Often the best advice is situational, and the situation here in the Bay Area has changed dramatically in the past decade. Today I wanted to detail the two answers a founder would receive to the question, “Should I move my startup to Silicon Valley?” depending on if they asked it in 2009 or 2019.
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Should you move to Silicon Valley: The 2009 answer
It was easy to give advice 10 years ago when founders asked me if they should move to Silicon Valley. The answer was a wholehearted “yes!” Given without reservation or consternation because:
- The sheer number of investors here
- The density of talented people here
High-growth startups, defined as the ones trying to hit $100M in revenue in under a decade (what you need to attract the elite investors and to achieve unicorn status), need talented team members and mountains of cash.
There is no place in the world with more of those two things than the Bay Area.
If you want to take over the movie business, you go to Los Angeles because that’s where the talent, money and distribution is. If you want to build a unicorn or decacorn, you come to the Bay.
It’s never really been a major debate.
Great founders can come from anywhere, but they build large businesses here.
Sure, we would see a Groupon (Chicago), Tumblr (New York) and Snapchat (Los Angeles), now and then, but we would see many more Ubers, Airbnbs, Facebooks, Googles and Teslas in the Bay.
Supply and demand worked exceptionally well for Bay Area investors, who didn’t feel any FOMO by sticking to startups in the Bay Area. Candidly, most VCs still don’t want to get on planes and do board meetings in places that are more than 1-2 hours away from the Valley (read: Seattle to San Diego).
Should you move to Silicon Valley: the 2019 answer
Over the past decade the delta between running a business in the Bay Area and everywhere else expanded dramatically.
Apartments in the San Francisco and the Bay Area are two to five times that of other cities. Heck, I’ve been reading about American developers moving to Tokyo and Kyoto to work remotely while living epic, affordable lives in one of the highest-functioning cities in the world.
Compensation will vary 2-3x as well in many cases. Combine that with the short tenure of people in Silicon Valley, typically calculated in months/quarters, while talent in other cities settle in and stick around for years, and it’s no wonder that VCs themselves are changing their position on the location of your startup.
Additionally, “remote work” has gone from a strange phenomenon a decade ago, to — at least for startups — commonplace today.
Add all this up, and I’ve seen the same VCs who insisted on founders moving to Silicon Valley in order to get funded, telling founders it’s great to come to Silicon Valley, but it’s also fine to stay where they are.
Often, the best advice is to split a startup’s office functions across geos, with corporate and product being in the Valley and everything else being “wherever makes things grow faster.”
I’ve seen startups raise $3m in the Valley with a plan to burn $250k a month, then move to Canada and have their burn drop by 75% — expending their runway by a couple of years.
If you do choose to be here in the Bay Area as a nascent startup, incurring the costs, you will be taken more seriously by most VCs — even though they will deny this. The thinking by some is that if you can’t figure out how to navigate the Bay Area you won’t navigate your business.
Talk about mixed signals!
Bottom line: Raising money is still much easier when your HQ is based in the Valley, but deploying capital across geos and embracing remote workers will stretch that cash meaningfully. Check back again in a year, if the economy and housing crash in 2020 the 2009 answer might be the correct one again!