Your company may or may not be best suited to a major tech hub. (BCV)

Deciding Where To Build Your Startup

Geography can be crucial in determining your startup's success. Whether you're looking at San Francisco or Columbus, consider these factors.

9 min read October 24, 2023
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When I worked at a startup early in my career, we weren’t based in the Bay Area or New York City. Instead, I found myself in Austin, Texas, where I was employee number 18 at Trilogy Software. A college classmate had started Trilogy, and I joined him to run product and go-to-market. 

Most of the startups we competed with were based in the Bay Area, and so we operated a bit under the radar in Austin, which was still decades away from becoming a tech hub and at the time was just a sleepy college town. Being in Texas allowed us to create a unique culture and vision, one that was focused on our customers and our mission without the distractions of the Bay Area and the noise of the latest fundings and hot new startups. 

We retained an amazing team that stuck with the company through ups and downs, and didn’t jump ship at their three-year vesting mark. Our team and culture, enabled by our Austin location, were key to Trilogy’s success as we scaled from 0 to $300 million in revenue. 

Whether you build your startup in a big tech hub like San Francisco and New York or in a smaller city, location can be crucial for an early-stage company’s ultimate success.  

In this article, I’ll explain what you should keep in mind as you decide where in the world to base your early-stage startup. A number of factors will affect where you decide to put down roots, and keeping these steps in mind could make or break how your business grows.

In-person or remote?

When you’re planning to launch your startup and you’re thinking about location, the first question to ask yourself is: Do you want in-person culture? This wasn’t a question most founders asked themselves before 2020, but now is an important decision that you have to make upfront and is hard to reverse over time.  

My own perspective is that in-person for the early core-team is critical, especially if that team hasn’t worked together before. Once the core team (generally up to 50-100 employees) is established, along with the culture, work ethic and camaraderie, then you can consider additional locations or moving fully-remote. 

In my early days at Trilogy, we were in the office seven days a week and on most weekdays we were there until midnight. Our pace of execution during this stretch was unparalleled. And the relationships forged with that early team are lasting to this day. There is no replacement for it. 

In the earliest days of Bloomreach, a company I partnered with as an investor in 2009, the founders met every Sunday to think through the plan for the week, key strategic choices and important hires they had to land. Could this have been done over Zoom? Maybe. But the dynamism of having a small group of people in one room trying to solve hard problems is hard to replicate virtually. 

Distributed teams and cultures have advantages: access to lower cost talent, access to a larger talent pool, elimination of high cost office space and leases, better work/life balance for employees — but I’m not sure any of these advantages compensate for the lack of cohesion, pace and culture that comes from your core team being together during the earliest and toughest phase of the startup journey.  

Are there exceptions to this? For sure. Teams that have worked together before and already have deep relationships can pull this off. Companies that are 100% product-led growth that require very little coordination between sales, marketing, product and engineering can be built this way. Sometimes a founder might be in a city with very little technical talent and therefore they have no choice but to build a distributed company.  

But given the choice, for the first 50 employees, there is nothing that beats in-person. (For a deeper dive on this topic, check out my partner Enrique’s article on it.)

Weigh the pros and cons of being in a major tech hub

You’ve established whether you want a remote or in-person culture. Now, regardless of your answer to that question, you need to ask yourself: Where should your founders be based?

The benefits of being a big fish in a small pond

Great companies can be built anywhere, and in the last decade we’ve seen many $10 billion-plus companies being built across the globe, in smaller countries as well as smaller cities across North America. These smaller geographies have many benefits for startups, like a lower cost structure overall and fewer distractions. There are advantages to being the largest tech company in a relatively small city. Shopify, headquartered in Ottawa, is a great example of a company that has successfully been able to isolate itself from Silicon Valley and grow with a lower cost structure and a unique culture. 

During my eight years at Trilogy, we rarely lost employees to other companies in Austin. If they left Trilogy for another company, it usually involved moving to the Bay Area. As a result, our leadership team could focus on building for the long term, and we weren’t distracted by the myriad of HR issues related to employees wanting more comp and equity in order to stay. There is also a sense of mission and pride that comes with building a generational company outside Silicon Valley.

Different cities have different talent bases

For many companies, however, the core technology and underlying innovation requires highly specialized technical talent. 

If you’re building a startup that is innovating in the field of generative AI, especially at the foundation layer, the nexus of talent is in the San Francisco Bay Area, and so you’re at a huge disadvantage if you don’t start your company there. If you’re working on autonomous driving, you’d want to be in San Francisco or maybe Pittsburgh, given its access to Carnegie Mellon University. BCV portfolio company ShipBob is located in Chicago, which is a hub for logistics, and another BCV company, Kiva Systems, was based in Boston, a hub for robotics technology given the proximity to MIT.

Bloomreach’s founders needed highly specialized talent in AI and machine learning when they set out to build their team. The two companies at the time that were doing the most advanced thinking around those topics were Google and Facebook, and so Bloomreach’s initial hub was in Mountain View, near Google’s offices and not far from Facebook’s in Menlo Park. The first dozen engineers Bloomreach hired were PhDs and engineers from both of those companies, which helped pave the road for the company’s initial innovation. Over time, Bloomreach expanded to lower-cost centers, with a facility in Bangalore, India and offices in the Netherlands and Boston. This expansion has helped distribute the business over time and bring down the cost structure, but the Mountain View presence Bloomreach had in its earliest days helped it tap into cutting-edge machine learning talent. 

In addition to specialized talent, the core startup hubs, and SF in particular, are places where founders can access a constant stream of ideas on new technologies, marketing approaches and distribution strategies. There is no geography where winning startup strategies are spread more quickly than the Bay Area. 

Founders and startup employees are culturally attuned to be students of the game — the flow of ideas is insane and founders are constantly learning and seeking new ideas. Yes, some of this can be gleaned through blog posts and social media, but there is no replacement for the walks with other founders and the networking events in SF and NY with some of the world’s best founders.

Tap into networks of founders

If you are based outside of Silicon Valley or NY, you need a way to stay connected to what’s happening there and elsewhere in the world. Like it or not, San Francisco is still the main hub of tech talent, trends and investment, and it’s worth paying attention to, even if you’ve decided to build a company in Atlanta or Columbus. 

Create a network of other founders from different geographies, especially if you’re in a geography that’s less populated with high-growth startups. BCV portfolio company ShipBob has done a great job with this, benefiting immensely from being part of Y Combinator, which provided a community of founders and peer groups around the world the ShipBob founders could tap into from their Chicago headquarters. 

SendGrid, by contrast, built itself in two hubs: Denver and Boulder in Colorado, and Orange County, California. It became one of the largest tech employers in Colorado, and it’s hard to think of a bigger tech company there. In SendGrid’s case, it had a developer-led company and served developers all over the world. But it made a point of building a developer community that included Silicon Valley yet extended across the globe. Ultimately, it did end up building a small hub in Silicon Valley when it went public, but up until its sale to Twilio, its center of gravity was Denver. 

Setting yourself up for success

Bottom line is that you can build a great startup anywhere in the world. SF and NYC have their advantages — network density, proximity to a peer group of world class founders, access to larger incumbents that are critical for partnerships and distribution, and access to specialized technical talent. Hubspot and Wayfair in Boston, Shopify in Ottawa, and Calendly in Atlanta are examples of built-to-last companies founded and created outside the traditional tech hubs.  Thanks to the cloud and the widespread access to venture funding, great founders are now everywhere!

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