Locations and the importance of choosing the right place to start a company.
Introduction
Starting your company in the right location is super important for Founders to get right in order for their company to succeed. Being in the right location is a vital contributor to having access to capital, access to talent, user acquisition and the right positive energy and ethos of the city you are in. Not hitting the right points on these points are not enough to fail a company but make it far more difficult for them to succeed, startups on the whole fail and only a few succeed, founders want to maximise their chances of success therefore and would be better off starting a company in the right place for them.
Access to capital
Founders want to ensure that they have easy access to capital, ideally from tier 1 VC funds. It is important to bear in mind that you as a founder have to make the pitch, the VC funds know that they are the A side, they do not have to go chase companies but rather companies chase after them. Founders therefore want to make it as easy as possible for VC funds to invest in them, meeting on their terms and at their location rather than bossing them around for your own needs. It is best therefore to be in hubs that have a high concentration of VC funds, these include SF, NYC and London. Even within this list the US is better than Europe in terms of access to capital and specifically SF.
As seen from the image above, 80% of the top 10 VC funds by AUM are based in North America. Founders need to consider this when making decisions about their company and how much they want to succeed. If they want to be a unicorn they should be moving to SF rather than staying where they are currently. This is not to say that successful startups cannot be created somewhere other than North America, but in a game of trying to increase your chances of success, you would be making it more difficult for yourself by being based somewhere else.
Locations for the best talent
When looking for talent founders want to ensure that they are two things:
Clever
Has a disposition to working at a startup
Whether someone is clever or not can be determined by a variety of ways but an easy clear indicator is which university they went to. Stanford, Harvard, MIT, Oxford & Cambridge are all good universities which produce students are are clever enough to make a company succeed in the way that it needs to. Therefore being close to these academic hubs can help when acquiring talent and scouting out early team hires.
A founder also needs to figure out however which places produce students who are disposed and comfortable with working at a startup. Stanford and Oxford both produce exceptional people but Stanford currently has a greater culture of startups than Oxford. It is therefore important to be in a location where there are talented people but they also have what it takes to create a successful company.
Considering these two factors a startup increases it’s chances of succeeding if it is based in California having access to both Clever and startup disposed people who are aligned on company aims. One bad hire is very bad for a company and can create more problems in the future which should be avoided.
Locations for the best user acquisition
At the end of the day, if you do not have anyone loving your solution then your solution is no good. Starting a startup in England which solves problems in India is not impossible to do so, but very difficult. It is easier to be on the ground talking to customers, actively engaging in customer discovery and seeing how you can better your product, all of which can be done better in the same location as to where your startup is trying to solve a problem at.
It is easier for founders to also provide a solution if the problem actually exists there; a company which reinvents how air conditioners cool a room is not valuable in Norway, but valuable in Turkey for obvious reasons. Founders need to be in touch and connected to where the problems they are trying to solve are based so that they can best provide a valuable solution to users.
Locations with the best energy and ethos
I am a firm believer in surroundings affecting your actions. If everyone smokes around you, you are more likely to adopt smoking, if everyone around you codes, you too are more likely to code. This goes for startups too. If everyone around you is hardworking, have a go get em attitude and all have interesting projects with which they are working on, you too are more inclined to work at least at the same amount as everyone around you. Founders therefore should aim to find locations which are more focused on definite optimism rather than definite pessimism. Surrounding yourself with like minded individuals who are as obsessed and certain of an idea as you are increases the chances of your company succeeding.
One bad pickle, placed in a jar of perfect pickles can turn the rest bad over time. Locations such as SF and New York have an energy of success and culture of starting successful companies, other locations such as London and Paris do not have that culture to the same amount, of course there are a few exceptions but it is important to continue looking at these steps as ways to increase chance and luck.
Conclusion
There is no rule book to creating $1Bn companies, it is not like banking where you climb the corporate ladder and there is a specific way to do so with every step already paved. Each founder creates their own path and create their own luck, this essay is one part of the other essays which all provide a way to increase luck in a founder’s journey to success, you want everything going for you when there is wind blowing against you, do yourself a favour and move to SF (in most cases).