Why Your Next Startup Doesn't Need to be in Silicon Valley
Silicon Valley, or rather the Bay Area, is the undisputed center of the tech universe. Whether it's experienced labor, capital or services, the density of these startup factors is simply unrivaled anywhere in the world. Yet there is an obvious trend of companies leaving or not moving to the Bay Area to establish themselves. Regions all around the US are developing burgeoning tech ecosystems. As someone who has done this in southern California, a couple of times, I can tell you about the regular stories about investors passing on investment unless you move north or the ones that invest telling you that within the next two rounds you'll actually make the move voluntarily – where else can you scale meaningfully than the Bay Area? "Need to ramp up 300 people, with a 30-person business development team that knows your market? You can only do that in the Bay Area," so I've been told.
While some of my friends/colleagues have made the move, I've noticed more and more of them simply disregard the notion that the Bay Area is where you need to be - great companies have been started all around the world. Certainly not with such a concentration as is seen in the Bay Area, but there are examples of other fantastic markets with large tech ecosystems across the US and around the world. So why are entrepreneurs increasingly choosing not to move to the Bay Area?
Competition / Cost / Churn
The sheer number of startups being created in the Bay Area has created tremendous competition for talent. According to basic economics, supply and demand takes hold – fierce competition results in increased cost of labor. The mid-to-high end of this market skews the regional cost of living, resulting in upward pressure for people to make more money, which in turn results in churn – people jump jobs to make more money, build a portfolio of options and play the market. This creates a vicious cycle where small startups are battling for talent and overpaying for almost everything, from labor to office space.
There's more to life than tech
As I mentioned, the Bay Area is the center of the tech universe. So if you live there and work in tech, you better be ready for that to be a major part of your life (as in nearly 100% of it). Kids birthday party? Tech folks, talking about tech. Holiday part at your neighbor's house? Tech. I know people who skirt this, but I know more who simply accept that you can't escape it, unless you leave. I can't count the number of people I've met in and out of the tech community who've fled the all-tech-all-the-time environment of northern California.
For many people, there is simply more to life than tech. I love my job and I love working in the technology industry, but I also love a lot of other things. Something that southern California embodies is a truly diversified economy (should I even mention the weather?). This results in a smorgasbord of interesting people. A sample of the adjacent houses to mine, in a small San Diego beach community, are a psychologist, a sales engineer (in tech), a retired farmer/former mayor of the town, a preschool teacher and a contractor. For many people, this is what real life should be. I pour myself into my job and love every minute of it, but when I'm away from work I want to experience normal life (or at least what I consider normal life). I also want to surf without a wetsuit and drink local beer – something San Diego is pretty fantastic for.
Democratization of tech
Increasingly, startups can and are built in all places around the world. Exits accelerate the development of tech ecosystems - as these other regions experience exits, we can expect to see catalyst for entrepreneurialism and increased gravity that pulls in outside investors. It is true that there are pros and cons to any region. However, the very nature of tech is democratizing the world of startups – tech and otherwise. Just wait for virtual reality to develop in the next 2-3 years, but that is another story.
Starting a company in northern California is a no-brainer, but starting it elsewhere can hold significant advantages. Quite frankly, a lot of investors will quietly agree (even those in the Bay Area).
Erik Caso is co-founder and Chief Executive Officer of Entangled Media, a San Diego-based consumer software company and maker of younity, a patented personal media streaming platform that allows consumers to access, stream and share all owned files and media libraries across multiple devices.