Location, Location, Location: Three Considerations for Startups Establishing their US Headquarters
Co-written with Gil Ben-Artzy, Founding Partner of UpWest Labs.
Location, location, location. As the adage goes, choosing the location of your startup headquarters is everything. It impacts not only you and your team, but likely the trajectory of your business as well. For Israeli startups, it’s an increasingly common practice to keep the R&D team in Israel, while moving headquarters to the US (a model we will discuss in future pieces). But the US is home to many hubs and regions for distinct industries — so where in the US is the best place for your startup to establish its roots?
The vast majority of time, the answer is Silicon Valley because of its proximity to leading investors and its culture of embracing disruptive new technologies. That said, after investing in more than 70 Israeli startups that have raised over $500M in follow-on funding, we have seen a few of our companies build successful businesses outside the Valley, including Los Angeles, New York, Boston and Texas.
It all comes down to what market your business is in. Here are three key factors that all foreign entrepreneurs ought to consider when deciding where to open their US headquarters:
1. Find the right first customers
One of the most important factors when deciding where to locate your HQ is proximity to your customers. However, these are not just any customers — these are your first customers. Early customers not only help you design the right product, but also become your champions that provide testimonials and other valued forms of support. Bureaucratic, slow-moving companies may be less inclined to adopt new technologies before the product is perfect. Find a city with a thriving ecosystem of fast-moving companies in your target industry.
Take SentinelOne as an example. When the company’s CEO first moved to the US, his location in Silicon Valley allowed him to secure pilots with top Fortune 500 corporations. Eventually, SentinelOne brought Netflix, Yahoo! and Box on as its first customers. Securing these top companies was much easier for SentinelOne because of their location, and having strong brand names as customers gave the company important early momentum.
2. Early-stage investing is a local business
Early-stage investors (Seed and Series A) want to be close to their founders so that they can help them in the initial stages of the startup and take advantage of their network. From finding early customers, to forming the best teams, to providing mentorship and securing future financing, investors prefer to be close to the companies in which they invest.
Another way to look at it: a partner at a VC firm that only invests in a couple of startups per year has a lot riding on your success; it is her job to keep tabs on how your company fares, which is easier done when investments are located across the street as opposed to across the country.
3. You need to be where the talent is
Ultimately, the talent is a function of the area. Finding the right people is regional and domain-specific. A startup in the adtech space is more likely to find the right marketing professionals in New York, while a cybersecurity startup may have better luck in Silicon Valley.
Hiring and retaining top talent is hard. Any co-founder knows this. But attempting to hire top talent in another continent is even more difficult. It is unlikely that the best sales and marketing professionals will want to work for a company whose CEO and core team are all located in Israel, while he or she is left alone in the US.
What to do next: Come visit
As you evaluate your options with the criteria above, you should find upcoming industry events to attend and book a trip out to the US for a couple of weeks. While planning your trip, reach out to other Israelis you know in the areas you’re visiting. Your network in the US will be smaller than it is in Israel, but you likely know someone in the cities you’re considering who can connect you to relevant folks.
You should plan to spend part of your trip in the Valley to get exposure to the community here, given its leadership in the US tech industry; roughly half of the country’s startups valued at over $1B are located here, including the majority of the most valuable private fintech companies and the leading health tech companies. Other perhaps less-expected industries have also established innovation hubs in the Valley, including major retailers (Amazon, Walmart, etc.), and automotive companies (Ford, GM, Honda, BMW, and more).
At the end of the day, not all companies are the same and choosing a location for your headquarters is not a “copy + paste” decision. The onus is on the entrepreneur to figure out which city will work best for her startup’s unique needs. After considering these three factors, the right answer won’t be the same for all entrepreneurs, but it will be clearer.
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UpWest Labs is a Silicon Valley-based venture fund investing in Israeli entrepreneurs looking to break into the US market. You can learn more about UpWest’s investment approach here, and learn more about breaking into the US market in our recent talk “The UpWest Playbook for Breaking into the US Market.”
