Why Palantir co-founder Joe Lonsdale is leaving Silicon Valley

Palantir co-founder Joe Lonsdale is following the lead of the software company he helped create and moving his venture firm out of California.

Earlier this year, Londsdale relocated his family from the Bay Area to Austin, Texas. He’s now doing the same with his firm, 8VC, though he told CNBC he’ll keep its San Francisco office open for employees that are staying.

The exodus from Silicon Valley and San Francisco has picked up steam during the eight months of the coronavirus pandemic, which forced offices across the country to shut down and tech workers to retrofit their homes and apartments. Between the high and rising costs of living, California’s hefty taxes and a broader shift to remote work, many in the tech industry are finding plenty of excuses to seek refuge elsewhere.

In some circles, particularly those that lean libertarian, there’s also a growing disdain for Bay Area politics, which have continued to swing farther to the left.

Palantir, which Lonsdale co-founded 17 years ago in Palo Alto, announced in August that it was moving to Denver. In the company’s prospectus ahead of its stock market debut, CEO Alex Karp ripped Silicon Valley, saying, “we seem to share fewer and fewer of the technology sector’s values and commitments.” Palantir has drawn the ire of liberals for its open support of American defense agencies, some of the company’s top customers.

Fellow Palantir co-founder Peter Thiel, who backed President Donald Trump’s 2016 campaign and joined his transition team, moved to Los Angeles in 2018 and relocated one of his investment firms, Mithril, to Austin.

Lonsdale, who supported congressional Republicans in the 2020 election, said the timing of his departure, so close to Palantir’s departure, is coincidental, and that he’s been considering a move for a few years as he’s made investments across the country. Working from home in the early days of the pandemic is what “really pushed it over the edge,” he said.

Lonsdale isn’t shy about criticizing California for issues like income inequality and its poverty rate, the highest of any state in the country. He also said that while California has a “reputation for being a green oasis,” the five most polluted cities in the country are in the state, data that’s backed up by the American Lung Association.

Then there’s the tax rate. California has the highest income tax in the country — 13.3% for top earners — while Texas is one of seven states with no income tax.

“I could either put that money toward things that are fixing the world or give it to the California state government,” said Lonsdale, who became a venture capitalist in 2011 and started 8VC four years later.

Close to Musk and Dell

In Austin, Lonsdale will be joining what’s already one of the hottest start-up markets in the U.S. Outside of the Bay Area, only New York, Boston and Seattle attracted more venture dollars last year, according to Crunchbase. Lonsdale said that within his portfolio, six companies hired more than 500 people there in the last three years. Over the past decade, it was the fifth fastest-growing city in the country.

There’s a lot of additional activity there, too. Tesla CEO Elon Musk said in July that the carmaker is building its new Gigafactory near Austin. Lonsdale is an investor in one of Musk’s other ventures, Boring Company, which has plans to build tunnels for high-speed underground transportation.

Lonsdale said he had Musk over at his house last week, along with Michael Dell, who started his computer company in Austin 36 years ago and is “very welcoming to entrepreneurs,” he said.

Musk hasn’t announced plans to build a tunnel in Austin, but he hinted at the possibility in a tweet in September. One of his Twitter followers recommended it to Musk, and he responded, “For sure.”

Lonsdale said that 10 to 15 of his firm’s 45 employees are likely to join him in the Austin area. He’s also moving his policy organization, Cicero Institute, to the city.

Among 8VC’s better-known investments to date are Palmer Luckey’s start-up, Anduril, which is building a virtual border wall, and Dustin Moskovitz’s software company, Asana, which went public in September. He’s also putting a lot of money in health-care companies like insurance provider Oscar Health and men’s health company Hims.

Improving primary care in rural areas is one Lonsdale’s areas of focus. He’s following significant advancements in telehealth in recent years.

“There are lots of ways we can invest in that, thanks to breakthroughs from Obama and Trump,” he said. “We can save the system tons of money.”

Lonsdale also expects to save himself time and money on travel by being in Texas. He’s now much closer to companies that he’s backing in mid-America.

“I’ll be flying 125 hours less next year being here,” he said. “I’m saving a ton of time being in Texas. And it’s a great place to build.”

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