
Our Startup Would Probably Die If We Were In San Francisco - marshallhaas
http://needwant.com/p/our-startup-would-die-if-we-were-in-san-francisco/
======
frankus
It's probably obvious to most, but I recently came to the realization that if
you're paying off debt, a high COL works in your favor, whereas if you're
living off cash, it works against you.

That means that if you're fresh out of college with lots of student loans,
you're doing yourself a disservice if you don't move to a big city and get a
high paying job. You can effectively inflate your way out of your debt by
making your salary much bigger in comparison (assuming COL and salaries
roughly match up).

And if you're about to retire (without having Fuck You Money), you should move
somewhere cheap, all else equal. The same could be true for many bootstrapped
startups.

~~~
bunderbunder
That only works out if the salary you can make increases in proportion with
the cost of living. I haven't lived in a lot of places, but at least based on
the few cities I have lived in, I don't believe the two are anywhere near that
tightly correlated.

For example, consider Milwaukee vs. Chicago. Chicago's a major finance and
banking center, and a huge percentage of the people living there are in some
kind of profession. Milwaukee's still mostly a blue collar town. This
difference shows in the very different costs of living: An apartment in
Milwaukee costs about half of what an equivalent one costs in Chicago,
restaurants cost less for similar quality meals, drinks are _way_ cheaper,
etc.

But it does not follow that you can earn twice as much money working as a
developer in Chicago. The same job in Chicago might pay a bit better, but the
difference is modest. This is because the two cities are so close to each
other that at least in tech they're essentially the same job market. There's
even a busy commuter train connecting the two cities.

In short, it's not necessarily doing yourself a disservice if you don't move
to a big city and get a high paying job. You might do yourself an even better
service by moving to a small city and getting a high paying job.

~~~
kasey_junk
There is a bit of a fallacy going on here. If your housing costs 2x of another
place it does not follow that the total COL is 2x. For instance, most cost of
living calculations predict that even though housing is 85% higher in Chicago,
the total cost of living is more like 28%.

A 28% salary differential is just about right for the last couple of jobs I
looked at and maybe a bit lower. This also doesn't count for the choice
differential between Chicago and Milwaukee which is extreme.

------
sayemm
I think this all depends if you're really a "startup" or not. As per Paul
Graham's definition:
[http://paulgraham.com/growth.html](http://paulgraham.com/growth.html). Just
because you're starting something up doesn't mean you're really swinging for
the fences for a big home run. But if you are, your survival depends on deal-
making and hardcore talent, so you're at a huge disadvantage by not being in a
major tech hub.

But if you're focused on building a 7 or low 8-figure business, bootstrapped,
and self-funded, and your goal is financial independence/freedom instead of
"changing the world", totally agree, starting up outside of SF is a great way
to build up and earn those first stripes.

I live in San Diego and there are lots of internet millionaires here:
[http://helenchangwriter.com/2009/11/20/millionaire-
internet-...](http://helenchangwriter.com/2009/11/20/millionaire-internet-
marketing-entrepreneurs-thrive-in-san-diego/)

~~~
parennoob
Wow, this comment really stopped and made me think. I honestly used to think
"startup" was used for any new business with an unusual, efficient way of
doing business.

Now that I know how HN people define it, I guess my inclinations are way more
towards small business than startup.

------
arohner
Counterfactuals are very hard to know. At CircleCI, being in SF gave numerous
advantages early on. We had multiple paying customers in the first two office
buildings. We had multiple customers within walking distance, and many more
within cycling distance. Being able to talk to real customers using the app
was extremely valuable.

Customers aside, there are tons of people willing to help, either through
advice or introductions. There's an entire ecosystem who understand startups,
and have been there.

My failed started before that was in Austin, Tx, and the startup density just
wasn't there at the time (2009).

Not every developer in SF is as mercenary as you make it sound. For your first
employee hire, you might find a single person living in an apartment in SF vs.
a family man in St. Louis who has to pay for day care and save for college.
Their salary requirements might be comparable. [Edit: my point here is not to
say that SF people are only single, and STL people only have kids, but that
salaries are a distribution, and that there are places where the SF and STL
distributions overlap, based on the individual's experience, desires and stage
in their life.]

~~~
JPKab
"Not every developer in SF is as mercenary as you make it sound. For your
first employee hire, you might find a single person living in an apartment in
SF vs. a family man in St. Louis who has to pay for day care and save for
college. Their salary requirements might be comparable."

This is based on a ridiculous premise:

1) That a highly paid professional in a city BRIMMING with recruiters and cool
new companies throwing themselves at them isn't going to respond to market
pressures and/or "the shiny new company" effect when you reach a certain
growth point

2) That a "family man in St. Louis" will cost something comparable due to this
odd concept unique to flyover country of having a family.... oh wait, people
in the Bay Area have kids too.

I'm sorry, but there is a huge amount of delusion in San Fran about the
advantages of physical proximity. I'm not idiotic enough to believe there
aren't huge advantages, but it seems as if there is absolutely no point (that
HN folks are willing to acknowledge) where the cost of being in San Fran and
having to pay your talent at grossly inflated rates actually MORE THAN CANCELS
OUT the benefits.

~~~
glitch003
There is some quantitative truth to what he said, actually. San Francisco does
have more single people than other cities, and in fact has almost 12% more
single people than St. Louis does. So probabilistically speaking, there is a
higher chance that someone you hire in SF will be single (and therefore more
likely to put in looong hours) than someone you hire in St. Louis (who may be
strict in going home at 5pm to be with family).

Source: SF has 44.7% single people, St. Louis has 32.9% single people

[http://www.bestplaces.net/docs/studies/solocities_list1.asp](http://www.bestplaces.net/docs/studies/solocities_list1.asp)

~~~
JPKab
Good point, but I think we all know that long hours aren't sustainable day
after day after day.

As a guy who has worked 13 hour days while having a kid when it was required
(as well as 2 night binges on the weekends prior to a Monday launch), I do get
sick of the "less likely to work late when its needed" stigma against married
people. I'll work late when its needed, in bursts. What I won't do is work 80
hours a week for 3 months so my boss can continue on with the delusion that
I'm being as productive as 2 people working 40. We all know that's bullshit,
and science says so.

Its funny, because the 20 something single guys I work with (anecdotal of
course) don't seem to be willing to sacrifice personal time. They'll work late
on a Tuesday, but getting them to work late on a Friday or come in on a
Saturday? Not happening.

------
freeqaz
I've thought a lot about this and I feel like it makes sense pre-seed to do
this. Save the cash, invest it in the business, and then when you raise money
move to San Francisco/Bay Area. It's really tough to grow outside of SF, I
feel like. But if you're bootstrapping yourself... Then I can't see many
reasons to come to SF.

~~~
marshallhaas
Agreed, San Francisco is probably the worst place to be if you want to
bootstrap.

~~~
rjurney
I don't think so. There are so many early adopter, visionary customers here
you can sign up on spec to pay you to develop your product.

~~~
vonmoltke
Assuming your product appeals to the type of consumers or businesses that
inhabit San Francisco.

~~~
rjurney
What kind of businesses aren't in the Bay Area that you'd want to target?

~~~
kasey_junk
Off the top of my head: large banks, insurance companies, automotive, military
contracting, commodity agriculture & energy.

[Edit] Actually, this made me think, what precisely is in the bay area that
I'd want to target. The obvious answer is companies whose major priorities are
VC and/or other acquisition events and the ecosystem they create.

------
faizanbhat
Staying somewhere cheap gives you a tangible advantage but also puts you at
several intangible disadvantages. At my first startup in the UK, we decided to
base out of Birmingham instead of London, which reduced our living expenses by
70% and allowed us to really stretch our seed funding. But we ended up having
to commute to London frequently for important meetings. Also, one could argue
that we might have accomplished more in less time had we had continuous access
to expertise and contacts at scale. Eager to hear other thoughts and
experiences.

~~~
glynjackson
It all depends on the type of business you are in and at what stage your
company is at. I'm a freelancer but I have staff. My office is based outside
the city, but all my work comes from clients in Manchester and London, UK. The
major cities are where the opportunities, networking and money comes from. My
sacrifice for cheaper living means higher travel costs, longer work hours and
in some cases less credibility. For myself, the offset of living in a low
crime area with better schools works for me. But, I can understand why
startups decide to work in expensive areas. Wealth breeds wealth.

------
Iftheshoefits
I've often wondered why startups locate in the SF/Bay area instead of
elsewhere.

Right now outside of truly hot tech areas like SF the hiring scene is stacked
heavily in employers' favor: there are fewer job opportunities with fewer
companies. That's true even in places like St. Louis (or Austin, or any of a
number of other supposedly "hot startup" areas). I get some recruiter-spam
from St. Louis and Austin based recruiters looking for candidates for "hot"
startups and established businesses in the areas, but these opportunities are
all with hospital/medical companies (STL) or corporate-y .NET type stuff
(Austin). It's a bit baffling, actually, since my resume pretty clearly puts
me far outside of those boxes.

It seems to me there's an opportunity there for would-be startups to exploit.
On the other hand, the very same phenomenon leads to a kind of resistance: the
density of "talent" to draw from reduces substantially outside of the SF/Bay
area because a lot of it has already been drawn here to the very same job
imbalance.

~~~
guyzero
"I've often wondered why startups locate in the SF/Bay area instead of
elsewhere."

For a non-trivial number of startups, the founders were already working at a
big tech company in the Bay Area before they started their own company.

For others it's access to investors or really critical employees. If you want
someone who can build Amazon/Facebook/Google-scale datacenters, you're not
going to have much luck in St. Louis.

------
cft
The problem is that the massively funded SF/SV start-ups will create the
"scorched earth" regime for the bootstrapped ones: try moving to St. Louis and
compete with a AirBnB from there? If you get traction, you will have to get VC
money, which means moving back to SF or NY.

~~~
JPKab
Why do VCs require companies to be in the city they are in? Can someone please
explain this? We are talking about an industry whose product is supposed to
transcend physical space, but we have to be located in an ultra expensive city
to get funded? Where is the logic?

~~~
neilellis
Everything we do as human beings (pretty much) is all about people. So think
in people terms, not purely resource or financial terms.

People like proximity, they like being able to pop in and see other people.
Distance is friction from a business point of view. Just as we see friction in
applications as bad, so do business people see friction in business as bad.
Distance is friction.

I'm bootstrapping in the UK, I love SF and would love to be there (at least
part of the year!), there are a lot of advantages to having that much contact
with other startups.

However, interestingly I notice that people who do what suits them best often
seem to overcome geographic and financial obstacles. So I certainly wouldn't
want to recommend or even suggest one way as better than the other.

You've got to balance what's right for you with what is right for others.

On a completely different note it would be great if we could swap the word
'funded' with debt everywhere it's used :-) The two words have very different
connotations but mean the same thing (unless someone is just willing to GIVE
you money :)) I think the word debt helps people to make more sober
judgements.

------
richard_cubano
You should have moved to Oakland. There's plenty of cheap real estate there,
and it's on BART.

~~~
tptacek
Is there actually "plenty of cheap real estate" in Oakland?

~~~
koberstein
Depends on what you call "cheap" hahahaha

------
bane
I've known a few businesses who "HQ" out of a big city, but usually just with
a small sales office. Then they hire almost all of the rest of their staff in
very cheap, but talent filled areas.

One mistake I've seen over and over again, don't hire your customer facing
staff in those cheaper areas. You really want sales staff/etc. To be in the
same area as your customer base

~~~
seanflyon
What areas do you consider to be very cheap and talent filled? I always
assumed that the expensive areas are expensive because well paid talent is
driving up the cost of living (though city attitude towards construction plays
a large role as well).

~~~
bane
Well, depends on what you consider cheap and talented I suppose. For example,
there are loads of people in Portland and the surrounding area that are
employable for far less than you'd get in the Bay Area (by about 35%). You
have to work at it though, it's not as bad as offshoring, but you can't half-
ass it. The talent won't go as high as the Bay Area, but you'll probably be
able to find folks good enough to make the kind of CRUD apps most of us are
making anyways.

Here's a list and the cost of living delta vs. San Francisco (which translates
into direct salary costs for your business).

    
    
       Portland, OR - 35% cheaper
       Nashville, TN - 80% cheaper
       Atlanta, GA - 70%
       Miami, FL - 50%
       Tampa, FL - 70%
       Huntsville, AL - 70%
       Northern, VA - 20%
       Blacksburg, VA - 60%
       Charlottesville, VA - 50%
       Virginia Beach, VA - 60%
       Fredericksburg - 40% 
       Richmond - 60%
       Williamsburg - 50%
       Phoenix, AZ - 70%
       Columbus, OH - 80%
       Tri-cities area, WA - 70%
       Boston, MA - 20%
       Newark, NJ - 25%
       Austin, TX - 70%
       San Antonio, TX - 80%
       Ft Meade, MD - 30%
       Chicago, IL - 40%
       Minneapolis, MN - 50%
       Las Vegas, NV - 60%
    

Off the top of my head, if you can't hire people in Austin, Nashville, or Las
Vegas, you're doing it wrong. All of those have large tech industries and/or
are near large cities with big populations. Nashville is near both a big city
and a major national lab. They're also cheap enough that you can basically
hire two people for the price of one in San Francisco.

~~~
Iftheshoefits
Well, I've lived/worked in a couple of the locations on your list. I'll just
say this: I think we have very different notions of what "large tech industry"
means. I don't consider Tampa, FL or just about any of the VA listings to have
"large" tech industries. Tampa's is especially slim, driven mainly by a couple
of hospitals, the university, and a few defense/government contractors. VA's
are driven mainly by defense/government contractors (having been there once,
I'd not choose it again except as a last resort, and then only reluctantly)
and some finance.

~~~
bane
If you don't think Northern VA or South East VA are large tech industries,
then we have very different dictionaries. NoVA/D.C. is only the home to the
second largest tech center in the country, larger than NYCs. You can't swing a
dead cat without hitting a tech company of any size along the Dulles tech
corridor. With a 5% unemployment rate, there are literally thousands of job
openings there, the demand is unbelievably high. If that doesn't qualify as a
large tech industry, then nothing does.

Blacksburg and Charlottesville have all the advantages of a place like MIT or
Stanford. Nice STEM focused college towns full of ready to work STEM students
who'd love to stay in those towns and low costs of living. If you want to open
a remote office, those are good places to do it.

Tampa has a sizable tech industry as well. If you didn't notice it, it's
because you, like most people, aren't paying attention or you've dismissed
every possible company you could have worked for because it wasn't in with the
cool crowd. I wonder how many folks in Tampa wouldn't mind working for Tampa
pay but get equity in an SV startup?

Here's 5 minutes of looking for Tampa tech companies. If there's companies,
there's tech employees you can hire for your company. Tech companies can't
exist where there aren't people they can hire. ( _all_ of these had open tech
positions and I didn't even look for non-tech companies with open tech
positions)

    
    
       - http://www.actsoft.com/
       - http://www.connectwise.com/
       - http://www.e-ins.net/
       - http://www.fairwarning.com/
       - http://www.syniverse.com/home
       - ...

you know what...screw the list, here's 7 _thousand_ developer position near
Tampa
[http://www.simplyhired.com/search?q=software+developer&l=Tam...](http://www.simplyhired.com/search?q=software+developer&l=Tampa%2C+FL)

I bet most of these are for some boring insurance company, healthcare or real
estate company. How many people do you think you can find who want to work for
a SV company and get SV startup perks?

Here's Nashville with almost 7,000 more open positions.

[http://www.simplyhired.com/search?q=software+developer&l=Nas...](http://www.simplyhired.com/search?q=software+developer&l=Nashville%2C+TN)

 _Portland_ , a tech friendly city, only has twice as many openings.

[http://www.simplyhired.com/search?q=software+developer&l=Por...](http://www.simplyhired.com/search?q=software+developer&l=Portland%2C+OR)

Guess who has more open positions on this board? San Francisco or Washington
D.C.?

[http://www.simplyhired.com/search?q=software+developer&l=san...](http://www.simplyhired.com/search?q=software+developer&l=san+francisco)

[http://www.simplyhired.com/search?q=software+developer&l=Was...](http://www.simplyhired.com/search?q=software+developer&l=Washington%2C+DC)

The point is that there is plenty of tech industry all over the place, and
people in those areas can be hired at fractions of San Francisco's going
rates.

People also don't like working in boring shitty jobs and the allure of working
for a startup, with high payout equity can be a good alternative, if it's
offered to them.

But Silicon Valley Myopia makes it impossible to see this. It's easier to sell
hiring in Hyderabad than in Austin sometimes, and that's a shame.

While I see posts on San Francisco's labor shortage and the desire to get more
H-1B visas, I can't help think of the hundreds of thousands of qualified tech
employees all over the rest of the country. It's not expensive to set up a
remote office and not hard to manage one either. If a SV startup can spin a
photo sharing site as "changing the world" they can spin opening a remote
office in Alabama as a an actual world changer.

Here's a very relevant example [https://gaganpreet.github.io/hn-hiring-
mapped/src/web/](https://gaganpreet.github.io/hn-hiring-mapped/src/web/)

~~~
Iftheshoefits
First, I'm not in the "cool crowd" here in the Valley, nor am I particularly
interested in it. I actually _enjoy_ writing C++ code, and developing in C++
code bases. It excites me to see compiler errors that break my terminal's
scroll history almost as much as to see a successful build, I get a bit giddy
whenever I have the opportunity to fire up gdb, and I enjoy the prospect of
trying to design a system with a multithreaded or parallel execution model
(although I wouldn't rate myself as being highly skilled at the latter). I
think we share similar views with respect to SV's myopia regarding hiring
practices.

That said, suffice to say that I view quality as mattering at least as much as
quantity when it comes to making these comparisons.

The kinds of jobs you describe, with some exceptions of course, are analogous
to Wal-Marts or Target jobs in retail. Sure, one might say that _technically_
there is a "large retail industry" in an area filled with Targets and Wal-
Marts, but one wouldn't say it's a very good industry that attracts the best
retail talent, and admittedly I suppose that's something I implicitly include
when I determine what constitutes "large" or not.

~~~
bane
Yeah, I think we can definitely agree on that point. The offerings available
for the average tech worker in a Nashville obviously aren't going to be as
good as for SV.

But it wouldn't take too many companies hiring in these places either to
create a reasonable ecosystem of high quality jobs. Airbnb, Getaround,
Aerohive, Prosper and Palantir are all trying to fill hundreds of positions.

A "startup park" in Nashville and Austin, offering low rent or favorable taxes
to SV and local startups would allow these companies to setup 10-50 person dev
shops very quickly. People get to stay where they want to, companies fill
their positions and local economies get to attract/retain high-end tech
workers. Repeat for growth and eventually you'll hit a self-sustaining
critical mass and now you have "the SV of Texas" or "the SV of Cumberland
River" or whatever.

My point is not that there _are_ sexy cool jobs in these areas, but there is a
sufficiently trained labor pool that it's not hard for your sexy cool company
to setup an office and hire a group of 10 developers and a manager and offload
some of your CRUD work to be developed at 60-70% the original cost.

The problem is that SV startups keep acting like this is some kind of
intractable problem, but it's honestly not all that hard (source: I've set up
3 remote offices in the past for just this kind of work).

~~~
Iftheshoefits
It is something of a feedback loop.

I think my last comment may have implied a bit of disdain for the quality of
talent in non-SV places. That isn't the case. I agree with you, I think, that
the number and quality of talent outside of SV is sufficient to sustain almost
any startup in theory. In practice, purely for artificial reasons, it doesn't
hold.

There are two barriers to reaching the "critical mass" you note outside of the
valley:

1\. The "critical mass" in SV of "interesting," "good" (or whatever favorite
positive adjective might apply) is just huge. Even the least interesting
corporate-y jobs are strongly influenced by the culture here, and that is a
big draw for talent from bottom to top. That's all I really meant, earlier:
the density of "good" jobs here is very large.

2\. SV is (over-?)run with people who--and this is another of my unpopular
opinions around here--have huge egos. I mean spectacularly huge egos. I come
from a background of academic research (very mathematical in nature). Yet I
never saw such egos as I've seen in this industry. The barrier here is
something of a self-imposed psychological one, I think: the fact is that the
vast majority of startups don't need even a single person who has an advanced,
in-depth, and broad understanding of mathematics, data structures, algorithms,
or basically anything else in academic CS, but they seem to treat it as the
minimum necessary element to hire. The armchair psychologist in me opines that
the interview process in this industry is more about certain people trying to
impress themselves or prop their own egos up instead of just accepting that
working on some shopping cart, ad analytics platform, or generic-social-media-
app-X just isn't that complicated (speaking academically/intellectually here).
They don't want to think they're working on something that is _academically_
trivial, and so they engage in employee selection processes that reinforce the
view that everything they do is super intellectual and requires only the best
minds from the CS world to succeed.

------
danso
It'd be interesting to see the OP's thoughts on how things would be different
if he hadn't started in San Francisco? It may be expensive to live there, but
it may be easier to network enough to get the contacts/experience/buzz you
need to get seen, compared to starting in St. Louis.

------
acheron
There's also the fact that California is regularly at the bottom of rankings
of "business friendly" states. I'd rather locate my business in a state that
wants me there.

~~~
smutticus
I've never understood these "business friendly" rankings. If CA is so terrible
to businesses, then why are there so many successful businesses in CA?

~~~
davidw
"Positive network externalities":

[http://en.wikipedia.org/wiki/Network_effect](http://en.wikipedia.org/wiki/Network_effect)

The bay area has 1) a large, talented workforce, 2) great universities, 3)
lots of venture capital, as well as people who have "already done it" to give
advice. Plus it's a nice place to live if you don't mind the traffic. Granted,
opening an LLC costs X compared to a much cheaper Y in Nevada, but that's
ultimately kind of small potatoes compared to all the things in California's
favor.

That said, I'm more interested in bootstrapping something: what people like
patio11, Rob Walling and company have achieved doesn't look like science
fiction, and they're doing it in places that are not Silicon Valley.

------
crazy1van
This comparison is impossible to do in any quantifiable sense. The cost
savings for leaving SF are quantitative (low rent. lower taxes. etc). The
perks for staying in SF are much more abstract (better networking. increased
visibility). I don't mean to imply the SF perks aren't worth it, but they will
only be quantifiable in hindsight at best.

------
josephjrobison
SF vs Austin, COL vs salary difference - deciding between the two in the next
few weeks - please help me choose!

~~~
rjurney
If you want to be an entrepreneur, there's no choice at all. You have to move
to the bay area.

~~~
kasey_junk
Correction, if you want to be a bay area VC backed entrepreneur. Oddly there
are businesses started in other parts of the world.

~~~
rjurney
Sure - thats my impression of him.

------
ChossMops
Er, to be a startup you have to be in a hot, happening city. Otherwise you're
just a new business.

