Everyday entrepreneurs are making a tough decision on what city they want to see their idea come to fruition. Many want to follow in the footsteps of the tech-gods of our era: Mark Zuckerberg or Steve Jobs. All entrepreneurs want to create the next billion dollar unicorn in Silicon Valley like Uber, Twitter, Airbnb, or Dropbox.
*The Crowded Unicorn Club In One Info-graphic. CB Insights. https://www.cbinsights.com/blog/increasingly-crowded-unicorn-club/
There are could be several reasons why these companies placed their HQs in the Bay Area. It could be the access to the top venture capitalists, community of tech-enthusiasts from all over the world, or the ecosystem of companies creating cutting technologies. When you walk into a Silicon Valley bar, you’ll definitely overhear a pitch of the “next big thing”, meet a top VC who lives around the block, and find your next best employee, all before getting a drink. After living and working in San Francisco for two years I know, this is all but true.
But my question to the entrepreneur: is Silicon Valley - the innovation capital of the world, really the best place for your startup?
The point I want to make is that Silicon Valley is definitely a great option if all the stars align but there are many other aspects of a city that should be considered.
One of the most important aspects of choosing a city, is the recruitable talent from top universities or being able to headhunt employees within the area. Being able to recruit talent is one thing, however retaining them is another. When researching the city, make sure to understand the cost of living may be, whether the housing market is up or down, and the quality of life.
The Bay Area, is already a magnet for employees with the beautiful weather, however, that comes with high price tag of cost of living. When the cost of living is higher, it creates a lower quality of life. In order to retain talent, Bay Area companies often provide non-monetary benefits such as the Google shuttle buses to & from the office, Drop Box gym memberships to stay healthy, or unlimited PTO that helps keep employees happy.
We are already seeing Bay Area companies relocate to cities that have a lower cost of living, while still maintaining a close proximity to San Francisco such as Los Angeles, Phoenix, San Diego and even Las Vegas. With an easy 90-minute or less flight to the Bay, relocation makes complete sense.
The Startup Costs:
Entrepreneurs must also understand the startup costs of their city. Depending on how large or small your workforce will need to be, you may need office space. In most cities, you can find co-working spaces like WeWork but office space in Silicon Valley can be a costly expense to your books. According to a report done by commercial real estate firm, CBRE group*, the Bay Area hit a record high last year of $72.26 per square foot of office space. *Local US Reports. CBRE. http://www.cbre.us/research/Pages/local-reports.aspx
Don’t get me wrong, Silicon Valley is flourishing. But where the city loses its rank is in startup costs. As seen below, in an analysis by The Chamber of Commerce of the total number of startups in a city, compared to their exit count, the San Francisco Bay Area has one of the lowest success rates. While still an exciting location, with 1,584 exits*, the Bay maintains its startup culture. Although when company count and exists are compared across multiple cities, startup costs must play a hand in the 4,416 companies* that did not receive an exit in Silicon Valley.
Below is a bar graph of top cities in the United States of Total Number of Startups vs. Exit Count by The Chamber of Commerce*. As you can see Silicon Valley is still exciting, having a total of 1,584 exits*, but definitely startups costs are a factor for the 4,416 startups* that did not receive an exit. Compared to most of the other cities, San Francisco has one of the lower success rates. *Innovation That Matters 2016. 1776. http://www.1776.vc/reports/innovation-that-matters-2016/
The 3 C’s: Connections, Clients, Competition
Connections. It’s all about who you know. As an entrepreneur you have to be able learn how to use your network. When looking at the city, knowing your opportunities for connections, potential clients, and competition is a must and will help tremendously. A lot of the time it will be your network that will introduce you to the VC or clients you need.
Clients. Understanding which potential clients have offices within range to easily meet is a must. If you are choosing a city that does not have the clients you need, it will be much tougher to get meetings and your deals closed. San Francisco is filled with startups with all different kinds of services and technologies, and if you are involved in the technology industry anyone who is anyone will be arriving at SFO at some point in time.
Competition. On the other side of the spectrum is knowing your competition. Entrepreneurs all over the world are producing innovations that rival what you see in Silicon Valley today. However, the problem with the crowded space in San Francisco, is that your clients can easily be your competition, so entrepreneurs do proceed with caution.
Why Las Vegas?
I couldn’t leave without filling you in on what makes the home of the Rebel Venture Fund, Las Vegas, a great city to bring your startup. Financially speaking, Vegas has a relatively low cost of living and entrepreneurs receive excellent tax benefits such as no income taxes, no franchising taxes, and limited tax increases as far as we can see.
Entrepreneurs will not be alone. Las Vegas brings big city resources, with a small town feel where everyone knows everyone. Organizations such as the Downtown Project, Rebel Venture Fund, VTF Capital, The Mill, Iron Yard, and more, bring the startup community together to help entrepreneurs thrive.
Known to be one of the entertainment capitals of the world, Vegas thrives on ensuring that you can make sure your employees and clients never get bored! Not only can Las Vegas provide the entertainment, but according to LVCA.com, we bring more than 21,000 conventions and conferences across all industries!
Even though Las Vegas is not well known to be a premier startup hub, we believe that our startup community is growing and will be thriving in the years to come. Las Vegas is already home to Zappos, WithMe, Banjo, Influential, Digital Royalty, and many more successful and thriving companies and entrepreneurs.
Do Your Homework:
Whether or not I have convinced you to thoroughly evaluate any city as a home base for your startup, I want to leave you with this message; don’t deny Silicon Valley as a powerful innovation hub. But don’t over fantasize it. Do your research, and understand the pros and cons of each city. In the meantime, check out Business Insider’s list of 20 hottest startup cities in the world, to get an idea of where you might go to start your company. Keep your options open, you have world to choose from.
About the Author
Jevin Tryon is a technology startup enthusiast and is an full-time Information Management undergraduate student at UNLV. While attending various undergraduate classes at Azusa Pacific University and San Francisco State University prior to UNLV, Jevin has a 4+ years of high tech online ecommerce experience in Los Angeles and San Francisco with a background in risk, payments. and online physical/digital distribution.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of RVF or UNLV. Thoughts and opinions are subject to change and this article is intended to provide an opinion of the author at the time of writing this article. All data and information is for informational purposes only.