If you are deciding where to locate or relocate your startup, I don't think you should simply move to where the real estate prices are lowest. Instead, pay attention to the most important factor to your company's growth: where there's a strong supply of talent.
While there could be exceptions, I've found that the lower the real estate prices, the weaker the talent supply. How so? Typically, talented people want to live near other talented people and that drives up the prices of real estate -- both places to live, work, and shop. So the greatest supply of talent is most likely to be living and working where the real estate prices are highest.
That reality has not stopped some from urging you to locate your startup far away from these technology hubs. Why would you do that though? The Wall Street Journal reports that between 2005 and 2017, 90 percent of the high tech job growth occurred in Boston, San Diego, San Francisco, Seattle and San Jose, California.
Proponents of avoiding these cities argue that bad traffic, overcrowded schools, and fierce competition for talent in these locations is a reason to move to places like Columbus, Ohio or Indianapolis, Indiana reports the Journal.
But here's why I think you should carefully reconsider making that move yourself, and what you might want to do instead:
1. Make Sure You Are Solving the Right Problem
If you aspire to success, your company must be solving the right problem. Your startup should pass three tests: Is there a large enough market? Is there a real existing customer pain that you're solving? And finally, Do you have an edge over incumbents?
If you're solving the right problem, you will have much more flexibility about where to locate your startup. That's because talent and capital is more likely to flow to a company that is solving the right problem. Conversely, if your company fails these three tests, moving to a different region will do nothing to improve your odds of success.
2. Know Your Strengths and Pinpoint the Skills You Must Add
Solving the right problem is a necessary but not sufficient condition to attract the talent and capital you need to build a business. The other essential condition is that you excel at one of two critical skills: convincing talented people that you can lead them well or designing and building a product that supplies customers with world-beating value.
To build a successful company, you must have both skills.
Therefore, knowing your strengths is essential to where you locate your company. If you are great at leading people, you can stay in the smaller city where you live now as long as you can bring on a world-class product person who lives there or is willing to relocate there. If you can't do that, you should move to a larger startup city where such a world-class product person wants to be.
The same logic applies if you are a great product person and need to bring on a co-founder who excels at leading people.
3. Raise Capital to Attract the Talent
To pay the world-class talent you should hire to strengthen your team, you may need to raise more capital. One thing is clear: if your business is getting big very quickly, you will be able to raise large amounts of capital from Silicon Valley and New York. This will allow you to finance your growth, while retaining the local talent propelling your growth.
4. Invest For Sustainable Growth
If you use the capital to grow rapidly while generating positive cash flow, I believe you will attract more talent and could eventually go public, become a pillar company, and strengthen your location as a startup hub.
Don't simply relocate where real estate is cheapest. Do these four things instead.