to Redwood City just isn’t that long.  Sort of like going from one end of Wheaton to the opposite end of Glen Ellyn.  The Valley is very suburban feeling, sort of North Shore-ish to those that are from Chicago.  Of course, topographically it’s a lot different.  Getting from San Jose to San Mateo is a haul.

Startup people here are like startup people in Chicago but there are a few characteristics that are unlike Chicago people.  Chicago people are more loyal.  They will stick with a startup.  There isn’t the danger of losing your whole team because another startup got funded and looks like a rocket ship.  Midwestern people are generally nicer in our Midwestern way.  However, people in the Bay Area shoot for the stars.  They have seen other companies do it again and again so they aren’t afraid of the impossible.  It’s just a different mentality.

Some of it comes from the fact that there is significantly more risk capital in the Bay Area than Chicago.  It’s never easy to raise a round of capital anywhere but you have more cracks at it in the Bay Area than you do in Chicago.  Again, because VCs in the Bay Area have seen a lot of rocket ships, they don’t hold back.  Chicago can learn a lot from the Bay, but it needs the capital to really be able to learn those lessons in real time.  Until the capital is there, it won’t happen at scale.

On the customer side, Bay Area customers are more willing to assume risk too.  For example, I spoke with a Bay Area bank.  They are willing to become a customer of a startup, even if they just have a modicum of annual recurring revenue.  I spoke to an East Coast bank and they weren’t interested unless the startup had $10MM of ARR.  Midwestern banks resemble East Coast banks more than West Coast banks.  Remember, bankers traditionally are conservative and risk averse by nature so having a bank seriously think about becoming your customer when you are an early stage startup is big and it builds the community.

Service providers and lawyers are different in the Bay too.  They understand that if they make things happen, good things happen to them.  The good ones really open up their networks.  You don’t see that in Chicago.  It’s more about taking liquidity out of the network rather than adding it in.  Ask yourself, are you a liquidity taker or maker when it comes to building your local network?  Be a maker.

This won’t be my last trip to San Francisco I am sure.  But, I am happy to be heading back to the Midwest in time for St. Patrick’s Day and the NCAA tournament.  I hear Loyola has a chance.  They are shooting for the stars.  Bay Area people wouldn’t discount the possibility.