Bay Area Small businesses and Startups- Outlook for 2021

By Zach Fisher and Aditya Bharadwaj

Now that the Coronavirus has plagued the US for more than a year, the destruction it has caused in its wake has become more and more visible. The utter chaos brought by COVID 19 has damaged hundreds of small businesses in the Bay Area, bankrupted many of them. However, some startups have used this period as a time for growth, and will come out of this better than they ever were. Large businesses are also affected, and some of the silicon valley tech giants are replanting themselves into more distant locations. For better or for worse, businesses across California are being changed forever. Economic Darwinism has taken over, and only the strongest businesses survive.

Unfortunately, many small businesses in the Bay Area have taken a beating. Shelter In Place mandates have caused many in person businesses to struggle. While these rules are set in place to hinder the spread of the virus, it also stunts the economic cash flow. No people means no customers, and no customers means no business. This has forced hundreds of locations to go out of business, including 24 Hour Fitness and Flights on Castro Street. Especially hit hard are the restaurants, since not many people are willing to go out to eat in a pandemic. Online delivery services are a slight help, but they leech off a majority of the food margins and restaurants are forced to take only a fraction of the profit. The tourism and business travel industry are also down for obvious reasons.

All this paints a pretty dark picture of the Bay Area economy, but there may be a bright side to be found. Some startups and small businesses are finding ways to adapt to this new hazardous environment, which will permanently improve the way things are done in the future. Out of the ashes of crumbling businesses rises a new era of restaurants and retailers. Many stores are introducing pickup or delivery ordering. While many restaurants are partnering with services like Doordash or PostMates, there are some who have taken delivery into their own hands.

Rather than closing down, they are finding new ways to bring their product straight to the consumer, without any percentage finagling. This will benefit them in the future as well, as the delivery infrastructure can be carried out once shelter in place finishes. Another way shops are adapting to the new age of social distancing comes in the form of websites. Many small businesses are creating or updating their websites to fit the times. New changes include online ordering or customization, rendering the need for a brick and mortar store unnecessary. From retailers to restaurants to design firms, websites are a renovation to the business experience, and an essential part of staying afloat. While startups may not be able to completely rely on these solutions, it’s at least enough to keep them alive as other businesses sink into the abyss of bankruptcy.

Many new tech startups are emerging as well, as the need for online interaction presents new challenges and thus new solutions. Companies that are involved in cloud data, video conferencing, and online education are thriving. For some companies online work can be even easier than working in the office, so these new technological innovations are here to stay. While it feels annoying now, the opportunity to work online allows employees to be productive in more and more places. Some startups are capitalizing off of this idea, and are setting themselves up well for the future.

Mark Zuckerberg of Facebook made a surprising statement that he wanted all employees to work remotely until July of 2021in early 2020. He wants remote work to become the norm, and for Facebook employees to embrace the idea. Not only that, he also expects 50% of employees to work completely remotely over the course of the next decade. As the tech giant transitions towards working from home, evidently it reduces the importance of where the workers have to live to be near an office. Given that a large portion of employees live in the Bay Area/Silicon Valley, where costs for real estate and overall living are “sky high,” Zuckerberg hopes that this change will encourage workers to move to a more affordable area.

This has the ripple effect of reducing the demand for homes in the Bay Area as more engineers vacate it, driving the prices of homes down by likely a significant amount. These new reduced prices may give way and open more opportunities for others to find here, as the overall ecosystem of Silicon Valley can be compared to a dream for a tech startup. This could also potentially decrease the fierce competition for software jobs in the area, as a significant portion of the workforce here is made of remote Facebook employees that will be likely moving to Atlanta, GA; Dallas, TX; and Denver, CO, where Zuckerberg plans to create “hubs” for workers to meet up occasionally. He emphasizes that these hubs are not offices, given limited capacity for buildings.

Other Tech Companies Leaving

https://www.wsj.com/articles/covid-19-pandemic-loosens-silicon-valleys-tight-grip-on-tech-industry-11607894048

https://www.theinfatuation.com/san-francisco/features/san-francisco-bay-area-restaurant-closings

https://abc7news.com/society/-sf-based-boba-guys-may-not-reopen-all-stores-after-covid-19-pandemic/6028665/

https://www.bizjournals.com/sanfrancisco/news/2020/12/30/bay-area-tech-startups-2020.html

Sources:

Marshall, Aarian. “Who’s Still Covered by California’s Gig Worker Law?” Wired, Conde Nast, www.wired.com/story/whos-still-covered-californias-gig-worker-law/.

Published: Nov 12, 2019by Gabrielle Pickard-WhiteheadIn Employment2. “The History and Future of the Gig Economy.” Small Business Trends, 12 Nov. 2019, https://smallbiztrends.com/2019/11/the-history-and-future-of-the-gig-economy.html#:~:text=Spawned%20by%20jazz%20club%20musicians,for%20more%20than%20a%20century.

O’Brien, Sara Ashley. “Prop 22 Passes in California, Exempting Uber and Lyft from Classifying Drivers as Employees.” CNN, Cable News Network, 4 Nov. 2020, www.cnn.com/2020/11/04/tech/california-proposition-22/index.html

https://www.theguardian.com/technology/2020/may/21/facebook-coronavirus-remote-working-policy-extended-years

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