Over the course of the last two years, the San Francisco Bay Area experienced a mass exodus. Since the beginning of 2020, more than 72,000 people have moved out of the city, and Silicon Valley specifically lost 40,000 residents in 2021– the largest departure since the dot com bubble burst.
However, these statistics alone fail to fully encapsulate the changing sentiments around being required to physically show up to the office every day. The pandemic left many of us rethinking what we value and how we spend our time, and, for many California residents, that translated into serious questioning of the state’s high cost of living, ongoing droughts, increasingly frequent wildfires, and ever-rising crime rate. Thousands of people living in the Golden State started asking themselves, is it really worth it?
For the so-called cradle of innovation, this question is bound to have some pretty serious effects. Already, Silicon Valley is arguably more of a concept than a physical place – one that’s inextricably linked to technological innovation as a whole. Beginning around 2005, that concept bled into the surrounding Bay Area, becoming synonymous with San Francisco and the individuals living there. Now, with many of the best and brightest leaving and with many who now have little incentive to move to the Bay, Silicon Valley will inevitably lose its grip as the leader of innovation. That means the concept of Silicon Valley is officially up for grabs, allowing individuals who don’t look, walk, talk, or think like anyone in tech today to have a chance to redefine the industry’s culture from the ground up and impact what our future will look like.
This shift is well-timed with the emergence of web3 and DeFi: new technological movements that are grounded in decentralization, open-source software, and financial empowerment. But, to make these ideals a reality, builders will have to operate outside of centralized locations, ideologies, and fundraising models– meaning the Silicon Valley paradigm is destined to fade.
Global teams ensure diverse perspectives.
Web2 behemoths claim to be made of diverse teams and thinkers, but the key flaw in the web2 model lies in the fact that centralized office locations are largely in one place: the Bay Area. This means that, no matter how diverse these teams might be, they all operate under the tyranny of a single culture and mindset. The ideal they strive for at the end of the day is largely the same.
As a result, many companies find themselves in an echo chamber. Even if they’ve done the work to build teams made up of individuals of different genders, identities, and ethnicities, thought diversity and unique perspectives will be forgotten in the process of conforming to the FAANG company ideal: “That’s how Netflix does it” or “Steve Jobs always said…” are often thrown around as a guiding light, meaning how things were done in the past are more important than how they’re being built in the future.
In contrast, web3 and DeFi companies often rely on global teams that are working on building tech products remotely; this industry is so new that experimentation and trying new things are not only encouraged, they’re expected. To truly build the next wave of innovative applications, it’s essential for creators and builders from every corner of the globe to be included in that process– and for these individuals to work in an environment that supports a strong sense of individuality and nonconformity when it comes to problem-solving. Only then can an ecosystem be created that rewards workers for bringing their unique perspectives to the table.
New fundraising models shift who holds the power.
The venture capital narrative– and the way equity raises work– is inextricably tied to the Silicon Valley model: in a traditional web2 fundraising process, companies raise a seed or pre-seed round, and then a succession of other rounds (such as a series A and B) before being acquired or going public (according to Crunchbase, software companies typically raise four rounds and take nine years to IPO). Each time a founder raises, she is diluting her shares and the shares of her employees, and if she’s fortunate enough to become one of the 0.0001 percent of founders that make it to an IPO, it’s likely that she’ll only own an average of 15 percent of her company at that time.
IDOs (initial DEX offerings), NFT raises, and token-gated DAOs all flip the venture capital paradigm on its head. These fundraising models allow protocols to capitalize off of their community and simultaneously reward community members for participating. That means instead of needing to meet the requirements to become a limited partner in any given venture capital fund, individuals can buy a protocol’s newly launched token on IDO day which offers a low barrier to entry when it comes to investing in a project they believe in. At the same time, DeFi fundraising mechanisms are still in their infancy, and token buyers need to be wary of the fact that diligence functions are lacking.
However, if these new paths to funding do in fact lead to viable companies, they have the potential to make traditional venture less relevant. And, as a result, the balance of power will inevitably shift from those who are accredited investors into the hands of people from all different socioeconomic levels, identities, and locations.
While Silicon Valley remains a potent force in our technological landscape right now, the way new projects are being built today will soon outpace web2 innovation. In the very near future, we’re bound to see some major changes when it comes to how the tech world operates– especially when it comes to who is given a seat at the most influential tables.