IT MAY only be 30 miles from San Francisco to Palo Alto, the effective “capital” of Silicon Valley, but to many, the Valley and the city may as well be on different planets.
“I’m in New York more often than I’m in the Valley,” says Oren Michels, chief executive of San Francisco-based Mashery, which has developed systems to allow firms to open up their data securely for re-use on the web.
Michels and co-founder Scott Rafer don’t pull their punches when it comes to dismissing Silicon Valley as “the suburbs”.
Now that it’s standing on its own two feet with customers like the New York Times, Best Buy and the Guardian, Mashery’s open-plan downtown offices on the city’s central artery Market act as an incubator for start-ups.
Michels says five start-ups are sub-letting space while four more have previously graduated to their own offices. “The Valley has got a few big employers but it’s not vibrant,” Michels says matters-of-factly. “Everything is up here except, in some cases, the money.”
Reflecting this new reality, many of the law firms, venture capitalists and other advisers who make a living working with start-ups are opening outposts in San Francisco.
One potential pitfall for San Francisco’s development as the new tech hub is the city’s 1.5 per cent payroll tax, which is also payable on the value of stock options awarded to staff. Last week the city’s board of supervisors voted to cap those taxes at their current levels for companies willing to relocate to the Tenderloin district.
The move is aimed at Twitter, but will also be applicable to other growing city companies like Farmville-maker Zynga, which have threatened to move their operations to nearby cities if they continue to have to pay the city payroll tax.
The Tenderloin is San Francisco’s Skid Row, an area of rough- and-ready bars and boarded-up premises inhabited by the homeless and those living on the breadline. The city councillors hope that by relocating Twitter’s 450 staff to the neighbourhood, it will kick-start stalled regeneration plans.
For those companies in the Valley, like Facebook, which has outgrown its base in Palo Alto and is due to move to Sun Microsystems old offices in Menlo Park this summer, the competition for talent is intense.
“True programmers tend to be very conservative, not politically, but in their own lives,” Michels says. “They want stability, good healthcare and perks. They would freak out working for a start-up that only has two months’ payroll in the bank.”
To ensure they choose the established players rather than the next wave of start-ups, Google et al have a very simple weapon in their arsenal – fleets of Wi-Fi enabled buses which pick up workers around the city and ferry them up and down Highway 101 every day.
