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Starting a Company Outside Silicon Valley Just Saved Me $1.1M

193 pointsby robertjmooreover 6 years ago

21 comments

duxupover 6 years ago
I always assumed the valley focus was because, yeah VC money there, and VCs wanted people close by to help (well if they help), and just generally there are a lot of good people there. By no means are those bad reasons, but not everyone will have those reasons.<p>A calculator seems a bit simplistic but I would generally agree that if there isn&#x27;t something outright drawing you to that area, you don&#x27;t have to be there and there are costs.<p>I worked for a really large company a while back. They bought some smaller company and discovered a support center ... that I worked at. They thought they&#x27;d try doing support at that site as they suddenly had support there.<p>For less than half the cost per employee we managed to do twice the workload, higher customer satisfaction, and we often were requested by customers who quickly realized we wouldn&#x27;t just shut down cases on them. Almost immediately there were tensions. I&#x27;d go out and visit and oh man it was tense. There was this idea that support just had to be in the valley because straight up the managers and folks working there didn&#x27;t know there were technical people... anywhere else (this was before we had other islands of tech in the US).<p>I even bought it for a bit thinking I was going out to meet some high performing folks and found ... way not that.<p>It was amazing that they had (including some management) convinced themselves that stuff only happens in the valley and if they hadn&#x27;t seen it they wouldn&#x27;t have believed it was possible outside (and some did not, oh the excuses).... and that was just for a maintenance type task like tech support. (granted this was some high end stuff so it did take good people, but they&#x27;re everywhere)
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geverettover 6 years ago
As someone who started a company outside SV, then moved there for 3 years to grow the company, and has now moved away again - I would say it&#x27;s well worth it to spend at least some time in the Valley to build a network and understand how deals get done in person.<p>The density of investors and other founders&#x2F;early employees in Silicon Valley can&#x27;t be beat, and I often found myself learning inadvertently - dinner table conversations would be about how people raised their round, the friend of a friend you meet while camping turns out to be a partner at a fund you&#x27;re trying to pitch. In more cases than are logical or fair, people simply invest in their friends - which means if you make friends there you&#x27;re increasing the chance you&#x27;ll be able to raise money easily.<p>That being said, the cost of living is absurd and I would never hire an engineer in Silicon Valley unless I was building something at the outer limits of frontier tech (and even then I&#x27;d scour the globe for qualified engineers elsewhere). And I don&#x27;t think you need to be there forever. If you build up a solid network you can move away and still reap a lot of the benefits from afar &#x2F; through occasional visits.
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unignorantover 6 years ago
Similar things can be said about starting a company with a fully remote team. I’d estimate we saved <i>much</i> more than $1M for our thirty-person company. An additional benefit is that you can recruit the best talent from anywhere, so long as they have experience working remotely (it’s a bit of a risk to experiement with someone who hasn’t done remote work before). With this setup, I’ve been blown away how easy it is for us to recruit amazing people. It would be much harder recruiting for local engineers wherever you are based, whether that’s SV or Philadelphia.
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filolegover 6 years ago
What about the opportunity cost that he potentially lost by starting his company outside of Silicon Valley? I am not saying that he definitely did, but the fact that OP doesn&#x27;t mention it at all makes his whole post feel a bit disingenuous. In fact, it reminds me a lot of people who talk about how much money they saved by not going to college and how it is the way to go for everyone, despite studies [of US colleges] showing otherwise.<p>P.S. I don&#x27;t lean one way or the other about colleges, there are definitely cases where not going is a good idea. However not even seriously looking into upsides of going and closing eyes on potentially missed opportunities will devalue your argument.
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jawnv6over 6 years ago
50% of VC funding lands in CA. 50% of that is on Sand Hill. So ~25% of all VC funding happens in offices in Palo Alto, the sheer efficiency of chasing a funding round can&#x27;t be beat.<p>For an established serial entrepreneur with a proven track record, it can absolutely make sense to stay in an area you know. But I think that math really changes if you&#x27;re going to be cold calling VC&#x27;s, trying to wrangle meetings from 3 time zones away, get meetings bunched up to consolidate travel, etc. The overhead of redeye travel is relegated to a joke at the end, where&#x27;s the &quot;measurement&quot; on that?
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JohnFenover 6 years ago
Personally, I wouldn&#x27;t start a company in silicon valley. On the whole, it looks to me like the downside of doing that far outweighs the upside.
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40acresover 6 years ago
Why do you need to start a company in the Valley when two mega-corps (Amazon, Microsoft) have already shown that you can succeed outside of the valley?<p>The huge companies are already starting to branch out (Amazon in NYC&#x2F;DC, Apple in Austin, FB&#x2F;Google in NYC) and ecosystems will be built around these hubs.<p>Not only that but there are a variety of other hubs in the nation that are in close proximity to elite technology schools (Pittsburgh, Boston). The talent is definitely there, the VC infrastructure may be lacking but you&#x27;re telling me Marc Andressen won&#x27;t hop in his private jet to meet with a promising founder?
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samprotasover 6 years ago
I find it kind of odd that there are all these comments claiming the article glosses over nuance and therefore its conclusion is baseless when the counterpoints have even less data.<p>Everyone seems to agree successful companies have started in SV and outside of SV, and that there’s a lopsided distribution. No one has spent much time on whether the location is the cause of or just correlated with success. I get that this is hard to determine, but maybe people should speak in less absolutes? The article is one persons decision making process, explained for the benefit of others. I don’t think it’s claiming to be The One Truth.<p>Disclaimer: I worked for the author in Philly previously.
inputcoffeeover 6 years ago
I think there is an error in the title.<p>It should read: &quot;Starting a Company Outside Silicon Valley Saved Me <i>Just</i> $1.1M&quot;
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jillesvangurpover 6 years ago
There is talent outside the valley and you can get it at a discount. I live in Berlin but I&#x27;ve worked with lots of Polish, Rumanian, Belarusian, Russian, etc. colleagues spread all over Europe. Good hard working people, with solid academic degrees, plenty of experience, up to date skill sets, etc. You can hire an entire team of them for the kind of money valley based teams spend on a single person. It doesn&#x27;t even have to be a good one.<p>From what I&#x27;ve seen, there sure are a lot of not so great developers working in the valley. At least judging from the copycat designs, the clumsy UIs, chronic UX issues, etc. from typical startups I don&#x27;t think that the grass is greener over there in any meaningful way. So, I think it is a myth that you get better than average people or products in SFO. Sure there are geniuses but the success&#x2F;failure rates are not significantly different. There&#x27;s simply more of both around. However, the failures are five times more expensive (ballpark, give or take, lets assume that for the sake of this argument).<p>That is only offset by the occasional unicorn; which due to the enormous amount of startups happens more often there as well. IMHO this is the main benefit the valley has. There are lots of unicorns creating lots of wealth which quite often gets reinvested locally. There&#x27;s a lot of money flowing around there. Most of it gets wasted on the same BS that VCs are funding elsewhere. But then you get the occasional unicorn making up for that and the practice of those companies acquiring the expensive failures to funnel some of that back to investors.<p>Is a valley based team five times more expensive than a Eastern European team five times as good? I don&#x27;t think so. I&#x27;d say it&#x27;s quite easy to find people and teams elsewhere that are arguably just as good. Also, job hopping is a thing in the valley. Despite the insane salaries, the average tenure is quite short, especially at the bigger unicorns.<p>So, there&#x27;s a bang for buck problem in the Valley and the smart VC money there is already encouraging startups there to work remotely or consider having remote developer teams. Relocating to the valley after you get funded stopped being a thing here in Europe. VCs are no longer asking or expecting that; that was a standard question a few years ago. What would be the point? Quintupling the burnrate is not a goal; you need a good excuse than vague beliefs&#x2F;hopes. You basically pay five times what you pay in e.g. Eastern Europe and most of that goes directly to real-estate owners, the state of California (taxes are actually very high there, even compared to Europe), and all the other overpriced stuff that the Valley has to offer.
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jarjouraover 6 years ago
The conversation that you&#x27;re either starting a company in SV or not seems silly. Of course you can start a company in most civilized places in the world, people do it all the time. Case-in-point the article above.<p>Plenty of industry defining tech companies started outside of the valley too. Microsoft up in Redmond, Commodore in West Chester Penn, AOL in Reston VA, and so on.<p>The point I never see talked about with conversations like this is, should you? You can find plenty of data points that say you can and you absolutely can. It&#x27;s the, does your idea and execution path make sense for the location you&#x27;re setting up at.<p>Some of the worlds top talent for tech are located in SV and that&#x27;s why so many companies are here fighting for them. We&#x27;re told, we need the best of the best to stay competitive and execute. If your product doesn&#x27;t need a concentration of world class product managers, designers and engineers, then don&#x27;t waste your time here competing for that talent. You&#x27;ll have a much easier time finding talent elsewhere and for less money.<p>For me, an engineer, I chose SV because I didn&#x27;t want to be the best person on my team. I wanted to be surrounded by people who are 10x smarter than I am and learn from them.
tschellenbachover 6 years ago
Traditionally the valley has clearly been the best place to start companies. Many VCs still believe its the best place today. Hard to say if that&#x27;s true, you won&#x27;t really know till companies that are started today end up growing and succeeding. That takes about 10 years to play out, so in 2029 we&#x27;ll have a good idea of where the succesful startups came from. I&#x27;m going to go ahead and guess that a larger percentage of them will come from outside of the valley. There is more VC funding outside the valley than before, great startup knowledge is available via books, classes, techstars outside of the valley. Due to cost of living talent has moved outside of the valley. So yeah definitely expect to see more startups succeed outside than has been the case historically.
aantixover 6 years ago
Sadly, if you&#x27;re an engineer, those savings aren&#x27;t passed on to you (obviously).<p>If you&#x27;re a software engineer and want to make an amazing salary by most people&#x27;s standards, move to the Bay Area and get a job with Google&#x2F;Facebook&#x2F;LinkedIn&#x2F;Etc.<p>You can literally make a 500K+ a year.
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erikbover 6 years ago
Which is not much, if you could&#x27;ve gotten $500M more in investments.<p>My experience is the complete opposite of Tim Ferris Wisdoms TM. If you are where the money is at, you have vastly more opportunity to participate on the receiving end of money flows as well as information flows. So if you are a keen developer in SF you will not live on $60k for long, but rather quickly bargain your pay up the food chain to $120k or $150k. And then check out how well you can live on $120k in Thailand, you know?<p>There are two exceptions to this rule of following the money, though.<p>Exception 1: When you hit the ceiling. It might be much higher than you initially thought, but there is one. And when you hit it, it might be more reasonable to try to stabilize on that level and find a more peaceful and cheap environment to live in.<p>Exception 2: When the current location is over hyped. Bay Area might still be in that phase where prices really are too ridiculously high. If you spend more than $60k&#x2F;year on rent alone then maybe it&#x27;s not wise to go there for $120k. But it might still be worth an internship or finding customers there.
ojbyrneover 6 years ago
“It’s VC arbitrage.”<p>The problem with arbitrage is that everyone wants to capture it, since it’s basically free money. Not in SV? You only need 1&#x2F;4 the funding.
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kokokokokoover 6 years ago
Philadelphia is less than two hours from New York. There are plenty of well known and successful startups from New York.<p>This is more like &quot;Starting a Company in Daly City&quot;. Definite clickbait hustle story to drive traffic and sell his product. I wouldn&#x27;t waste your time on the article.
oarabbus_over 6 years ago
Is it just me or is the headline a good reason to start a company _inside_ Silicon Valley? I can&#x27;t be the only one who thought &quot;all you saved was $1.1 million? I&#x27;d rather spend that and be in a location which is drowning in tech talent&quot;
rc_kasover 6 years ago
Good on you that you had access to $1.1M.<p>Congratulations.
znpyover 6 years ago
tl;dr: the silicon valley is unreasonably expensive.
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avallarkover 6 years ago
penny wise, pound foolish
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jacquesmover 6 years ago
You could save a ton of money starting a restaurant on the North Pole! Free real estate, low bill to light the place during half the year, what&#x27;s not to like. As much as I hate the draw of SV <i>if</i> I were to start a company that needs that kind of funding I would do everything I could do to do it there. Why hamper yourself on purpose, the $1.1M saved might easily translate into a couple of missed connections worth a very large multiple of that amount.