It’s a lot more expensive to live in San Francisco or Boston than in San Antonio or Indianapolis. To account for this difference, most startups adjust the compensation they offer depending on where an employee is based.
Startups tend to pay employees a little more in cities where basic expenses like rent and childcare are more costly. They tend to pay a little less in cities where the necessities of life are more affordable.
Across the startup industry at large, however, the geographic differences in compensation are not quite commensurate with differences in cost of living.
Take San Antonio. Among startups on Carta, the average new hire in San Antonio in the first half of this year received about 76% of the average compensation of a new worker in San Francisco. Meanwhile, the median income in San Antonio is about 44% the median income in San Francisco, and the median rent is 51% of San Francisco levels. This gap means that the typical startup salary goes further in San Antonio than it does in San Francisco.
Startup compensation vs. cost of living
This sort of gap exists in nearly every metropolitan area in the U.S.—although to differing degrees. On average, the way startups adjust compensation for geography affords a higher standard of living to employees outside San Francisco compared to their Bay Area colleagues.
To track the relationship between compensation and cost of living, we created the Salary-Cost Index (SCI), a metric that compares Carta’s latest compensation benchmarks against government data on income, rent, and other key measures of cost of living. Each metro receives an SCI score that measures the difference between median startup compensation and an aggregate index for local cost of living. We first conducted this exercise based on data through the end of 2022, then again with data for H1 2023.
This newest analysis includes data from Carta’s latest survey of the state of startup compensation, plus newly updated government data on cost of living for the period from 2018 to 2022.
Let’s dive into the data. The below graphic shows the metros with the lowest SCI scores—that is, the areas where compensation and cost of living are most closely aligned. The list starts with San Francisco, which serves as the baseline for this dataset.
The first column in the above chart shows the average startup salary in each metro area as a percentage of the average salary in San Francisco. The second column does the same thing, but for cost of living instead of salary. To calculate the SCI score, we subtract the cost of living percentage from the salary percentage.
The final two columns show how each metro’s latest SCI score compares to its prior scores from 2023 and 2022—again, a negative change means that compensation and cost of living are growing more closely aligned.
Next, here are the metros with the highest SCI scores, where the widest gap exists between compensation and cost of living:
Lastly, here are the metros where SCI scores changed the most from 2023 to 2024. The cities with a red number got comparatively more affordable for startup workers, while those with a green number grew relatively less affordable:
What the data reveals
Compared to San Francisco, nearly every other major American metro area has a wider gap between average startup compensation and cost of living. The only two exceptions—San Jose and Santa Cruz—are within a 90-minute drive of San Francisco. The typical startup compensation package goes further in every market outside Northern California.
In some cities, such as Detroit and Cleveland, the gap between compensation and startup living is more like a gulf. The typical startup employee in Cleveland, for instance, earns 87% the salary of a startup employee in San Francisco. But by our combined metric, the cost of living in Cleveland is less than 40% of what it is in the Bay Area.
In terms of how SCI scores have shifted from 2023 to 2024, there are clear differences between different regions of the country. This sample includes 15 metros across the Midwest and Northeast that were included in both the 2023 and 2024 analyses. This year, SCI scores got higher in 10 of those 15 metros (meaning salaries are outstripping the rising cost of living) and lower in just Chicago and St. Louis, where salary differentials moved closer to the relative cost of living. In most metros across the Midwest and Northeast, the gap between compensation and cost of living is growing larger.
The opposite is true in the West and the South. This sample has 34 metros in the West and South that were included in both of our most recent analyses. This year’s SCI scores got higher in just eight of those 34 metros, and they declined in 22. This means that in most metros across these two regions, the gap between compensation and cost of living is growing smaller, signaling a shrinking advantage for these cities in compensation versus cost of living.
This shift may have significant implications for startups. The West and South are home to many of the fastest-growing startup hubs in the U.S, a list that includes cities like Atlanta, Austin, Denver, Miami, Nashville, Salt Lake City, and San Diego. As the relationship between compensation and cost of living continues to shift—and as geographically distributed workforces become the new norm—companies may have to think in new ways about how to attract and retain talent in markets across the country.
Assessing the West
Here’s a closer look at the latest data for the West census region:
Some takeaways:
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SCI scores are falling in the West: Setting aside San Francisco, 12 of the 17 cities in this West dataset have a lower SCI score today than they did a year ago. Only three—Riverside, Tucson, and Sacramento—have a higher SCI score. In secondary startup hubs such as Seattle, Denver, and Salt Lake City, the relationship between average salary and cost of living is starting to look more like it does in San Francisco.
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Major SCI movement: In some cases, these changes are significant. San Diego’s SCI score dropped from 17 to 10, the biggest year-over-year change for any city in the U.S. Several other cities in the West saw four-point declines, including the prominent tech markets of Denver, Boulder, and Salt Lake City.
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The cost of California: Even if we set aside San Francisco, the five metro areas with the lowest SCI scores are all in California. That’s true for the Western subset of companies, and it’s also true for the entire national dataset: No other city in the U.S. has an SCI score lower than 14.
Shifts in the South
Just like the West, the South is home to several cities that have gained traction in recent years as developing startups hubs. And just like in the West, many of those Southern cities have seen their SCI scores shrink in 2024, indicating that working in those markets today has become slightly less advantageous to tech employees, at least in terms of these metrics.
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Big cities, shrinking scores: Some of the biggest changes in SCI score have occurred in the biggest cities. San Antonio’s SCI score is six points lower in 2024 than it was in 2023. Nashville, Miami, Austin, and Charlotte have also all declined by at least three points.
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SCI scores are still high: Even with this year’s declines, the likes of Atlanta, Nashville, Austin, and Miami all still have SCI scores of 25 or higher. There’s still a big gap in how compensation and cost of living looks in these cities compared to how it looks in San Francisco—i.e., startup salaries still go a lot further in the South—even if that gap is shrinking.
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Exceptions to the rule: In some southern cities, the bargain of average startup salary compared with cost of living is growing even more appealing. Charleston, Jacksonville, Raleigh, and Richmond have all had their SCI scores increase by at least 10 points compared to our 2022 analysis.
Full data on 50+ metros
Want more of this data? Use the form below to download a full ranking of more than 50 metro areas broken down by SCI score, including the largest risers and fallers on this year’s list, plus regional spotlights of SCI scores for the Midwest, Northeast, South, and West census regions:
Methodology
SCI score relies on median income and rent data from the U.S. Census Bureau and family budget estimates from the Economic Policy Institute, a nonprofit think tank that aims “to include the needs of low- and middle-income workers in economic policy discussions.” These three cost-of-living metrics are broken down by city, while Carta’s base salary data is broken down by metro area. For cost of living, we used the largest city within each metro area. Median household income and median rent are from the five-year span of 2018-2022, the latest available government data, while Carta salary data is from Jan. 1-July 14, 2024.
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