How to build a tech startup outside of Silicon Valley
Contrary to conventional wisdom, Silicon Valley isn’t the only place to go when you get serious about building a new company in the technology space.
Sure, it’s a great place to start this sort of business, but the case for moving your company there is not as strong as it used to be. I’ve stared, run and sold many companies far from the Valley – with my latest venture firmly based in Philadelphia. Here’s why I’ve avoided ground zero for many tech companies:
If you are currently located outside the Valley but in a so-called secondary market such as Philadelphia or Boston, Seattle or Austin, you may be well-placed to succeed without moving. Yes, Silicon Valley still has large amounts of human capital, venture capital, and deal-making expertise, but there are also a very large number of companies competing for it.
The availability of venture funds in secondary markets, as well as angel money and super-angels, has also increased substantially in recent years – in some places outpacing the supply of exciting local projects seeking funds. As a result, the chances of your project getting the VC attention it deserves may be higher in a secondary market.
Of course, simply having access to money isn’t everything. To grow a successful technology company from the ground up, you need investors who have experience doing just that. Increasingly, you can find them in secondary markets.
While it’s getting easier to mature a tech company away from Palo Alto, there have been some historical downsides. People in secondary markets used to suffer from an information disadvantage, whether they were investors, entrepreneurs, engineers, designers, deal-makers, bankers, or lawyers. That’s because a lot of the information about how to do things and get things done was shared in social circles or networks that were defined geographically, namely Silicon Valley.
With the advent of blogs and other social media, though, there is now much more information sharing and transparency in the startup world, both on the founding side and on the funding side.
Should you move out of Silicon Valley if you’ve already started operations there? Probably not. But if you’ve started your company somewhere else – such as Philadelphia, where there is a thriving local VC community, a good supply of talent from good schools, and mentors accessible through social networks – then your chances of success are a lot better than they were five years ago.
Finally, starting up outside the Valley means you won’t be competing with Google for people as you build your team, and there’s less chance that Facebook will stunt your growth by stealing your best players. Just don’t expect to have the local playing field all to yourself. Building tech companies outside the Valley is one trend that is likely to keep growing.