Why Location Matters Less Than You Think
When many entrepreneurs think about where they should found their startup, a few locales typically top their list: Silicon Valley, Seattle, Austin, New York, and Boston. While it’s true that there are numerous high-growth companies based in those areas, with more founded each year, they are by no means the only places you can successfully build a business.
Just look at ExactTarget, the integrated marketing platform that was recently acquired by Salesforce.com for $2.5 billion. While the company now has offices in San Francisco, Seattle, and New York, any guess where the business was founded? Indianapolis. Yes, that Indianapolis -; the 13th largest city in the country, and a metropolis best known for auto racing, corporate conventions, and the Colts, not high-tech startups.
ExactTarget isn’t some sort of outlier success story, either.
At my Boston-based venture capital firm, many of our portfolio companies are headquartered in cities that are nowhere near being classified as traditional tech hubs. A few examples include learning management tool Instructure, which calls Salt Lake City home; website optimization solution Monetate, which has its roots in Philadelphia; and local marketing automation software provider Balihoo, which continues to thrive in Boise, Idaho.
When and Why Location Does Matter
Of course, there are benefits to operating in traditional tech hubs, particularly as your business begins to scale. Generally, those hubs provide greater access to talent, mentors, partners, and investors, while idea sharing tends to be more advanced and free-flowing. As such, it’s generally far easier to find and hire specialized team members in San Francisco than in Portland, Maine, while the investor-to-investee ratio in New York will obviously be higher than it is in Miami.
That doesn’t mean that I’m suggesting your business needs to pack up and move to San Francisco if you want to catch a venture capitalist’s attention. Instead, I’m simply addressing the potential downside of operating a growing business in locations that are off the beaten path.
If you’re headquartered in a smaller city, you will just have to work harder to identify people with the level of expertise you need to nail the process of scaling. It’s certainly possible, as the companies listed above have shown, but it’s a challenge nonetheless.
Passion, Innovation, and Execution Always Trump Location
Ultimately, if your startup has the right leadership and vision, and it’s able to achieve product/market fit, then it shouldn’t matter if you operate in Greenville, South Carolina, or Cupertino, California.
In my experience, the best companies form wherever there’s a great entrepreneur with a great enough idea and skillset to get something going. I’ve seen that happen in Maine, Florida, Idaho, Southern California, and everywhere in between.
That said, I often advise entrepreneurs who are looking for the right place to build a business to consider one key factor: Try to pick a place with a professional football team nearby. The National Football League has done its homework, and its teams are in geographies with big populations. Typically, that translates into a pool of talent, mentors, and investors that is large enough to fuel almost any company’s growth.
Still, even that isn’t a deal breaker.
As a venture capitalist, I’d much rather invest in a company that has all of the core components of a potentially great business in a not-so-great location than in one with myriad holes that happens to be in one of the major tech hubs. If that means flying to meet with entrepreneurs in Albuquerque instead of New York, then I’m more than happy to book my ticket.
SCOTT MAXWELL | Columnist
Scott Maxwell has worked in venture capital since 2000. In 2006, he founded OpenView Venture Partners, focusing on expansion-stage tech companies. He graduated from MIT with a Ph.D. in engineering and an M.S. in management.