- How to Find Silicon Valley Success Without a Silicon Valley Address - January 3, 2018
There is a quote that has stuck with me in the weeks since I sat on a Dreamforce panel moderated by Mark Cuban: “Talent is equally distributed, but opportunity is not.”
Rachel Carlson of Guild Education made that statement, and she’s building an impressive EdTech startup in Denver on this basis. She’s recruited a rockstar team of engineers, product leaders, salespeople and marketers from the universities and startup ecosystem in her town, but she’s fundraised almost exclusively in Silicon Valley.
There is absolute truth in the idea that the Valley can be the best place in the world to build and scale a business. But, Rachel has found ways to overcome the challenges of operating a high-growth startup elsewhere. In fact, she’s found big advantages operating outside of the Bay Area—besides access to talent and low turnover, she’s landed two Fortune 1000 customers in Denver. And like ours in Raleigh, her employees can afford to buy homes there.
These are advantages a growing number of entrepreneurs are recognizing. It’s evidenced by Amazon’s very public search for a second headquarters and a stream of headlines, such as, “Why I Moved my Company from SF to…” San Diego, St. Louis and Los Angeles.
The best communities for building high-growth startups have some key similarities: strong local universities, high livability, a community-wide drive for constant innovation and proximity to capital. Here’s a breakdown:
Local university talent
During the beginning stages of a startup, executives want to hire highly skilled workers with years of intensive experience. As we progress, it becomes a top priority to attract a more entry-level workforce with relevant university and internship experience. Silicon Valley companies are known to draw from UC Berkeley, Stanford and other colleges nearby.
However, we’ve found some of our brightest young engineers at world class universities like Duke University, NC State University and the University of North Carolina at Chapel Hill. NC State also has an excellent analytics program churning out data scientists. My fellow panelists shared their strong relationships with universities in Denver and Chicago.
Regions with strong university talent are going to be more appealing for entrepreneurs. But those of us outside Silicon Valley have another talent advantage, too: we’re rarely competing with Google and Facebook for the best young engineers.
That keeps salaries competitive but not outrageous, and helps us prioritize employee benefits and perks to the ones our people care about the most.
The other great thing about mining local universities is that you can be strategic in building a diverse talent pipeline. In Raleigh, we have solid historically black colleges and universities (HBCUs) and a women’s liberal arts college, along with growing recruiting relationships at each.
Takeaway: Choose a community with a stream of educated and passionate local university graduates who represent the diverse company you want to create.
Pick a place where people want to live. Rachel said it well: Denver lets her team have the life they want to live.
It’s no surprise that cities like ours and Austin are so frequently cited as top startup hubs outside of the Valley. We have nice weather, affordable home prices, reasonable commutes, quality public education and lots to do for fun, whether it be hiking in mountains, checking out breweries or unique restaurants or enjoying family activities.
Companies in these towns prioritize life outside of work, and employees value that. They’re willing to pick up their families and move to enjoy it.
But Mark Cuban mentioned a valid point—that the risk-taking, in-it-to-win-it culture of the Valley is unmatched. Your best recruits will want a high quality of life, but just as important is working for a company with an urgency to win.
Make sure you’re building a company that dares to be as bold as those out west, with high growth goals and a strong push to meet and surpass them. The perks will only sweeten the offer.
Takeaway: Don’t underestimate the value of a short commute, outside-of-work activities, homeownership and other personal perks for employees.
Strong technology communities have an active entrepreneurial community that engages mentors, investors, political leaders and major corporations.
In Chicago, where panelist Shradha Agarwal operates Outcome Health, key supporters of startups are Mayor Rahm Emmanuel and major healthcare organizations, many of which are customers. And Denver-based Chipotle took an early bet on hometown startup Guild early on, providing higher education opportunities to its employees.
Mark rightly noted that being a bigger fish in a smaller pond tends to have benefits like these, but you need to have other compelling startups in the pond with you.
I love that Denver has the largest Startup Week in the United States. Here in Raleigh, we’re part of a community with a longstanding history of innovation. Red Hat and SAS started here, and IBM, Cisco and Lenovo have planted major operations at Research Triangle Park, a hub of technology disruption since the 1950s. We’re in good company among hundreds of startups working across our region.
Perhaps the biggest benefit of operating in a smaller town is the humility that comes with it. People are less likely than in the Valley to ask your company’s post money valuation in the first few minutes of meeting.
Takeaway: Look at past successes as well as the long-term stability and vibrancy of a region’s technology community. Be sure others are as eager and determined to build strong businesses as you are.
Proximity to capital
A major downside to operating outside the Bay Area is the shortage of capital. It serves us well in some ways—I believe we’re more capital efficient and focused on building a lasting company that solves problems and fills a need.
When it is time to raise capital, it’s challenging until you start to get some traction. The best startup towns will have early investors and advisors willing to put money into an early stage venture or make connections to viable funders.
In most cases, you’ll have to hop on a plane to raise later or growth stage venture capital. It’s valuable to live in a town with both Silicon Valley investor connections, but also easy flights to and from San Francisco.
Mark wondered if location impeded our ability to raise money from outside our regions. In the case of my software company, Pendo, a key criterion for investors was their willingness to come visit us, see Raleigh, meet our team and experience the unique culture we’ve built outside the Bay.
Takeaway: Be willing to travel to fund your company. But set your location as a priority too. Investors will come to you if you’re building a winning business with a strong team and culture, regardless of where you’re located.