Silicon Valley has long been considered the white-hot destination for entrepreneurs.
“The area is extremely start-up friendly,” says the University of Silicon Valley.
The University of San Francisco’s Center for Research, Artistic and Scholarly Excellence tell us
“Silicon Valley has a long history of creating and nurturing an ecosystem of entrepreneurs, startups, investors, and academics.”
This is a case in which a well-earned reputation remains even when the facts have come to be in conflict with the image.
New ratings from WalletHub show multiple Bay Area cities rank among the nation’s worst places to start a business. The survey “compared the relative startup opportunities that exist in 100 U.S. cities,” using “19 key metrics, ranging from the five-year business-survival rate to labor costs to office-space affordability.”
San Francisco is ranked 91st, Fremont 97th and San Jose next to the bottom at 99th. That’s three Silicon Valley cities among the last 10.
Oakland, by the way, is 85th.
The steep cost of doing business in California is expected, particularly in Silicon Valley, where living and work spaces are at a premium due to high demand. The gap between supply and demand closed appreciably if market forces are allowed to prevail. But this is California, where building, especially housing, is difficult due to public policies that discourage construction.
This has created a crisis that’s made housing unaffordable and, when combined with the prices government charges residents for just living in the state, contributes to a punishing cost of living.
Taxation is another variable that is controlled by policy. California has the sixth highest top marginal corporate tax rate in the country at 8.84%, which is in fact its only corporate tax rate and starts with the first dollar of taxable income earned. The same tax rate that has driven businesses from the state is also a barrier to entrepreneurship.
California is a regulatory quagmire that makes “starting new businesses a grueling experience that for many just isn’t worth the effort.” It is a judicial hellhole, too, “the trial bar’s laboratory,” where lawyers “go to pursue innovative new theories of liability and push the envelope with regard to expanding liability for business,” according to the American Tort Reform Foundation.
Silicon Valley will continue to attract innovators and entrepreneurs. But there are alternatives outside of California, and talent and capital will seek paths that present the lowest resistance. If being the leader in something other than windmill-chasing energy plans, unfettered spending and wokeness codes has any value to them, policymakers need to wake up to the mistakes they’ve made.
Kerry Jackson is the William Clement Fellow in California Reform at the Pacific Research Institute.
