Silicon Valley is changing, and its lead over other tech hubs narrowing

THE garage in which Hewlett-Packard was started in 1939 is now a private museum—a modest monument to the cut-price creativity and bare-knuckle entrepreneurship that made Silicon Valley famous. Drive south from Palo Alto through 20 minutes of inevitable traffic to Sunnyvale and you will find a landmark of a different kind. Nothing of technological note has taken place there. But in February this small two-bedroom house, which boasts just the sort of garage a startup would once have felt at home in, sold for $2m, 40% more than its asking price, within two days of listing—a new record for the area. That translates into a price of $25,386 per square metre ($2,358 per square foot).

When Ajay Royan of Mithril Capital, an investment fund, asks rhetorically “How are you supposed to have a startup in a garage if the garage costs millions of dollars?”, he is barely exaggerating the problem. The immense success of its tech industry means that the San Francisco Bay Area in which Silicon Valley sits has the highest cost of living in America. A median-priced home costs $940,000, four-and-a-half times the American average. The Department of Housing and Urban Development considers a family earning less than $120,000 in San Francisco “low income”.