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Are there ever any advantages to starting a technology company in New York versus Silicon Valley?
Summer and I have spent the last nine months traveling; all of our things are in storage; we could live anywhere. I want to start another technology company. We’re trying to decide where to go.
Let me simplify things. Obviously my wife’s career is important too, but I am not going to discuss her career here. And obviously we have friends in New York and strong feelings about the place, strong enough perhaps to keep us here no matter what. But we’ll weigh all these things ourselves. The fact is we have no children, jobs, or apartment, and it is very easy for us to move. What I want to focus on here is the business advantages, if any, of starting a technology company in New York.
Fred Wilson thinks that "entrepreneurs should start businesses where they want to work and then organize the company according to what works best for them. The whole company, particularly development, does not need to be in one location anymore." I agree, but as in all things just because you can doesn’t mean you should.
It is true that you can start a company almost anywhere. The founder of RightNow moved to Bozeman, Montana after selling his previous company, got bored, and started another - in Bozeman.
But certain places have undeniable advantages: high concentrations of talent, capital, infrastructure, service providers, and more. In tech, nowhere beats Silicon Valley. (Paul Graham has written two essays on the subject, comparing the Valley to the rest of America and America to the rest of the world, and without repeating his arguments let me say that I agree with most of them.)
Build your business in Bozeman and on top of all the usual risks of starting a new business - market acceptance, competition, execution, e. coli. - you add the risk that it will take six months longer to find staff, investors, office space, and lawyers with expertise writing contracts in your market. You should only do it if the risk is worth it to you in order to live in Bozeman (or New York). Otherwise you will find yourself moving, like the companies in this recent article in the Wall Street Journal (registration required). There are also the intangibles.
There are of course other considerations. Where are your likely customers? Suppliers? Other business partners? If you were opening a bodega and planning to live above it, you would be crazy to choose the location based on which street you wanted to live on. You would put your store wherever the customers were (and far away from the competition). Jeff Bezos left new York to found Amazon.com, but he didn’t go to the Valley. He moved to Seattle, home of Ingram - the largest wholesaler of books in the country. Not surprisingly, technology companies that focus on finance or advertising are often based in New York, and ones that focus on music or film in L.A.
Note that these are arguments for putting sales, business development, and marketing in New York, not necessarily engineering. Fred points out that many of his NYC portfolio companies have engineers scattered around the country or even the globe.
Which brings me to his second point: "The whole company, particularly development, does not need to be in one location anymore."
Again, it is true that you do not need to be based in one location. But there are real advantages. Successful startups need to be highly flexible, responsive, able to change direction. At the same time they need to have a strong team culture, a sense of unity and purpose: "We may all be changing direction, but we understand why and we’re doing it together." This is much harder to accomplish when the team is widely distributed.
Don’t tell me that IM and wikis solve the problem. They help, a lot, but if you believe that they are a complete substitute for daily human contact then you need therapy. Again, you can take the risk, but the risk is not zero.
Which brings me back to my original question. Leave aside personal considerations, lifestyle. Let’s agree that you can start a tech business in New York, just as you can start one in Bozeman or Topeka. And let’s also agree that depending on your customers, New York may be the best place to locate sales and marketing and business development. Let’s even forget the disadvantages of New York, chiefly the high cost of living and consequently high salaries.
My question is are there ever any advantages to starting a technology company in New York versus Silicon Valley?
