Your Tech Startup Doesn’t Need to be in Silicon Valley.

By Jeremiah Owyang @jowyang, living in Silicon Valley since 1997.

My long-time, close friend, Chris Saad, wrote a helpful essay on 39 tips for startups. He shares many suggestions, based on his personal experience, in the startup world, from his home country of Australia, and in Palo Alto, and in the heart SF’s tech district SoMa.

While I agree with 38 of his tips and suggestions, I’d like to discuss the merits of tip number one. Dear readers please know, I first chatted with Chris in advance, he was aware I was writing this, as I certainly don’t like to surprise a friend.

Chris gives startups the following suggestion as his opening tip:

#1: “Be in Silicon valley. Yes you can succeed in other places, but the chances of any business succeeding are so small, why start with a disadvantage? Some argue that the ecosystem in their area is “getting better” or they’re “going to help build the ecosystem along the way”. Trust me, as someone who’s tried, It’s hard enough building and driving the train, you can’t lay the tracks at the same time!”

I’ve seen many successful startups emerge and flourish outside of Silicon Valley, like Hootsuite, Jive, Bazaarvoice, Omniture, Spredfast, Sprinklr, BuddyMedia, BlaBlaCar, Freelancer, and a plethora of Chinese tech companies that are worth billions and billions, so I guess that rules out any suggestion that all startups must be in Silicon Valley.

Of course, that’s not what Chris was suggesting, his point is that it’s easier to have a successful startup if you’re in the tech center of planet Earth. Oh, and I agree, in most situations, but let’s first break down the pros and cons of having your startup be in Silicon Valley, before we rule on any universal truths.

Here’s the pro and cons, in two simple bulleted lists.

Upsides of having your startup in Silicon Valley:

  1. In proximity to VC funding, money is literally falling out of trees.
  2. In an environment where new ideas are embraced, failure accepted.
  3. Connected to tech talent, and seasoned partners and advisors.
  4. New ideas quickly emerge, a source of innovative thinking.
  5. Fantastic climate, diverse culture, and high-quality of living.

Downsides of having your startup in Silicon Valley:

  1. Expensive, 1 bed apt are $3,250 in SoMa, and office rent is sky-high.
  2. Competitive salaries challenge loyalty; tech salaries are $100k–350k
  3. Myopia to other cultures, a limit if you’re aiming at other regions.
  4. Entangled traffic in bay area makes commuting a frustrating challenge.
  5. Tech bros, glasshole douchbags, SF aroma is weed+urine, ahem.

Now that we’ve explored the ups and downs of situating your beloved startup in tech mecca, we can reframe the discussion to When it makes sense to have your startup in Silicon Valley.

It makes sense to have your startup be based in Silicon Valley if you’re heavily VC backed, or already rich, or if your talent base is in this network, or if you’re seeking a culture of constant innovation. It doesn’t make sense if you’re in an area that already has a tech talent ecosystem, is focused on a different market like Europe or NY media and publishing, or are not cash laden.

So there you have it, your tech startup doesn’t need to be in Silicon Valley, but instead, know when to use pros and cons to your advantage.

Salut to Chris, for sparking this interesting topic, you should follow him on twitter @chrissaad and check out his site. Oh, and there’s a thriving discussion about this essay, over here on Facebook.