Ask YC: How important is location when your startup isn't looking for lots of VC money?
14 comments
I've asked this before, but it bears repeating:
Have there been many wildly successful tech startups that were based on the premise "save money", to the point that they located themselves some place incredibly cheap (but far outside of tech industry circles)?
I'm not saying it isn't a valid business plan, as I don't know, but I can point to an awful lot of Silicon Valley startups that have been wildly successful, and no wildly successful tech startups from Idaho. It's really cheap to live in Idaho, so you've got a REALLY long runway. Why aren't there success stories? (Expand it to the whole midwest, and the story isn't remarkably better.)
Then again, Kevin Hale from Wufoo told me a great story about a technique he uses in one of his presentations (which are awesome)...he passes around printouts about the top 20 or so fastest growing companies according to Inc. Magazine, and asks questions about them, asking folks to raise their hand if the answer is "yes". One of the questions is "Is the company you're looking at based in California or Boston or New York?" and only one or two hands go up (Wufoo is based in Florida, and thus they take great satisfaction in talking about successful companies outside of the tech startup hubs). But, Inc. Magazine covers stuff that isn't tech.
Have there been many wildly successful tech startups that were based on the premise "save money", to the point that they located themselves some place incredibly cheap (but far outside of tech industry circles)?
I'm not saying it isn't a valid business plan, as I don't know, but I can point to an awful lot of Silicon Valley startups that have been wildly successful, and no wildly successful tech startups from Idaho. It's really cheap to live in Idaho, so you've got a REALLY long runway. Why aren't there success stories? (Expand it to the whole midwest, and the story isn't remarkably better.)
Then again, Kevin Hale from Wufoo told me a great story about a technique he uses in one of his presentations (which are awesome)...he passes around printouts about the top 20 or so fastest growing companies according to Inc. Magazine, and asks questions about them, asking folks to raise their hand if the answer is "yes". One of the questions is "Is the company you're looking at based in California or Boston or New York?" and only one or two hands go up (Wufoo is based in Florida, and thus they take great satisfaction in talking about successful companies outside of the tech startup hubs). But, Inc. Magazine covers stuff that isn't tech.
I've not got data, but I'd imagine that reporting bias causes a tendency to conflate the cool web 2.0 and 90's dot-com startups with the tech sector as a whole. There are plenty of less sexy tech companies that are thriving outside of hubs. The technology sector is not a unique snowflake -- microeconomics still applies. Lowering your costs is a good thing.
The world is flat. If you've founded, say, an enterprise software firm with no interest in outside funding and you have all the employees you need, there's no reason to be in a "startup hub" unless you want to be.
The world is flat. If you've founded, say, an enterprise software firm with no interest in outside funding and you have all the employees you need, there's no reason to be in a "startup hub" unless you want to be.
"The world is flat."
I'm not sure I believe this one. I've lived in a lot of different places...and I know that I build better technology when I'm surrounded by technology people. Humans are social animals, and if your peer group is building next generation technology you're more likely to do the same...likewise, if your peer group is pushing paper, building cars, milking cows, packing chicken, etc. I suspect you're far less likely to be producing the best technology. You might be happier. You might be able to run your company for longer without raising money or running out of what you did raise. But, I doubt you're building the best technology you're capable of building. Maybe I'm unique...maybe nobody else is effected this way, but I doubt it.
Of course, if by saying "enterprise software", you mean "a market no one else is interested in, and thus I can build any old technology I want and people will have to buy mine", then sure. No matter where you are, you'll do fine. But what happens when an agile web-based competitor arrives who are using modern techniques and have hired the best nerds they could find in the technology center where they're based (which are, let's face it, better than the nerds you can find in a non-tech-focused city)?
I also have very little data, I just think the reasoning is flawed somewhere, since whenever I've met someone starting a company in the sticks (often "to save money"), it is fatally flawed from the get-go--often based on five year old thinking. I'm just suggesting that maybe there is a continuum of "tech productivity goodness" and that the Valley is near the top and Idaho is near the bottom, and placing yourself at the bottom of the continuum might be bad for your odds. Balancing other elements is certainly fine...but beware of what you're giving up by "saving money".
In my previous business I did a lot of work in out of the way places ("packing chicken" was actually true of the city where I once worked on a pretty big project, and the IT and software managers there were desperate for talent but simply couldn't hire it at any price)...you keep acting as though "once you have your employees" it doesn't matter where you are. But, employees leave, and if you're lucky your company will grow. You have to hire sometime if you survive.
I'm not saying you're wrong, but I think the evidence is much stronger that you are than that you're not.
I'm not sure I believe this one. I've lived in a lot of different places...and I know that I build better technology when I'm surrounded by technology people. Humans are social animals, and if your peer group is building next generation technology you're more likely to do the same...likewise, if your peer group is pushing paper, building cars, milking cows, packing chicken, etc. I suspect you're far less likely to be producing the best technology. You might be happier. You might be able to run your company for longer without raising money or running out of what you did raise. But, I doubt you're building the best technology you're capable of building. Maybe I'm unique...maybe nobody else is effected this way, but I doubt it.
Of course, if by saying "enterprise software", you mean "a market no one else is interested in, and thus I can build any old technology I want and people will have to buy mine", then sure. No matter where you are, you'll do fine. But what happens when an agile web-based competitor arrives who are using modern techniques and have hired the best nerds they could find in the technology center where they're based (which are, let's face it, better than the nerds you can find in a non-tech-focused city)?
I also have very little data, I just think the reasoning is flawed somewhere, since whenever I've met someone starting a company in the sticks (often "to save money"), it is fatally flawed from the get-go--often based on five year old thinking. I'm just suggesting that maybe there is a continuum of "tech productivity goodness" and that the Valley is near the top and Idaho is near the bottom, and placing yourself at the bottom of the continuum might be bad for your odds. Balancing other elements is certainly fine...but beware of what you're giving up by "saving money".
In my previous business I did a lot of work in out of the way places ("packing chicken" was actually true of the city where I once worked on a pretty big project, and the IT and software managers there were desperate for talent but simply couldn't hire it at any price)...you keep acting as though "once you have your employees" it doesn't matter where you are. But, employees leave, and if you're lucky your company will grow. You have to hire sometime if you survive.
I'm not saying you're wrong, but I think the evidence is much stronger that you are than that you're not.
Of course, if by saying "enterprise software", you mean "a market no one else is interested in, and thus I can build any old technology I want and people will have to buy mine", then sure. No matter where you are, you'll do fine. But what happens when an agile web-based competitor arrives who are using modern techniques and have hired the best nerds they could find in the technology center where they're based (which are, let's face it, better than the nerds you can find in a non-tech-focused city)?
Isn't it presumptuous to think that one's city would dictate one's knowledge of "modern" technology? If you're going to stagnate, you'll do it wherever you live.
I'll concede the point about local staffing but, again, if you've got your team together and build your startup so that it's profitable, you'll have no problem hiring when you need to.
Isn't it presumptuous to think that one's city would dictate one's knowledge of "modern" technology? If you're going to stagnate, you'll do it wherever you live.
I'll concede the point about local staffing but, again, if you've got your team together and build your startup so that it's profitable, you'll have no problem hiring when you need to.
There are plenty of less sexy tech companies that are thriving outside of hubs.
My thoughts are this... You are in a low tech town, but you have a startup where you do not plan to get funding.
Well then your ultimate goal is to get exposure and users. How do you get exposure to the press in Silicon Valley if you are in Winnipeg (dont know that is where you are from but its a start)?
A blog, being part of the communities that they are apart of. Social networking sites, posting comments to articles on their blogs. ITs a lot of work, but you could honestly make it seem as if your startup is in silicon valley even though it is no where close. The key is what another user said...the world is FLAT! Take advantage of it.
Chris http://www.stampedeblog.com -- our startups blog http://www.propertystampede.com -- our startup
Well then your ultimate goal is to get exposure and users. How do you get exposure to the press in Silicon Valley if you are in Winnipeg (dont know that is where you are from but its a start)?
A blog, being part of the communities that they are apart of. Social networking sites, posting comments to articles on their blogs. ITs a lot of work, but you could honestly make it seem as if your startup is in silicon valley even though it is no where close. The key is what another user said...the world is FLAT! Take advantage of it.
Chris http://www.stampedeblog.com -- our startups blog http://www.propertystampede.com -- our startup
In Canada right now I'd have to say the hottest area is Montreal, with Vancouver and Toronto on a second tier. There's more momentum and innovation going on in Montreal, and some interesting early-stage funds have opened up there.
Toronto has an internet community, but not really a startup community. And Vancouver has a bunch of highlights (Flickr comes to mind), but is really stagnating right now IMO (I live there currently). In Canada, the money and attention disproportionately follows the local tech celebrities, and it's hard to get either if you're starting out on your own. And if it's hard to get investment, it's hard to get your ideas off the ground.
The question of whether to relocate is one that I've thought about quite a bit recently. I think to get a foot in the door, you have to meet the right people first. And it's really hard to meet those people when you're not in a tech-hub. Once you're a success, you can extrapolate that success in your hometown or where-ever with more certainty.
Canadian VCs fawn over local people who have a well-known name in the Valley. I know that for a fact - more than a few startups in town are created by people who are purely riding notoriety from Web 1.0. If you don't have the notoriety, they'll always be suspicious of you.
Toronto has an internet community, but not really a startup community. And Vancouver has a bunch of highlights (Flickr comes to mind), but is really stagnating right now IMO (I live there currently). In Canada, the money and attention disproportionately follows the local tech celebrities, and it's hard to get either if you're starting out on your own. And if it's hard to get investment, it's hard to get your ideas off the ground.
The question of whether to relocate is one that I've thought about quite a bit recently. I think to get a foot in the door, you have to meet the right people first. And it's really hard to meet those people when you're not in a tech-hub. Once you're a success, you can extrapolate that success in your hometown or where-ever with more certainty.
Canadian VCs fawn over local people who have a well-known name in the Valley. I know that for a fact - more than a few startups in town are created by people who are purely riding notoriety from Web 1.0. If you don't have the notoriety, they'll always be suspicious of you.
Move to Austin! I consider this THE place to be. It is a tech city, we have Silicon Hills, its MUCH MORE CHEAPER than SF and you have all the commodities of the tech cities like SF, Seattle and Boston. Plus, we have UT Austin, a top 10 school in CS, in case you are looking to recruit.
I've been thinking about it. :)
37signals are in Chicago (and until around 1½ year ago one of them was in Denmark), and Skype was done in Estonia. There are many other stories of successful companies that aren't in the major hubs. So I would say that it is definitely possible. Especially now where almost all business can be taken care of over the web. A designer I know even moved to Thailand, and did his work from the beach without skipping a beat - without his customers knowing about it.
1. Resources
2. Talent
3. Money
4. Travel Costs / Accessibility
These ideas all come to mind on why you would want to be in a major hub. That said I believe a start up can start anywhere but needs to be prepared to relocate should the needs of the business demand that they do so.
These ideas all come to mind on why you would want to be in a major hub. That said I believe a start up can start anywhere but needs to be prepared to relocate should the needs of the business demand that they do so.
That said I believe a start up can start anywhere but needs to be prepared to relocate should the needs of the business demand that they do so.
Yeah, moving away from major hubs can be a good way to save money.
Yeah, moving away from major hubs can be a good way to save money.
We're based in Geneva, Switzerland and Sweden. We even have our own developers (not outsourced) in Bangladesh. Its easy to be distributed, and we've had no problems being in Europe. Geneva is not huge, but I try and get out and meet local entrepreneurs, participate in Open Coffees, talk to some local VCs etc. You can be anywhere if you have a great product and people want it.
I started my company in Seattle and just recently moved to SF -- even though Seattle is extremely tech-friendly, it's still like moving from the countryside into the Big City. Ideas abound, it's like the whole city is involved in a big brainstorming session. Even if you don't need more talent or money (lucky you!), your product benefits.
I am asking this because I am currently living in Western Canada in a fairly low tech area and my future plans include web startups.
My co-founder and I are trying to weigh the pros and cons of relocating. Because we are not planning to look for large rounds of funding or to begin a hiring binge in the near future, are there other large benefits to basing our web company out of these "startup friendly" centers?
Does Canada have any areas that stand out as being startup friendly?