One reason the Bay Area is so expensive is that the way to make a successful startup is to make the right product, not to pay employees less. So cheaper locations have no advantage.
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The "right people" are leaving CA in droves right now. The cost of living is too high. I don't think it'll be the end of success in CA, but I do think it will slow it down, if it hasn't already.
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You can only convince people to work all day and night for your dream and a lottery ticket for so long. Eventually people will want to be able to raise a family in something larger then a closet
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