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STARTUP

Should You Move to a Bigger Start-Up Hub?
 

A New Orleans angel investor weighs in on when entrepreneurs should resist the lure of bigger hubs in favor of homegrown networks

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About a year ago, Inc. took a look at the buzzing New Orleans start-up scene, which many founders claimed offered a warmer support network for entrepreneurs than some better known locales where competition is more cut-throat.

But times change and companies grow from a sketch on a napkin to a small business in need of its first outside funding. And as they do, the bright lights of the likes of Silicon Valley become more alluring. Some New Orleans-based start-ups—probably much like fledgling companies in other less celebrated start-up cities—are pondering a move.

Clayton White—a New Orleans angel investor who also works with Simmons & White, a management consulting firm that advises NOLA start-ups—talks to local entrepreneurs regularly and has a few words of warning for founders with their eye on a westward bound U-Haul.

Think carefully before you make a move, he insists.

Should I Stay?

"For early-stage funding there's a couple of reasons to stay local," White told Inc. "The first is most angel groups invest in a very limited geographic area. For instance, we'll only invest in companies in Louisiana and along the Gulf Coast. The reason being, if you're putting a half million dollars into a company, it's not a big enough investment to say, 'let's fly to Michigan once a quarter to see what they're doing and attend a board meeting.'"

Because of these practicalities, local angels are more likely to be interested in your company if it's physically nearby, insists White, and you're also more likely to find a means to connect with them. "Local entrepreneurs have local contacts. There's lots of local groups that facilitate networking, so it's fairly easy for them to get into this networking scene," he says.

Or Should I Go?

But just because White warns entrepreneurs not to be bedazzled by big-time start-up hubs, doesn't mean he feels that staying put is always the right option, especially if you're playing in a niche with a strong community clustered elsewhere.

"I run an angel group –South Coast Angel Fund—and I tell companies all the time that we may be a great funding source for them and we may not be. If all we can add is the money then we're really not a great source. We have to add resources to the company in the way of contacts, help with strategy, help with technology. If that business experience isn't available and it is available somewhere else then it's probably a good idea to go. If they just focus on the money, that's a mistake," he says.

The available support network, in other words, should be the make or break factor in any entrepreneur's decision, according to White. Your local connections can be incredibly valuable, so don't throw them away without careful thought, but if the right people to move your specific business forward are located across the country, it may, in fact, be time to pack that moving van.

Do you agree? 

 

Last updated: Mar 1, 2013

JESSICA STILLMAN is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist.
@EntryLevelRebel




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