Should You Start Your Business In Silicon Valley?

Jan 29 2014, 3:09pm CST | by

Should You Start Your Business In Silicon Valley?

I recently got the following from a reader: “I am based in the UK. Does that put a tech startup at a disadvantage to one in Silicon Valley? Would Facebook be Facebook if it started life in Cambridgeshire?”

My response was that – in general – it’s probably best to get on a plane and take a one-way flight to Silicon Valley (of course, I recommend this in my book on startups that focuses on “creating the next Facebook”!)

But to get some more insight on this topic, I reached out to a variety of top operators in tech. Here’s what they had to say:

Kraig Swensrud, Founder & CEO, GetFeedback

“Having started two businesses in Silicon Valley, I can’t imagine setting up shop elsewhere. My latest venture, GetFeedback.com, is based in downtown San Francisco. Being steps away from hundreds of other tech startups is invaluable: I am able to connect with some of tech’s brightest minds on a regular basis to share best practices, ideas, and war stories. Face-to-face access to mentors, advisors, and VCs firms are all within a short drive. Hiring can be difficult – and expensive. On the flip side, if you can prove you’re onto something exciting, luring amazing talent is not as difficult as one might think.”

Chase Curtiss, Founder & CEO, Sway Medical

“As an entrepreneur from Silicon Valley with a current business headquartered in ‘Middle America’, the thought of endless resources and plentiful talent is a lure that is hard to ignore. Successful companies that raise large amounts of capital and scale quickly have the ability to become the next Instagram, Snapchat, or Nest. However, banking on this type of strategy can be a potentially fatal decision for your company. While there are definite hurdles to overcome in smaller cities (e.g., availability of knowledgeable investors, smaller talent pool, proximity to customers and business partners), there are some positives that deserve mention. Namely, less distractions and significantly less employee turnover. The talent pool may be smaller, but you’re not competing with Google and Facebook. Being in the Valley has its perks, however, it’s definitely not the only place to grow a successful startup.”

Marius Moscovici, Founder & CEO, Metric Insights

“Silicon Valley is the epicenter of funding and has a stellar reputation in the world of business. No doubt about it – it’s extremely useful to be able to leverage the leadership of your company in the Valley. However, building out an entire company here takes a lot more money than would otherwise be necessary, to capitalize on your business opportunity. The most capital efficient startups have a presence in Silicon Valley, but put disciplined processes in place that allow them to tap into the global resource pool of excellent talent. This approach creates competitive advantages in areas such as experience, tenure and cost.”

Alex Gorbansky, Founder & CEO, Docurated

“As a B2B focused entrepreneur, I believe that being based close to your customers and in markets where you have a symmetric ability to recruit top talent are the two key ingredients for early success. Capital will find you. The large number of potential enterprise customers and strong base of technical talent relative to available opportunities made NYC a clear winner for Docurated HQ. That said, when it came to raising capital we ended up partnering with a top tier Silicon Valley firm which found us.”

Andrew Eye, Founder & CEO, Boxer

“Bad news – it’s almost 2015 and we don’t yet have hoverboards. Good news – it’s not 1989 and you don’t need to move your startup to Silicon Valley to be successful or raise money. Entrepreneurs should target cities that are a draw for talent nationally – places where people are excited to live, and places they can afford to own a home. Cities like Austin and Boulder have thriving startup communities with accessible mentors, angel investors, and local talent pools. That said, there’s still no better place to raise money than SV. 30% of deals and 40% of VC dollars still come from the Valley. However, Valley VCs increasingly recognize that an inflated cost of living and negative tax climate can be arguments against a CA-based company. If you are looking to raise funds, don’t move to the Valley – just fly there. Your investors and employees will thank you.”

Davy Kestens, Co-Founder & CEO, Sparkcentral

“When founding Sparkcentral, I moved from Belgium to San Francisco. I feel the biggest hurdle for international founders moving to Silicon Valley is the lack of a personal network. I actively advise international startups to first build a prototype wherever they are, where they know people and can keep costs low. As soon as you have a viable business model in place, the advantages of the Valley become very attractive. While there’s a huge hunt for talent in Silicon Valley, the ratio of people here who have been working on big and bold technology over simplistic web projects is invaluable. You’ll be able to recruit from a pool of talent that built the scalability systems behind companies like Facebook, PayPal and Twitter, or the incredible big-data engineers behind companies like New Relic and Cloudera. Direct access to that premium talent in your own backyard is priceless for building a successful startup.”

Tom Taulli (@ttaulli) operates MasterCFO, which helps founders with accounting and taxes.  He is also the author of “How to Create the Next Facebook,” which is a step-by-step guide for creating a breakout startup.

Source: Forbes Business

 
 

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