Monica SelbyHere at Nibletz, we’ve long known the benefits of starting up “everywhere else.” Silicon Valley gets so much press–and they have certainly been at the top for a long time–but we know that the hottest new companies of this century will come from outside the Valley.
And now we have an infographic to back us up!
GoodApril is (ironically) a San Franciso-based tax-planning company and a startup themselves. In conjunction with Entrepreneur, they ranked the 7 hottest startup scenes in America on 5 measures:
- median tech-employee earnings
- max personal income tax
- property tax
- cost of housing
- cost of office space
There are some people who argue that these factors don’t affect the decisions of people you actually want. But, we’ve met plenty of great entrepreneurs over the years who definitely understand the benefits of low cost of living. And they know that employees can work from anywhere.
So, you’re looking to move you’re startup. Where should you go?
According to the GoodApril rankings, Austin, TX is the best place to build a new company. San Francisco? Well, by these metrics, the Valley is actually the worst place to start your new company, despite the concentration of talent and VC money. In a blog post on GoodApril’s website, co-founder Mitch Fox tells this story:
I recently met an entrepreneur who’s had enough of the Bay Area’s living costs and taxes, and is moving to Austin. He launched his startup in San Francisco several years ago. Now he says, “The business case to move is just too compelling. Austin has everything we need at a much lower cost.” He’s had an office in Texas for three years. Now he’s going all-in. “This tax increase was a tipping point for me, but it’s not just about taxes. My employees can buy a large, three bedroom house in Austin for less than a one bedroom condo in Noe Valley.”
Several states don’t have income tax, including Florida, Texas, Washington, and Nevada. A lack of income tax makes life easier for employees as well as companies. And for many families with children, the pace of life outside the Valley is a better fit.
It may take awhile for any one of these scenes to overtake the Valley, but the more entrepreneurs see the benefits of “everywhere else” the quicker it will happen.
Check out the infographic from GoodApril and Entrepreneur for all the details.
While I agree that SV’s dominance is fading, I think this particular analysis is fundamentally flawed. I built several successful startups in the Bay Area (including a $4.5B IPO) and I made the difficult decision to move roughly 10 years ago (relocating to Seattle). The reasons for my move were, admittedly, largely related to CA’s highly burdensome regulatory environment – but that was only an issue due to the fact that my business had grown well beyond the bounds of a typical startup.
I would argue that many other factors play a much bigger role in startup success / failure and overall growth of a “startup scene” than those factors listed above. In fact, I was recently asked to perform a similar analysis of the Seattle startup environment (as it compares to CA / SF) and I found a number of other important factors come into play.
In my view, only a handful of regions feature the elements necessary to develop a thriving and viable long-term startup community. Key components include:
– an educational system or other means by which to attract and foster the best young talent;
– a healthy and dynamic ecosystem of startups, mid-market companies, and established industry-leading corporations (for mentoring and to provide acquisition / exit paths);
– access to capital and shared technical or professional resources
To varying degrees, each of these features can be seen in markets such as Seattle, Boston, and NY. Invariousbly, this leads to comparisons with California and Silicon Valley – but such talk is neither fair nor rational. Markets such as NY and Boston can compete on some level with the Bay Area (in terms of size, education, and market infrastructure). However, the same is not true for other, less developed markets. To illustrate, I’ll use WA as an example.
California has over 38M people. That’s over five times the population of Washington. Both ecosystems are supported by outstanding universities – but California has over 100 four-year universities. Of those, nine nationally recognized campuses sit within one hour of the Valley. Compare that to Washington, which has 7 four-year universities in total. It’s simply not a realistic exercise. California is bigger and has significantly more legacy infrastructure to draw upon.
As startup entrepreneurs, one of our greatest challenges revolves around the diversity of our respective tech communities. We have to understand that we are part of a larger organism. In fact, the success of larger corporations in our region can be hugely beneficial to our own success. Similarly, the development and encouragement of startups is important for a number of obvious and not-so-obvious reasons.
Startups create new ways of doing things, thereby forcing change and innovation. In addition, they provide an alternative training and development path which often lives outside the traditional educational norms required for employment in a large corporation. Perhaps most importantly, they provide acquisition fodder for local firms and, while this may seem unimportant in a global economy, such could not be further from the truth. In almost any tech acquisition, human capital is an extremely valuable and critical component. I can tell you from hard-earned experience that local acquisitions are the best and only way to retain talent over the long haul following an acquisition.
One final thought — I am a huge believer in the power of Renaissance thinking. Startups are known for innovation. Such tech advancements, as a whole, are greatly aided by exposure to new ideas and new ways of thinking (TED Talks is a great example of this concept in action). Look at the impact that Big Data is already having in the fields of biotech, gene sequencing, clean energy and aerospace. Bringing disparate groups and thinkers together accelerates technology growth and opens lines of communication between organizations and industry sub-verticals. We should be looking to bring together (rather than silo) different technology verticals. This has lasting implications for the community, and startups (without all the legacy baggage) play a huge role in this process. Being in a market with diverse tech offerings is generally a good thing for a startup. In this case, more is almost always better.