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Location, Location, Location

Q: What tips do you have for startups who aren’t in any of the usual vc hotspots like the Valley, NYC, or Boston?

Some people believe that the real estate adage “location, location, location” is sacrosanct when starting a company.  While there is no doubt that it is easier to find your way in a well-known entrepreneurial community, companies get started (and flourish) everywhere.  Following are some suggestions for getting started if you aren’t in one of the usual VC hotspots.

Don’t worry about it: Presumably you live where you want to live.  If you don’t, consider moving!  However, if you are where you want to be, realize that building your business – and your life – go hand in hand. 

Be realistic about the available resources: Every community that can support entrepreneurship (and basically every MSA in the US can) has its strengths and weaknesses.  Usually these are defined by three things: (1) local universities and research programs, (2) major companies in the area, and (3) historical vectors of entrepreneurial activity.  Be realistic – if you want to start a new biotech company and you live in a city that doesn’t have any graduate-level life science research, no anchor biotech companies, and no history of creating biotech companies, the odds are stacked against you.  On the other hand, if you live in a telecom rich region and you want to start a new OSS for IP services company, you are probably in pretty good shape.

Find the local entrepreneurial ecosystem – now!: It’s easy, is usually right in front of you, and often simple to access.  Find an advisor who is a successful local entrepreneur and is plugged into the scene.  Go to every local “entrepreneurial” event, especially those linked to regional or national organizations.  Don’t be shy asking for help – the worst someone can say is no.

Don’t try to get investors to do unnatural acts: Assuming you are looking for capital, focus your energy on two categories: (1) local investors – either angel or VCs and (2) VCs that are interested in the specific business you are creating.  In category #2, “software” is not a specific business – you need to be a lot more granular than that.  Your chance of #2 is enhanced by a relationship / investment with someone in category #1, so make sure you focus enough energy on that early on.

Don’t play the “we can be virtual” game: While being virtual can work for some businesses and some entrepreneurs, it’s not the cure all for being in a geography other than “the top tier.”  If you make progress, you will reach a point relatively early where you want everyone on the team to be in one place (or your investor will.)  If “being virtual” is natural for your team, that’s cool – go for it – but don’t use it as a justification for geography.

March 26th, 2007 by     Categories: Geography    
  • Scott

    My experience of starting a biotech company in the Midwest has taught me that location is a major issue for many, many VCs, especially in regards to early stage companies – seed and Series A deals. One of the reasons (along with VCs not wanting to fly too much) is that a company may not be able to attract the best talent if they are located in a non-hotspot area. There are not as many people with startup company expertise and experience in the fly-over states. There are some very good ones, but just not nearly the amount as in San Diego, San Francisco, Boston, or RTP.

  • Yang

    I’d like to add two links that support why location matters….A LOT!
    When It Comes to Innovation, Geography Is Destiny
    http://www.nytimes.com/2007/02/11/business/yourmoney/11ping.html?th&emc=th
    How to be Silicon Valley
    http://www.paulgraham.com/siliconvalley.html

  • http://www.jdsblog.com Jason Drohn

    Fantastic article.
    In my area, Erie, PA there is a lot of talk about innovation and technology. A lot of the different economic development agencies are just starting to get their act together. Sometimes it is frustrating to a young entrepreneur who has no clear path in building his/her own business.
    So the thought goes, do I move to Boston or Seattle, or spearhead development here? I prefer the latter, I think. The potential is there, it is just misguided.
    Please pardon my rant. Great article with some great points :0) Location isn’t everything.

  • DC

    One question though: have you invested in a foreign startup?