*Originally posted on CNBC here.
It’s no coincidence that some of the most successful start-ups in history — including many of the so-called “unicorns” — are headquartered in Silicon Valley. The Bay Area’s proximity to top tech talent, a plethora of incubators and accelerators, and a “who’s who” of innovative companies make it a fertile hunting ground for venture capitalists looking to throw money into the next Facebook or Apple.
Increasingly, cities like New York, Los Angeles, Boston, Chicago, and Austin are developing reputations as start-up hotbeds, as well.
While a lot of would-be entrepreneurs dream about starting a company and then moving to Silicon Valley, or vice versa, the reality is that the resources that founders need in order to be successful aren’t exclusive to a particular geographic location. More often than not, you can find everything you need right in your own back yard — no matter where in the world that is.
The expansion of start-up success
The insane amount of investment poured into Bay Area companies over the course of the past decade or so has inevitably given rise to the belief that a start-up’s location is a key indicator of its potential to be successful.
Certainly, there are many examples of companies that have made it big in the Valley — too many to name here, in fact. But lately, examples of successful innovative companies are popping up all over the map, and that’s only going to continue.
About 800 miles to the east of the start-up capital of the world lies another valley. Provo, Utah, is now home to three start-ups valued over $1 billion. Qualtrics, an online survey company; Vivint, a home automation provider; and Ancestry.com, a genealogy giant, were all bootstrapped and built from the ground up within walking distance of one another and have helped establish the state’s reputation as a start-up breeding ground.
Go due east another 1,500 miles and you’ll end up in St. Louis, where Jonathan Herrick has helped build an award-winning customer relationship management and marketing automation platform for small businesses. The chief sales and marketing officer and co-founder of Hatchbuck, together with the firm’s other founders, took advantage of T-REX, which offers Hatchbuck and more than 100 other start-ups roughly 160,000 square feet of co-working space. In about five years, Hatchbuck has been able to secure nearly $10 million in investor funds.
Meanwhile, in the nation’s capital — which has almost always been dominated by government organizations and a plethora of federal contractors they do business with — a burgeoning tech scene has given rise to companies like FiscalNote, a data analytics start-up, and Contactually, a CRM. And up and down the east coast, from Philadelphia to Charleston, South Carolina, start-ups are disrupting nearly every industry imaginable.
So what’s making it all possible?
The new normal
Not long ago, Pat Riley, founder and CEO of Global Accelerator Network, which has worked with start-ups in more than 100 cities on six continents, noticed a significant shift in the number of companies choosing to forgo a move to so-called greener pastures. Riley cites four primary reasons for this shift:
1. Local investments: “In the past two years, in particular, most cities around the world have done a great job bringing investors together who want to invest locally,” Riley says. The start-ups that GAN works with typically get around $500,000 from investors located within 50 miles of their headquarters.
2. Tech tools: Riley also notes that companies no longer have to travel to find customers. “The cost of doing business anywhere is cheaper than it’s ever been,” he says. “You don’t need to do business in person like before because tools like WhatsApp and Google Hangouts make chatting incredibly easy.”
3. Real estate costs: The cost of doing business outside of large cities is often dramatically cheaper than it is in major metropolitan areas. “It’s hard to find a one-bedroom apartment under $2,500 per month in San Francisco or New York City. That same apartment in Omaha is going to cost you under $1,000,” says Riley. He cites this reality as a major reason plenty of companies are moving out of the Bay Area. Office space can be expensive. The cost savings available to start-ups outside the big city arguably gives them a longer runway and more time to get off the ground.
4. Far-reaching success: Finally, Riley points out that location is irrelevant if your start-up isn’t successful. With GAN start-ups that aren’t located in San Francisco or New York City staying in business or getting acquired over 80 percent of the time, the idea that location isn’t everything is becoming the new normal.
Plus, in your hometown, you’ll have a support system in the form of friends and family that won’t be there if you move.
According to Riley, the relationship you have as a start-up founder with the people in your city can be mutually beneficial. He points to a study funded by the Kauffman Foundation as the catalyst behind his decision to become an advocate for keeping start-ups in the communities where they started. Essentially, the study found that new businesses account for nearly all net new job creation in the U.S.
When founders decide to stay in their communities, they can have a huge positive impact on their communities. Sure, they create jobs, but, perhaps even more importantly, they can create a sense of purpose.