6 ms·

Where to start up a startup

82 points by yurisagalov 12y ago

xhrpost 12y ago
Though I may not like it, I believe it. It's unfortunate that with SF's skyrocketing cost of living that we can't spread that out to cheaper and less economically fortunate cities.
- exelius 12y ago
  It's hard to replicate SV's investor network. VCs in other cities definitely form small communities, but everyone has ties to the valley. If you're in the valley, there is also a critical mass of other companies to provide services -- many VCs use the other companies in their portfolios dogfood each other's products, which helps create networks between founders and engineers as well. There is definitely a critical mass in SV that's really hard to replicate elsewhere. Not that it can't be done; but it's a lot easier to acquire funding and talent in SF than elsewhere. And I say this as someone whose focus is outside the SF area.
rdl 12y ago
The most unfair advantage seems to be: be a "foreign" founder with deep connections to a network outside the Bay Area (could be India, but could also be UMich..). Relocate to SF, do your startup here, raise money here, hire initial people either here, or have people from "home" move out for your company. Later, open an engineering office in your "home" location to take advantage of non-SV hiring possibilities. You can get started on this in a limited way by contracting work back "home", especially for non-core functions.
- xhrpost 12y ago
  Sounds like an interesting possibility. Do you know of any start-ups who have successfully done this?
  - rdl 12y ago
    Basically every Israeli successful startup ever. (Eng office in Israel, sales office in the Bay Area or NYC, with senior leadership being very familiar with the US market and often present. Maybe less required now, but still a winning strategy). I also saw a bunch of YC companies started by foreign (non-US) founders take advantage of deep networks at home. MIT alumni companies also recruit pretty heavily from MIT even if they move to SFBA, etc. I assume other college alumni networks are the same way.
- codegeek 12y ago
  how can a US company open engineering office in a country like India etc ? Is there anyone on HN doing this ?
  - beat 12y ago
    Countless companies do it at the enterprise level, or even much smaller. A dedicated Indian engineering team can be managed more like an in-house team than rented contractors.
    - codegeek 12y ago
      In terms of logistics, I would love to know how to go about this like setting up office in India being a US company etc. Any online resource to tap ? I doubt my local accountant will have any clue.
      - BSousa 12y ago
        Can't say about India, but usually goes like -> US C-Corp or the likes which is owned by the shareholders. Then C-Corp owns 100% of the shares of the company of subsidiary (depending on jurisdiction there maybe legal limitations imposed). Then there is usually an 'agreement' where all IP generated by sub. is owned by parent company, and parent company pays X to sub. company for services (which are usually 100% match to the expenses). Sub. company hires and manages the employees and deals with local taxes, etc. This of course, depends on size of the companies (both parent and subsidiary) and countries and then there are a bunch of agreements to make sure everything is above board, but pretty much works this way. source: just had a friend's company that went through doing that, having a Delaware parent company and a subsidiary setup in Portugal.
        codegeek 12y ago
        Thanks for the helpful tip.
  - mahyarm 12y ago
    There are many companies that do this, from the start even. You get situations where an early employee wants to move back home and to keep him they have him start an eng office back home.
dsugarman 12y ago
I couldn't disagree more about the access to talent section. While many engineers are willing to relocate to the bay area, many also are not. Right now, it is pretty saturated. There is also a missing part of your function, # of good positions with other companies. When you move to the bay area, because of the saturation of engineers, the lowest hanging fruit for many is to poach engineers who work at other companies. You are going to have much, much more competition for your engineers in SV than virtually anywhere else in the world. Your example of Waterloo proved it is a great place to bring in talented engineers with RIM, even if they didn't hold on to their dominant position.
- curun1r 12y ago
  The part about the average size of the deal is also somewhat misleading. The difference between an average of $16M and $6.9M starts to look a lot smaller when you see recent college grads getting ~$100k/yr and office space costing you ~$80/sq ft. And that $100k/yr will start to look a lot smaller to that recent college grad each time his $3500/mo rent check is due...SV startups are essentially paying inflated real estate prices twice, once in rent, once in employee salary.
- s73v3r 12y ago
  "While many engineers are willing to relocate to the bay area, many also are not." The numbers indicate that many more are willing than those who are not.
  - ejdyksen 12y ago
    Which numbers might those be?
  - dsugarman 12y ago
    You can't honestly believe that. Consider the # of professional software developers in the US alone is much higher than the total population of San Francisco.
    - s73v3r 12y ago
lettergram 12y ago
I have decided to base my starup out of Champaign IL. The burn rate is super slow, there are ton of resources (and people to recruit) from the University of Illinois, and tons of willing buyers/participants.
- remyp 12y ago
  I grew up in Champaign, spent two years in college there, and fled to Chicago in 2009 because there were absolutely no programming opportunities available. Thank you so much for investing in my home town -- I belong in a big city, but I still think of Champaign fondly.
jarek 12y ago
If your goal is to get VC funding, Bay Area is the place to be. If your goal is to run a company, that is not quite as clear.
- d357r0y3r 12y ago
  Yeah, that's one thing that isn't really addressed. Not everyone is out to get 50 million in funding and build a trillion dollar business.
  - jarek 12y ago
    It's posed as an answer to Y Combinator questions so fair enough, if you're already in YC you probably want the 50 million of VC. But it seems so oriented at VC lifecycle - funding, hiring people SV VC acquihirers would want, exits - that it leaves no room for factors involved in actually running a company.
- derefr 12y ago
  I'd love an article on "the best place to bootstrap a tech business."
beat 12y ago
Every time I'm in California, people tell me I should move my startup out there, rather than Minneapolis. But I'm (probably) staying here. I have a network here, too... maybe not as grand as Silicon Valley, but it's something. Just like startups need to find a niche against entrenched companies, non-Bay area startup communities need to find their niche to compete with Silicon Valley. In the Twin Cities, we have a lot of medical startups, and a lot of interest at least in enterprise-oriented startups, thanks to our massive Fortune 500 headquarters concentration. Best Buy is very supportive of the startup community, and Target is very supportive of DevOps. In March, we're having our first enterprise startup conference (http://enterpriserising.co http://enterpriserising.co). Over the next few years, I think we're grow into our niche. I hope so!
deleted 12y ago
[deleted]
kidsil 12y ago
TL;DR: Silicon Valley is better than Canada because more money is flying around. I mean come on, at least make some sort of fail rate, future tendencies by looking into the data over the years, ANYTHING.
codingdave 12y ago
I've only been involved in 2 funding efforts for the companies I have worked for, but did not find it true that potential investors will refuse talks just because you are not incorporated in Delaware. There were some who requested that we incorporate in Delaware as requirement of the deal, but that is just a matter of making the change. I've never seen anyone unwilling to start discussions just because some paperwork will need to be done. The advice I have received from my own legal counsel was to incorporate locally until that time that a Delaware move made business sense. Of course, that was my counsel in my situation. If your goals and business differ, you may receive different advice.
- tlb 12y ago
  Of course they'll talk to you. The question is whether they'll write the check. Re-incorporating from another US state is not too hard and expensive, although I have seen it hose some companies (for example, Rhode Island is a particularly bad state to be incorporated in). Re-incorporating from another country is much harder and can delay things by a couple months, which is long enough for a deal to fall through. The important thing is to be physically near investors. They'll want to drop by many times during the life of the company.
mojoe 12y ago
I realize that this is a Canada vs SV post, but I wanted to plug Boulder, CO as a great place to start a startup. We don't have even close to the amount of venture capital funding as there is in SV, but the talent pool is large and highly concentrated, and there are a decent amount of VC firms. Many tech companies both large and small are realizing this (for example, Google is currently in the process of building a 1500 person campus there, expanding on their current presence). Also, quality of life is very high.
tjl 12y ago
The comment about SR&ED is somewhat incorrect. It's not exactly difficult to fill out timesheets, even for "thinking". It's just research into a specific topic. I worked for a Canadian startup for a time and I spent a few minutes each week updating my SR&ED spreadsheet for the work I did that week. There's a pretty big pool of talent in Waterloo (as well as Toronto and Ottawa) and there's many startups in here as a result. While the pool is smaller than in SV and there's less access to capital, there's some good accelerators around and space costs far less.
LordHumungous 12y ago
I'd have to imagine that the burn rate in Canada is going to be much lower than in San Francisco in terms of cost of living, paying people, etc. Not that it totally negates SF's advantage of course.
- TheHydroImpulse 12y ago
  I'll go through what I've experienced having worked at a few Canadian startups based in Edmonton. Yes, the burn rate can be significantly less. Salaries are much less than in SF (average is ~60K-75K for software developers and sales people typically made this much at the last startup I worked at, although not all salary based). Cost of living where they were located (Edmonton) is pretty average. It's not super cheap nor insanely expensive. From some quick research, rent is on average 30% that of New York. Even with all this considered, I still wouldn't base a company here -- ever. Hiring the best of the best is simply not possible. I've only seen a couple times a company being able to hire someone from elsewhere (SF go figure) because the position was super specific and needed someone with lots of experience. Every other time you're dealing with a junior developer or someone straight out of university because finding senior developers and employees in general is hard. Edmonton has a few startups here, but it's pretty much a circlejerk to be honest. The earlier startup copies everything what a startup further along them does, and that continues up the chain. This doesn't have to be a bad thing, but it was quite the extreme in this case. Startup A - "We wasted hundreds of thousands of dollars trying to build a salesforce integration." Startup B - "Ok, we'll just build our own fully custom CRM, that'll be sooo much cheaper and easier" Needless to say, it was more expensive in time and money and they're going to end up moving to Salesforce anyways. Startup A - "We instituted a new sick day policy of 96 hours because people took advantage of the lenient system" Startup B - "That's sounds good, we'll do that too" The saying "Hire slowly and fire quickly" just doesn't work out well when you have a hard time hiring excellent candidates. From what I've experienced, they couldn't hire people they really wanted, they had to hire people they needed. So the whole culture thing didn't exist. So I think the main reason, after hiring, is having those model companies. There are none in the area I lived in, so they're all just screwing up together. This is only what I've experienced in a single city in Canada, however.
otakucode 12y ago
If you've asked the question, you've already failed. It's 2015. Are you not capable of overcoming the limitations of geography with technology?
mgob 12y ago
Echoing other comments here, I think college towns make excellent startup founding locations. They often have plenty of access to graduating talent, and many have thriving tech scenes to begin with. Ann Arbor, Boulder, Waterloo, Champaign, Boston, and many other towns avoid the costs of SV while still allowing plenty of access to technical and financial resources. While markets in these towns might not perfectly mimic the larger national market, they have a similarly young-and-technically-proficient subset of the population as larger tech hubs, both in terms of talent and users.
widowlark 12y ago
I'm gonna put my vote in for Bellevue, WA to be the next place to start a tech business. Wait and see.
- droidist2 12y ago
  Why Bellevue instead of Seattle?
  - bhayden 12y ago
    Lower cost of living probably, but still access to a big tech community
  - rifung 12y ago
    I would guess it's because it's relatively close to both Seattle and Redmond so you have ex Amazon and Microsoft employees who are willing to work there. Actually I think that Microsoft already has some offices in Bellevue. Plus, it's way cheaper. For what it's worth, I currently work and live in Seattle but I would completely prefer living and working in Bellevue.
chrisdinn 12y ago
Starting your business in Canada also limits your exit options, or makes them a lot more difficult. As someone who just survived an acquisition that required the entire engineering team to relocate from Toronto to NYC I can tell you that it's much harder to move a company across the border than you'd think.

82 points by yurisagalov 12y ago

Though I may not like it, I believe it. It's unfortunate that with SF's skyrocketing cost of living that we can't spread that out to cheaper and less economically fortunate cities.

exelius 12y ago
It's hard to replicate SV's investor network. VCs in other cities definitely form small communities, but everyone has ties to the valley. If you're in the valley, there is also a critical mass of other companies to provide services -- many VCs use the other companies in their portfolios dogfood each other's products, which helps create networks between founders and engineers as well. There is definitely a critical mass in SV that's really hard to replicate elsewhere. Not that it can't be done; but it's a lot easier to acquire funding and talent in SF than elsewhere. And I say this as someone whose focus is outside the SF area.

rdl 12y ago

The most unfair advantage seems to be: be a "foreign" founder with deep connections to a network outside the Bay Area (could be India, but could also be UMich..). Relocate to SF, do your startup here, raise money here, hire initial people either here, or have people from "home" move out for your company. Later, open an engineering office in your "home" location to take advantage of non-SV hiring possibilities. You can get started on this in a limited way by contracting work back "home", especially for non-core functions.

xhrpost 12y ago
Sounds like an interesting possibility. Do you know of any start-ups who have successfully done this?
- rdl 12y ago
  Basically every Israeli successful startup ever. (Eng office in Israel, sales office in the Bay Area or NYC, with senior leadership being very familiar with the US market and often present. Maybe less required now, but still a winning strategy). I also saw a bunch of YC companies started by foreign (non-US) founders take advantage of deep networks at home. MIT alumni companies also recruit pretty heavily from MIT even if they move to SFBA, etc. I assume other college alumni networks are the same way.
codegeek 12y ago
how can a US company open engineering office in a country like India etc ? Is there anyone on HN doing this ?
- beat 12y ago
  Countless companies do it at the enterprise level, or even much smaller. A dedicated Indian engineering team can be managed more like an in-house team than rented contractors.
  - codegeek 12y ago
    In terms of logistics, I would love to know how to go about this like setting up office in India being a US company etc. Any online resource to tap ? I doubt my local accountant will have any clue.
    - BSousa 12y ago
      Can't say about India, but usually goes like -> US C-Corp or the likes which is owned by the shareholders. Then C-Corp owns 100% of the shares of the company of subsidiary (depending on jurisdiction there maybe legal limitations imposed). Then there is usually an 'agreement' where all IP generated by sub. is owned by parent company, and parent company pays X to sub. company for services (which are usually 100% match to the expenses). Sub. company hires and manages the employees and deals with local taxes, etc. This of course, depends on size of the companies (both parent and subsidiary) and countries and then there are a bunch of agreements to make sure everything is above board, but pretty much works this way. source: just had a friend's company that went through doing that, having a Delaware parent company and a subsidiary setup in Portugal.
      - codegeek 12y ago
        Thanks for the helpful tip.
- mahyarm 12y ago
  There are many companies that do this, from the start even. You get situations where an early employee wants to move back home and to keep him they have him start an eng office back home.

dsugarman 12y ago

I couldn't disagree more about the access to talent section. While many engineers are willing to relocate to the bay area, many also are not. Right now, it is pretty saturated. There is also a missing part of your function, # of good positions with other companies. When you move to the bay area, because of the saturation of engineers, the lowest hanging fruit for many is to poach engineers who work at other companies. You are going to have much, much more competition for your engineers in SV than virtually anywhere else in the world. Your example of Waterloo proved it is a great place to bring in talented engineers with RIM, even if they didn't hold on to their dominant position.

curun1r 12y ago
The part about the average size of the deal is also somewhat misleading. The difference between an average of $16M and $6.9M starts to look a lot smaller when you see recent college grads getting ~$100k/yr and office space costing you ~$80/sq ft. And that $100k/yr will start to look a lot smaller to that recent college grad each time his $3500/mo rent check is due...SV startups are essentially paying inflated real estate prices twice, once in rent, once in employee salary.
s73v3r 12y ago
"While many engineers are willing to relocate to the bay area, many also are not." The numbers indicate that many more are willing than those who are not.
- ejdyksen 12y ago
  Which numbers might those be?
- dsugarman 12y ago
  You can't honestly believe that. Consider the # of professional software developers in the US alone is much higher than the total population of San Francisco.
  - s73v3r 12y ago

lettergram 12y ago

I have decided to base my starup out of Champaign IL. The burn rate is super slow, there are ton of resources (and people to recruit) from the University of Illinois, and tons of willing buyers/participants.

remyp 12y ago
I grew up in Champaign, spent two years in college there, and fled to Chicago in 2009 because there were absolutely no programming opportunities available. Thank you so much for investing in my home town -- I belong in a big city, but I still think of Champaign fondly.

jarek 12y ago

If your goal is to get VC funding, Bay Area is the place to be. If your goal is to run a company, that is not quite as clear.

d357r0y3r 12y ago
Yeah, that's one thing that isn't really addressed. Not everyone is out to get 50 million in funding and build a trillion dollar business.
- jarek 12y ago
  It's posed as an answer to Y Combinator questions so fair enough, if you're already in YC you probably want the 50 million of VC. But it seems so oriented at VC lifecycle - funding, hiring people SV VC acquihirers would want, exits - that it leaves no room for factors involved in actually running a company.
derefr 12y ago
I'd love an article on "the best place to bootstrap a tech business."

beat 12y ago

Every time I'm in California, people tell me I should move my startup out there, rather than Minneapolis. But I'm (probably) staying here. I have a network here, too... maybe not as grand as Silicon Valley, but it's something. Just like startups need to find a niche against entrenched companies, non-Bay area startup communities need to find their niche to compete with Silicon Valley. In the Twin Cities, we have a lot of medical startups, and a lot of interest at least in enterprise-oriented startups, thanks to our massive Fortune 500 headquarters concentration. Best Buy is very supportive of the startup community, and Target is very supportive of DevOps. In March, we're having our first enterprise startup conference (http://enterpriserising.co http://enterpriserising.co). Over the next few years, I think we're grow into our niche. I hope so!

deleted 12y ago

[deleted]

kidsil 12y ago

TL;DR: Silicon Valley is better than Canada because more money is flying around. I mean come on, at least make some sort of fail rate, future tendencies by looking into the data over the years, ANYTHING.

codingdave 12y ago

I've only been involved in 2 funding efforts for the companies I have worked for, but did not find it true that potential investors will refuse talks just because you are not incorporated in Delaware. There were some who requested that we incorporate in Delaware as requirement of the deal, but that is just a matter of making the change. I've never seen anyone unwilling to start discussions just because some paperwork will need to be done. The advice I have received from my own legal counsel was to incorporate locally until that time that a Delaware move made business sense. Of course, that was my counsel in my situation. If your goals and business differ, you may receive different advice.

tlb 12y ago
Of course they'll talk to you. The question is whether they'll write the check. Re-incorporating from another US state is not too hard and expensive, although I have seen it hose some companies (for example, Rhode Island is a particularly bad state to be incorporated in). Re-incorporating from another country is much harder and can delay things by a couple months, which is long enough for a deal to fall through. The important thing is to be physically near investors. They'll want to drop by many times during the life of the company.

mojoe 12y ago

I realize that this is a Canada vs SV post, but I wanted to plug Boulder, CO as a great place to start a startup. We don't have even close to the amount of venture capital funding as there is in SV, but the talent pool is large and highly concentrated, and there are a decent amount of VC firms. Many tech companies both large and small are realizing this (for example, Google is currently in the process of building a 1500 person campus there, expanding on their current presence). Also, quality of life is very high.

tjl 12y ago

The comment about SR&ED is somewhat incorrect. It's not exactly difficult to fill out timesheets, even for "thinking". It's just research into a specific topic. I worked for a Canadian startup for a time and I spent a few minutes each week updating my SR&ED spreadsheet for the work I did that week. There's a pretty big pool of talent in Waterloo (as well as Toronto and Ottawa) and there's many startups in here as a result. While the pool is smaller than in SV and there's less access to capital, there's some good accelerators around and space costs far less.

LordHumungous 12y ago

I'd have to imagine that the burn rate in Canada is going to be much lower than in San Francisco in terms of cost of living, paying people, etc. Not that it totally negates SF's advantage of course.

TheHydroImpulse 12y ago
I'll go through what I've experienced having worked at a few Canadian startups based in Edmonton. Yes, the burn rate can be significantly less. Salaries are much less than in SF (average is ~60K-75K for software developers and sales people typically made this much at the last startup I worked at, although not all salary based). Cost of living where they were located (Edmonton) is pretty average. It's not super cheap nor insanely expensive. From some quick research, rent is on average 30% that of New York. Even with all this considered, I still wouldn't base a company here -- ever. Hiring the best of the best is simply not possible. I've only seen a couple times a company being able to hire someone from elsewhere (SF go figure) because the position was super specific and needed someone with lots of experience. Every other time you're dealing with a junior developer or someone straight out of university because finding senior developers and employees in general is hard. Edmonton has a few startups here, but it's pretty much a circlejerk to be honest. The earlier startup copies everything what a startup further along them does, and that continues up the chain. This doesn't have to be a bad thing, but it was quite the extreme in this case. Startup A - "We wasted hundreds of thousands of dollars trying to build a salesforce integration." Startup B - "Ok, we'll just build our own fully custom CRM, that'll be sooo much cheaper and easier" Needless to say, it was more expensive in time and money and they're going to end up moving to Salesforce anyways. Startup A - "We instituted a new sick day policy of 96 hours because people took advantage of the lenient system" Startup B - "That's sounds good, we'll do that too" The saying "Hire slowly and fire quickly" just doesn't work out well when you have a hard time hiring excellent candidates. From what I've experienced, they couldn't hire people they really wanted, they had to hire people they needed. So the whole culture thing didn't exist. So I think the main reason, after hiring, is having those model companies. There are none in the area I lived in, so they're all just screwing up together. This is only what I've experienced in a single city in Canada, however.

otakucode 12y ago

If you've asked the question, you've already failed. It's 2015. Are you not capable of overcoming the limitations of geography with technology?

mgob 12y ago

Echoing other comments here, I think college towns make excellent startup founding locations. They often have plenty of access to graduating talent, and many have thriving tech scenes to begin with. Ann Arbor, Boulder, Waterloo, Champaign, Boston, and many other towns avoid the costs of SV while still allowing plenty of access to technical and financial resources. While markets in these towns might not perfectly mimic the larger national market, they have a similarly young-and-technically-proficient subset of the population as larger tech hubs, both in terms of talent and users.

widowlark 12y ago

I'm gonna put my vote in for Bellevue, WA to be the next place to start a tech business. Wait and see.

droidist2 12y ago
Why Bellevue instead of Seattle?
- bhayden 12y ago
  Lower cost of living probably, but still access to a big tech community
- rifung 12y ago
  I would guess it's because it's relatively close to both Seattle and Redmond so you have ex Amazon and Microsoft employees who are willing to work there. Actually I think that Microsoft already has some offices in Bellevue. Plus, it's way cheaper. For what it's worth, I currently work and live in Seattle but I would completely prefer living and working in Bellevue.

chrisdinn 12y ago

Starting your business in Canada also limits your exit options, or makes them a lot more difficult. As someone who just survived an acquisition that required the entire engineering team to relocate from Toronto to NYC I can tell you that it's much harder to move a company across the border than you'd think.