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New home: tech giant Oracle has already moved to Austin, Texas


Moving to Texas A


COMPANIES ARE LEAVING CALIFORNIA LOOKING FOR A BETTER BUSINESS ENVIRONMENT. PHILIPPA MAISTER REPORTS


challenge faces California’s Silicon Valley and Bay Area — the standard- bearer of the technology revolution.


The same technologies it helped create have evolved to the point where some of the compa- nies founded and nurtured there no longer feel the need to call ithome. To the alarmof business leaders, severalhave


already announced plans to relocate their head- quarters to other states. Texas is one of the big winners of this exodus. There are common factors underlying these


decisions, including high taxes in California, perceived over-regulation, high land and hous- ing costs, high cost of living, and the ability of executives andemployees towork remotely. Among the Silicon Valley companies that


have moved or plan to move their corporate headquarters to Texas are giants such asHewlett- Packard Enterprise (HPE) and Oracle. Elon Musk, the chief executive of Tesla and SpaceX, has also moved to the Lone Star State, although his com- panies remain headquartered in Silicon Valley. However, HPE’s Silicon Valley campus will


remainaninnovationhub, withnolayoffs, it has been announced. And in a Securities and Exchange Commission filing, Oracle said its Oracle’s existing US hubs will still be “sup- ported” and employees may choose to work at any of themor fromhome. In some cases, like HPE and Oracle, compa-


nies say the relocations are motivated by busi- ness needs, cost savings, a diverse talent pool, andemployees’ preference forworkingremotely. Other companies are moving because of a per- ceived cultural misfit. In a Wall Street Journal interview, Elon Musk blamed California’s “com- placency” and “entitlement”. Looking further inland, the software com-


pany Palantir has moved to Denver, Colorado. Palantir’s chief executive Alex Carp objected in an Axios interview to the state’s “increasing intolerance and monoculture”.


February/March 2021 www.fDiIntelligence.com


But it is not just tech companies that are


flooding out of the Golden State. Financial ser- vicescompanyCharles Schwab and themedical distribution giant McKesson have also moved their headquarters to Texas. The outflowstarted before the Covid-19 pan-


demic, but the epidemic reinforced it, says Jeff Bellisario, executive director of the Bay Area Council Economic Institute. “Business leaders are concerned about the


future of the state,” Mr Bellisario says. “The movement of corporate headquarters is prob- lematic because talent follows. We have all this talent and networks and an ecosystem of inno- vation, but if remote work allows you to access that across the globe, it becomes less necessary to have a presence in Silicon Valley.” And while abundant local venture and seed


capital remain a major attraction for the region, accounting for 44% in 2019 of all such funding nationwide, Mr Bellisario sees a chal- lenge in the growth of venture capitalists in rival US innovation hubs. Texas is more than happy to welcome the


Californian arrivals. “While some states are driving away businesses with high taxes and heavy-handed regulations, we continue to see a tidal wave of companies like Oracle moving to Texas thanks to our friendly business climate, lowtaxes,andthe bestworkforce in thenation,” gloated Texas governor Greg Abbott. Michael Caffey, president of advisory services


for the Texas region of commercial real estate firmCBRE, agrees.MrCaffey notes that Texas has noincometax, a lower corporate tax rate, a lower wage structure, light regulation, moderate hous- ing costsandgoodinfrastructure, coupled witha diverse technology base and good universities. Still, California cannot be counted out. “I


still think that when you look across the globe, the Silicon Valley name is held up as the gold standard for how you look at innovation, growth and opportunity,” saysMr Bellisario.■


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