A few years back, I was hired as an early employee at a tech startup.
The company had already raised some venture capital, it had an unconventional office, it was tackling a large problem, and most of the employees were young and tech-savvy.
In other words, it lived up to the media’s portrayal of a startup.
There was one major difference though — it was located in Richmond, Virginia, not Silicon Valley.
Living in the DC Metro Area, this actually worked out well as I was able to drive down a few times per week to be there for weekly meetings and key events, while also working at a satellite office in DC.
Medium is full of articles from people who have worked at startups and tech companies. And while I have enjoyed reading many of these stories, there are some major differences between working at a startup in a well-established tech hub filled with startup veterans, and working at a startup in any other city elsewhere in the U.S. (even if that city is fairly large, as Richmond is).
These are some of the key differences and lessons I learned while working at a startup outside of Silicon Valley.
Funding comes from the local community so you need to engage with other local businesses and entrepreneurs. There are not (many) established VC firms or private equity investors.
Larger coastal funds will use regional funds as filters when deciding whether to invest in a company or not, so having local support gives your company an edge and helps you be seen as a leader in the community.
Many startups in smaller cities experience a kind of informal, peer-to-peer exchanges that provide founders advice and the initial financial backing that is necessary to build your company.
Salaries are lower for employees based outside of Silicon Valley. But typically, so is the general cost of living. Making low six figures in Richmond? You can live quite nicely. Silicon Valley? Not so much.
The other interesting thing about having lower salaries (and generally cheaper labour) is that you can sometimes afford to use people for processes that might otherwise be outsourced.
For example, we had a call centre that was staffed by local employees. This type of work would be cost-prohibitive at your typical Silicon Valley startup, which would normally outsource this type of work.
This is great because you can actually have all your employees in house, at your office, making certain function easier to oversee. Additionally, you have a chance to stimulate the local economy.
Not only is creating jobs a source of pride, but it also functions as a way to further establish ties to the local community, likely resulting in goodwill.
Explanation of Company Structure/Compensation
When you are in a smaller region, where startups are less common, it’s important that employees (both current and prospective) understand the company structure and the payment structure.
How you structure compensation with early employees can have serious financial impacts down the road. So it’s important to create a startup compensation package that reflects the company culture and financial outcomes you actually want.
It’s easy to start giving equity away on a first-come, first-served basis without thinking about reserving equity for key hires and being mindful that you’ll want to hire some senior employees down the line.
A good lawyer goes a long way and is well worth the cost in documenting the allocation of equity, setting a vesting schedule, and establishing “cliffs” to ensure company equity is not diluted by early employees who quickly leave.
When you are a startup in Silicon Valley, you are looking primarily for private funding. For startups in other cities, partnering with cities and municipalities may be a better way to look for financial support.
For example, our startup partnered with the City of Richmond and The Greater Richmond Transit Company (GRTC). These partnerships not only provide financial support but lend your startup a sense of legitimacy.
Just because you are in a smaller city doesn’t mean you need to stay there forever. Even if you have ambitions to end up in Silicon Valley, working at a startup in a smaller city can be a great stepping stone.
Much of the experience you develop will be transferable, and if you go through the process of pitching nationally, you may meet a lot of interesting people. Some of these may be impressed by your skills, and offer you a job. Others can act as a powerful referral.
Role of Technology in Day to Day Work
Take advantage of technology. It’s never been easier to host meetings, talk with prospective investors, or collaborate with other companies remotely.
Once you figure out how to optimize your communication, it is also much easier to scale your startup.
You can now find remote employees who otherwise would not have been able to work for you due to various logistical and geographic constraints.
Even if your team is all local, utilizing technology efficiently for communication allows employees increased flexibility and allows for lower fixed costs that many traditional businesses face (such as needing a large physical footprint of office space).
Operating at a Loss
Businesses that operate at a loss for extended periods of time are not viewed favourably. If you want to create a company that does not have a clear path to profitability, Silicon Valley is probably a better choice. Investors in most cities are accustomed to investing in more traditional investments, with clear returns, such as commercial real estate, retail stores, or refinancing debt.
Your pay will likely be lower than your Bay Area equivalent but you will still be required to work long hours. This is the one major negative that I experienced working at a startup outside of Silicon Valley.
If you are going to work long hours, it is better to be a well funded Silicon Valley startup, that understands that employees need to work long hours, so it is often in their best interest to make their working environment as pleasant as possible, to boost productivity.
Treatment of Employees
Be aggressive toward your competitors, not your employees. This is probably sound advice at most businesses, but when you have a relatively modest skilled labour pool, high employee turnover can be devastating financially and for company morale.
We had dozens of early employees fired as part of a management-driven purge, including one of the founders, which contributed to a very negative work environment.
Not only is finding external hires tougher in a smaller city but the negative reputation you will create by firing many employees or treating them poorly will make recruitment much more difficult.
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Casey Botticello is a partner at Black Edge Consulting. Black Edge Consulting is a strategic communications firm, specializing in online reputation management, digital marketing, and crisis management. Prior to founding Black Edge Consulting, he worked for BGR Group, a bipartisan lobbying and strategic communications firm.
Casey is the founder of the Cryptocurrency Alliance, a Super PAC dedicated to cryptocurrency and blockchain advocacy. He is a graduate of The University of Pennsylvania, where he received his B.A. in Urban Studies.