Silicon Valley is often seen as a mecca for startups. But it isn't for everyone.
Entrepreneurs behind small businesses, for instance, rate Utah, Idaho, Texas, Virginia and Louisiana as the friendliest states for tinier enterprises. Where does Silicon Valley's home state of California rank? It earned an "F" in a survey of 12,632 entrepreneurs conducted by the Kauffman Foundation, which supports entrepreneurship, and Thumbtack.com, a customer service company. California, in fact, has been ranked in the bottom five every year the survey has been conducted.
So why have some companies that could have moved to the Valley decided to stay put where they are?
The talent equation
After Ryan Holmes, the CEO of the social media management company Hootsuite, secured financing in San Francisco and New York, many investors asked him about moving his team south. But he didn't budge from Vancouver, and Hootsuite has managed to attract more than 740 of Fortune 1,000 companies as clients.
"There were a lot of benefits of keeping the team in Canada," explains Holmes, who points to incentives such a federal tax program that encourages scientific research and experimental development. "Part of it was we had an established team and community in Vancouver. We had seven people that were working hard and I knew it was going to be a distraction to relocate them down in the Valley."
"There's also less talent competition," he adds. "You think about when you're a small startup and looking for great engineers. In the Valley, you're competing with the likes of Twitter, LinkedIn, Facebook and everyone else. It's a super competitive environment. We already had a good team established here but also a good name locally so we continued to build on that."
Plus, Holmes says, it isn't like Vancouver is that far from the Valley. "We're a two-hour flight away," he says. "We do keep in good touch with our partners there."
There's no place like home
Indochino, a custom online menswear company, raised more than $4 million in a series A financing round then another $13 million last year in a series B round. But when Indochino was just getting started, and the company secured suit suppliers from China, its co-founders had to make an important decision: where to establish our headquarters?
"We actively looked everywhere," says Kyle Vucko, Indochino's CEO and co-founder. "One of our major investors was from the Valley, which we looked at because of tech and engineering. We had a board member in Seattle, and other investors in Vancouver and Victoria. So we looked at all of those markets, and New York because of fashion. Ultimately I wanted to build a company here, in Vancouver, and I like staying Canadian and closer to home."
"There have been tradeoffs, for sure. You struggle with [getting attention from] media, especially fashion media. It probably would have been easier to get money if we had been in the Valley. However, my experience from what I've seen in the Valley is you have a shot at getting very big, very quickly--but if you have a down six months you can get shot in the head, whereas here you have the ability to sit back, watch the trends and pick the ones that actually stick around. So you don't get into the same level of rat race as in the New York or Bay Area."
If you're focused in the software or consumer electronic goods area then you likely need a presence in the Valley, "because that's where it's happening and that's where a lot of customers and partners for integration are," says Michael Helander, co-founder and president of OTI Lumionics, a Toronto-based company specializing in thin organic light emitting diode (OLED) technology.
"For what we're doing, there's not a lot of advantages there--and you're competing against the same talent pool, and your operating costs go very high. Here in Toronto we have equal, if not better, engineering talent at a reasonable price."
That's not to say, of course, that there aren't plenty of reasons why a company should consider moving to Silicon Valley. Read more on that side of the debate here.