Venture

You Don’t Have to Move Your Startup To Silicon Valley, Here’s Why

I rewatched The Social Network recently, and between the dramatic pauses and the brooding Andrew Garfield, one Justin Timberlake line really stuck out to me:

“Mark, you have to come to California.” (That’s paraphrased, but if memory serves, it’s basically what he said).

Oh, how times have changed–and I’m not talking about Facebook’s valuation.

Fifteen years ago, it may have been necessary for Zuckerberg to fly out to California to convince VCs to invest. But more often we here at Crunchbase News learn that entrepreneurs don’t need to move to the Bay Area for VC funding.

In fact more VCs, like Steve Case, are encouraging investment elsewhere, as companies also migrate outside of the Bay.

From interviewing founders and VCs alike spanning Colorado to Canada to Latin America we’ve found that the rest of the country, and world, isn’t the capital-dry desert that Silicon Valley entrepreneurs and VCs have said it is.

In fact, over the course of reading, interviewing, and writing about venture capital and tech outside of Silicon Valley, our coverage has revealed a collection of interviews detailing the opposite.

VC Roadtrip

We’ve seen vibrant VC activity in Colorado, Utah, and Texas. These are three U.S. states with a heck of a lot of startup and venture growth, and a lot of people who are content living, working, and getting funding outside the Bay – surprisingly even for some of them.

Last year, Utah startups banked more than $700 million with multiple IPOs and exits, Colorado pulled in $1.9 billion in venture capital during the same period, and startups in Texas picked up $800 million in Q1 alone. It’s likely from a funding perspective that those regions are only going to gain momentum.

Another point worth making centers around talent acquisition. Texas, Utah, and Colorado are home to huge universities with highly technical talent. Not to mention, larger tech companies, ranging from Apple and Google to Facebook and Oracle, have opened up offices and second headquarters in these locales. While that may create competition for talent, it also keeps workers in-state.

Beyond talent and funding, founders point to a number of aspects that make basing a startup outside of the Bay Area an attractive option. Mainly, it’s just too damn expensive in the Bay.

According to Zillow, the median home value in San Francisco is $1.3 million, and with the density of people and startups, it’s not surprising that paying for an office in Austin, Boulder, or Provo makes better financial sense.

Salary also goes a long way outside the Bay. Texas, for example, has no state income tax. That’s a win for investors and employers, and it means employees aren’t necessarily forced to pay insane amounts for rent or bear long commutes while stressing about student loans or saving to buy a house.

Work-Life Balance Matters

When we spoke to Boulder-based Foundry Group’s Seth Levine, he said Colorado startups, in general, have a much better track record when it comes to employee attrition rates compared to San Francisco.

That employee churn could stem from several factors. Notably, when people see a financially viable future in a place, they may be more likely to stay put.

Several founders and VCs also pointed to a difference in industry culture outside the Bay. Specifically in San Francisco, everyone works in tech or venture. If they don’t, they certainly know a lot about it. While that may be a perfect atmosphere for many engineers, marketers, salespeople, designers, and VCs–escaping the tech bubble has its appeal.

One of the best selling points for smaller hubs is the community aspect of “growing together.” Unlike many companies in big hubs like the Bay Area and New York, when one company scores funding or an exit in these “fringe” regions, it generally raises the tide for the rest– that means more momentum, more attention, and more prominent investors.

That was certainly the case for Utah, which has experienced a lot of growth in funding, in large part due to the attention that Bay Area VCs have paid to the state.

So whether you’re starting a company or searching for a second headquarters, it looks like Silicon Valley isn’t the final frontier after all.