Startup Journey Through a Pandemic: Marathon, not a Sprint
Thoughts on Long-term Market Access Plans
Gil Ben-Artzy, Founding Partner, UpWest
With the pandemic forcing the world to work from home, it’s only natural for early stage startups to wonder how that will impact their long term location decisions. Many founders are evaluating whether they will reopen their offices at all, and how they can identify their early customers remotely and pitch potential investors via Zoom. After all, these customers and investors are likely working from home as well and are no longer easily found at events, conferences, etc. If this is indeed the case, what might this mean for startup hotbeds like the Silicon Valley startup scene, which rely on the proximity to the investors, customers and talent that make everything go?
Some have argued that because work is becoming more distributed, it’s possible that a place like Silicon Valley might no longer have the edge as a hotbed for dynamic startups. Couple that with the notion that some talent is leaving the Bay Area, and it’s fair to question just what the Valley’s role will be in the years to come. In fact, some investors outside of the US are encouraging their portfolio companies to forego altogether any plans to establish a meaningful US presence now and in the future.
At UpWest, we have always believed in the importance of being close to your ecosystem. Clearly, for the next 12–18 months, most if not all customer interactions will need to take place remotely. However, despite the adjustments to our new normal of working from home, we believe that the pandemic ultimately will not dent the importance that this market represents for early stage founders. While it’s true that technical teams can (and often do) operate remotely all around the world, it will still be critical for many startups that their business, sales, and marketing folks are located near their customers.
Ultimately, the importance of physical proximity to your customers boils down to a short vs. long term discussion. If the pandemic really lasts for 5+ years, thus changing how our companies operate, then obviously the way business is done will change dramatically. However, if you believe that the current state will last ~1 year based on the rate of vaccination development, then permanently removing yourself from the markets that matter most to you will put you at risk of being left behind.
Long term, our belief is that the vast majority of industries and businesses will continue to rely heavily on in-person interactions. Here’s why:
Major tech hubs such as Silicon Valley are not going away
Silicon Valley’s reputation is well-established and its role in shaping early stage startups cannot be understated. Tomasz Tunguz of Redpoint Ventures recently wrote on why Northern California is still the best place to start a company, most notably because of the concentration of capital and access to potential customers and acquirers. An overwhelming concentration of unicorns and high-growth startups are based here and this will continue to attract new startups hoping to replicate their success. For example, Startup Genome just ranked Silicon Valley the #1 tech ecosystem on the planet for the eighth year in a row.
Most venture funds are located in Silicon Valley as well. Even though the pandemic has stopped most in-person meetings for the near future, investors will want to return to their usual way of investing that is largely dependent on spending in-person time with founders. Ultimately, this is still the best way for many investors to decide whether they want to “marry” the startup founders they are evaluating. We’ve seen how new investments have slowed down because it’s harder for investors to embrace the risk of a new startup when you can’t meet in-person. While workforces likely will remain more distributed than they were pre-coronavirus, the most prominent investors and a majority of tech companies aren’t going to suddenly abandon Silicon Valley en masse. This remains, and will always be, a vital hub for innovation.
Networks run deep
We’ve discussed the power and influence of networks a lot over the past few months as remote work has changed the way we all interact with stakeholders and partners. A founder’s network is still one of the biggest factors in determining the success of a startup, and the importance of this network is only magnified during the pandemic. Increased physical distance puts more of an emphasis on proactive and frequent communication with the partners, customers, and advisors that validate a company and its products. Yes, the people that comprise these networks are located all over the world, but there is an overwhelming concentration in Silicon Valley and many have been here for decades. One of the most famous examples of this is the PayPal Mafia, which has gone on to spawn dozens of the most recognizable startups, venture funds and Silicon Valley luminaries. Stanford University’s proximity to the Valley has also made its network incredibly strong and omnipresent. The established networks in Silicon Valley run deep and you’d be extremely hard-pressed to find another market that can match its depth and breadth.
Being near your customers will always be vitally important
Even in a choppy economy, the US market is still ultimately the best market for early stage startups to focus their efforts because of its size and openness. Because the tech ecosystem in Silicon Valley is so strong, it’s also where many startups will find their first customers, early adopters, and advisors. Customer relationships are obviously important and require constant nurturing, so while you can technically keep those conversations fresh over Zoom, there is really no substitute for in-person interaction — especially for making that first connection. You also cannot underestimate the role time zones can play. If you’re on the other side of the world from where your customers are, then it’s going to be incredibly difficult and counterproductive to have regular touchpoints to get feedback. Being here (or at least relatively close by) is a must, both now and post-pandemic.
It’s certainly a positive that other markets and tech hubs around the world are growing and playing an increased role. Short term, identifying and engaging with customers remotely may be the only way to go. At the same time, there is no substitute for being close to your customers. Unless you believe that the pandemic will last for many years, thus forcing most companies to permanently redesign the way they operate, the role of hubs like Silicon Valley and the need to be close to your market should ultimately remain a key consideration for startups that are planning their go-to-market strategies and physical location.
