California Spotlight #16

How a New Wave of Out-of-State Competitors Are Threatening California Founders—and What You Can Do About It

Mar 08, 2025

For decades, California was the undisputed capital of innovation. If you wanted to build a high-growth company, this was the place to be.

But in 2024, something strange is happening: out-of-state businesses are invading California markets at an unprecedented rate.

From Texas-based e-commerce brands stealing local customers to Florida’s rising startup scene poaching talent, the threat is real—and it’s accelerating.

The question is: Are California founders ready for the fight?

The Data No One Is Talking About

Look beneath the headlines about California’s economic struggles, and you’ll find a trend that should have every business owner paying attention.

Business formations in California dropped by 18% in 2023. Meanwhile, Texas, Florida, and Arizona saw double-digit growth.
California’s cost of doing business is the highest in the U.S. In some industries, operating expenses are 40% lower in competing states.
Customers in California are increasingly buying from out-of-state companies. Shipping logistics and digital marketing have made “local” businesses more vulnerable than ever.

The impact? We’re seeing an exodus of revenue, talent, and innovation—not just from major corporations but from small businesses that once dominated local markets.

But while some founders are panicking, others are quietly adapting and winning.

How California Businesses Are Fighting Back

Not all California companies are losing ground. The ones that are staying ahead of the competition are using strategies that many founders still overlook:

Owning the local narrative. The best founders aren’t just selling products; they’re selling their California roots. Consumers are increasingly supporting businesses that highlight their connection to the state—leaning into local identity as a competitive advantage.
Rebuilding customer loyalty. With out-of-state companies using aggressive pricing tactics, California businesses are doubling down on brand affinity. Some are launching invite-only communities, local perks, and in-person events to lock in customer relationships.
Adapting operations for the new economy. The smartest business owners aren’t waiting for California to lower costs. They’re restructuring—leveraging automation, remote teams, and new supply chains to stay competitive.

If you’re running a business in California, you have two choices:

Ignore the shift and risk getting outpriced, outmarketed, and outrun by outside competitors.
Adapt now, build defensibility, and make your California presence an asset—not a liability.

This isn’t speculation. We’ve spoken with founders who are already executing these strategies, and their results speak for themselves.

So the real question is: Will you fight for your market, or let someone else take it?

— James