Garry Tan, President and CEO of Y Combinator, criticized California's economic conditions just days after venture capitalist and White House AI and crypto czar David Sacks suggested that the accelerator open an office in Austin to reduce its exposure to the state's rising fiscal and political pressures.

Tan Highlights California’s Economic Failures

Tan quoted a Financial Times opinion piece stating California has “the nation’s highest unemployment rate, its highest homeless population, its highest median housing prices, and its highest gas and electricity prices (save for Hawaii),” meaning Hawaii exceeds California in energy costs.

The Financial Times column by Chairperson of Sequoia Capital Michael Moritz warned that California’s billionaire tax plan will backfire, noting the state has become overly reliant on a few deep pockets over the past 50 years.

Sacks Pushes Geographic Diversification Strategy

Sacks previously urged Tan to reconsider Y Combinator's geographic concentration, noting that Austin's startup ecosystem has gained momentum following relocations by Tesla (NASDAQ:TSLA) CEO Elon Musk and venture capitalist Joe Lonsdale.

“If you don’t start diversifying now, you won’t have any leverage,” Sacks wrote, warning Silicon Valley’s network effects grant California politicians rent-extraction power over tech.

Y Combinator Signals Openness To Expansion

Tan has responded positively to Sacks’ arguments previously while noting San Francisco Bay Area startups achieve product-market fit at 2.5 times Austin’s rate.

In a separate post, the Canadian-American venture capitalist, replying to an X user, said that Y Combinator would "have to consider Austin or Cambridge programs" if California's wealth tax reaches the ballot.

Y Combinator has famously backed some of the biggest names in tech, including Airbnb (NASDAQ:ABNB), Reddit (NYSE: RDDT), and DoorDash (NASDAQ:DASH).

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