Elon Musk says Tesla HQ will move to Austin. Are California’s vaunted venture capital deals next?


You Might Also Like

– Advertisement –

Higher taxes are playing a role in California’s VC Fed

– Advertisement –

In May last year, Elon Musk—disappointed by California’s increasingly harsh regime—Threatened to move Tesla’s headquarters to Texas. A month later, Tesla was in talks to build its massive new factory outside Austin. By December, Musk himself had moved into the Lone Star State.

Now, 17 months later, Musk has announced that Tesla’s headquarters is moving from Palo Alto, California to Austin, Texas.


Corporate headquarters moves grab headlines, but they don’t employ as many people as manufacturing ones. Not all employees will move with headquarters, however—it depends on corporate policy and the individual wishes of the workforce as they seek to balance friends and family (and high taxes and skyrocketing housing costs) for the low cost of living in Texas. Huh. hot summers.

Firms leaving California for Texas stand to reduce their operating costs by as much as 32 percent.

– Advertisement –

Elon Musk announces that Tesla is moving its headquarters to Austin

Last year, Musk was highly critical of California’s heavy regulatory burden, suggesting that big companies can absorb regulatory compliance into their overhead when startups struggle: “You have a forest of redwoods and small trees don’t grow.” can.” Musk said California should “just get out of the way” of innovators.

But what if California refuses to be “out of the way” of innovators?

Innovators need money to make their dreams a reality. Venture capital (VC) often provides that cash. Last year, 10,862 high-growth startups with 2.5 million employees raised $164 billion– 51 percent of the world’s total. Meanwhile, 103 venture-backed firms went public, generating $222 billion in publicly traded stock money.

California policymakers like to claim that their state gets the bulk of VC deals. one in livestream debate Sponsored by Stanford and the University of Texas, Austin in September, I pointed out several of California’s shortcomings, among them: the high cost of living, high taxes, and the nation’s highest poverty rate. My sparring partner, Gavin Newsom, former chief economic aide to California Gov. Told That California captured 50 percent of VC deals in 2020, more than the next three, New York, Massachusetts and Texas, combined.

Tesla hikes Model 3 and Model Y prices again, makes Cybertruck the cheapest vehicle

California has seen tremendous VC activity for decades, feeding off the state’s top-tier research universities, deep personal networks, and ready access to capital. But California’s share is shrinking as the state continues to live up to the mass of goodwill built since becoming an aerospace powerhouse in World War II.

If California has been the VC motherboard of America, then Silicon Valley has been the high-speed processor. But Silicon Valley’s dominance is waning with stake in US deals Falling below 20 percent for the first time in history.

Get Granthshala Business on the go by clicking here

Higher taxes are playing a role in California’s VC Fed. When I was vice chairman of the California Assembly Committee on Revenue and Taxation, I remember the state benefiting from huge tax revenues from Google’s initial public offering.

State tax on capital gains from stock sales grew 36% to $54 billion from $39.7 billion in 2004 Google’s founders contributed nearly $5 billion in growth with the redemption of their stock from its 2004 public offering.

That’s what happened when Facebook went public eight years later. Had those firms incubated, matured, and gone public in Texas, the founders and early-stage investors would not have paid anything in state capital gains—Texas has no personal income tax.

While Musk’s move to Texas made headlines, other significant inventors and investors have made the move over the past year as well. Joe Lonsdale, a Silicon Valley founder of Palantir and Adapper, moved to Austin about a year ago, just before Musk announced his move. Lonsdale’s VC firm, 8VC, Did 70 percent of your investment in California. It moved from San Francisco to Austin last November.

It takes time for a successful VC activity to be presented. With Musk establishing himself in Texas with both legs, some of his friends, board members, and investors have a following.

Texas’ mighty tax-exempt magnet is set to move the pole of the VC world from Silicon Valley to Austin, and with the change, billions of dollars of innovation-fueled investments will follow.

Chuck Devore is the Vice President of National Initiatives for the Texas Public Policy Foundation, served as the California State Assemblyman from 2004 to 2010, and is a lieutenant colonel in the U.S. Army Retired Reserve.

– Advertisement –

Related News

Next Post

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending News