From the article: "The cost savings startups achieve from cloud computing infrastructure or other technology cost reductions are dwarfed by the steady cost incr

From the article: "The cost savings startups achieve from cloud computing infrastructure or other technology cost reductions are dwarfed by the steady cost increases of labor in particular." I don't have hard data, but my intuition is that this is not the case. The raw price of storage / compute has only declined a little bit since 2009, but the number and variety of development tasks you can outsource to (broadly speaking) "cloud services" has dramatically increased. In 2009, Heroku was still a relatively primitive platform with only Ruby support - today, it can save you the cost of a sysadmin or two. Mailgun didn't exist and SendGrid was just coming out of TechStars - if you wanted email in your app, you needed a dev to build it. Twilio couldn't do text messages yet, and we didn't have Stripe for payments or Mixpanel for analytics - both were glimmers in their founders' eyes. The sheer amount of grunt work you need to do to get you app up and running has plunged since 2009 - now you can buy these core services for 1-2% of what you had to pay to develop them. These wins are most pronounced for seed- and A-stage companies, but they substantially cut your development and operations costs throughout your scaling lifecycle. I'm willing to bet that if you plot the median number of employees it takes to reach a seed, A, B, or even C round, you'd find that the leverage gained from this ecosystem of services more than makes up for increasing personnel costs. Of course, startups everywhere benefit from these cost reductions - this has nothing to do with San Francisco - but it certainly makes the increase in salaries and real estate expenses an easier pill to swallow.