I couldn't disagree more about the access to talent section. While many engineers are willing to relocate to the bay area, many also are not. Right now, it is pretty saturated. There is also a missing part of your function, # of good positions with other companies. When you move to the bay area, because of the saturation of engineers, the lowest hanging fruit for many is to poach engineers who work at other companies. You are going to have much, much more competition for your engineers in SV than virtually anywhere else in the world. Your example of Waterloo proved it is a great place to bring in talented engineers with RIM, even if they didn't hold on to their dominant position.
The part about the average size of the deal is also somewhat misleading. The difference between an average of $16M and $6.9M starts to look a lot smaller when you see recent college grads getting ~$100k/yr and office space costing you ~$80/sq ft. And that $100k/yr will start to look a lot smaller to that recent college grad each time his $3500/mo rent check is due...SV startups are essentially paying inflated real estate prices twice, once in rent, once in employee salary.
As someone living in a very low wage country now, I will never again want to grow a company / work as an employee, in a place where the workers are lowly valued.
In my experience, it turns out bad for everyone. The company gets a far higher ratio of people who don't mind being lowly valued, the workers get lowly valued. Bad for everyone.
If you're hiring people in Waterloo it's not because you want low-wage seat-fillers. That would be, like, Podunk, New Brunswick. There's levels between "lowly valued" and "omg i can only get best A-players in SF"
They don't, actually. While the engineering population of SF is growing fast, the increase is a tiny fraction of the total number of software engineers in the U.S, let alone in the world. Remember Joy's Law: "No matter who you are, most of the smartest people work for someone else." [1]
What the Bay Area does have is a greater concentration of talented engineers than any other major municipality. When you're trying to make a concrete decision where to locate your startup, that matters. And most of the people who argue "Don't move to SF" aren't actually arguing "Move somewhere else", it's usually "Adopt a distributed team where you pick the best engineers regardless of location." The latter approach has a bunch of its own problems, so it becomes a tradeoff of getting the biggest possible talent pool possible vs. reducing communication costs and building a team locally.
It works if you substitute "willing and able" for "willing", which is the usual context of this discussion. If you are willing and able to date a supermodel and you don't, well, why the hell not?
(FWIW, I personally have little interest in supermodels...but then, most people would consider that lack of interest = "not willing", so the logic still holds. Like all logic, it obscures subtleties - I'd be quite willing if she were a good match beyond being a supermodel and I weren't already attached - but then, this is a problem generally with imposing words on the world, and not with the specific instance.)
You can't honestly believe that. Consider the # of professional software developers in the US alone is much higher than the total population of San Francisco.
If the opposite was true, and more were not willing to go to San Francisco, don't you think most of the larger companies there would have moved elsewhere?
Keep in mind, I said "willing to go," not that they were already there.
The most unfair advantage seems to be: be a "foreign" founder with deep connections to a network outside the Bay Area (could be India, but could also be UMich..). Relocate to SF, do your startup here, raise money here, hire initial people either here, or have people from "home" move out for your company.
Later, open an engineering office in your "home" location to take advantage of non-SV hiring possibilities. You can get started on this in a limited way by contracting work back "home", especially for non-core functions.
Basically every Israeli successful startup ever. (Eng office in Israel, sales office in the Bay Area or NYC, with senior leadership being very familiar with the US market and often present. Maybe less required now, but still a winning strategy).
I also saw a bunch of YC companies started by foreign (non-US) founders take advantage of deep networks at home.
MIT alumni companies also recruit pretty heavily from MIT even if they move to SFBA, etc. I assume other college alumni networks are the same way.
Countless companies do it at the enterprise level, or even much smaller. A dedicated Indian engineering team can be managed more like an in-house team than rented contractors.
In terms of logistics, I would love to know how to go about this like setting up office in India being a US company etc. Any online resource to tap ? I doubt my local accountant will have any clue.
US C-Corp or the likes which is owned by the shareholders. Then C-Corp owns 100% of the shares of the company of subsidiary (depending on jurisdiction there maybe legal limitations imposed). Then there is usually an 'agreement' where all IP generated by sub. is owned by parent company, and parent company pays X to sub. company for services (which are usually 100% match to the expenses). Sub. company hires and manages the employees and deals with local taxes, etc.
This of course, depends on size of the companies (both parent and subsidiary) and countries and then there are a bunch of agreements to make sure everything is above board, but pretty much works this way.
source: just had a friend's company that went through doing that, having a Delaware parent company and a subsidiary setup in Portugal.
There are many companies that do this, from the start even. You get situations where an early employee wants to move back home and to keep him they have him start an eng office back home.
Echoing other comments here, I think college towns make excellent startup founding locations. They often have plenty of access to graduating talent, and many have thriving tech scenes to begin with. Ann Arbor, Boulder, Waterloo, Champaign, Boston, and many other towns avoid the costs of SV while still allowing plenty of access to technical and financial resources. While markets in these towns might not perfectly mimic the larger national market, they have a similarly young-and-technically-proficient subset of the population as larger tech hubs, both in terms of talent and users.
I have decided to base my starup out of Champaign IL. The burn rate is super slow, there are ton of resources (and people to recruit) from the University of Illinois, and tons of willing buyers/participants.
I grew up in Champaign, spent two years in college there, and fled to Chicago in 2009 because there were absolutely no programming opportunities available. Thank you so much for investing in my home town -- I belong in a big city, but I still think of Champaign fondly.
Though I may not like it, I believe it. It's unfortunate that with SF's skyrocketing cost of living that we can't spread that out to cheaper and less economically fortunate cities.
It's hard to replicate SV's investor network. VCs in other cities definitely form small communities, but everyone has ties to the valley. If you're in the valley, there is also a critical mass of other companies to provide services -- many VCs use the other companies in their portfolios dogfood each other's products, which helps create networks between founders and engineers as well.
There is definitely a critical mass in SV that's really hard to replicate elsewhere. Not that it can't be done; but it's a lot easier to acquire funding and talent in SF than elsewhere. And I say this as someone whose focus is outside the SF area.
It's posed as an answer to Y Combinator questions so fair enough, if you're already in YC you probably want the 50 million of VC.
But it seems so oriented at VC lifecycle - funding, hiring people SV VC acquihirers would want, exits - that it leaves no room for factors involved in actually running a company.
I realize that this is a Canada vs SV post, but I wanted to plug Boulder, CO as a great place to start a startup. We don't have even close to the amount of venture capital funding as there is in SV, but the talent pool is large and highly concentrated, and there are a decent amount of VC firms. Many tech companies both large and small are realizing this (for example, Google is currently in the process of building a 1500 person campus there, expanding on their current presence). Also, quality of life is very high.
Every time I'm in California, people tell me I should move my startup out there, rather than Minneapolis. But I'm (probably) staying here. I have a network here, too... maybe not as grand as Silicon Valley, but it's something.
Just like startups need to find a niche against entrenched companies, non-Bay area startup communities need to find their niche to compete with Silicon Valley. In the Twin Cities, we have a lot of medical startups, and a lot of interest at least in enterprise-oriented startups, thanks to our massive Fortune 500 headquarters concentration. Best Buy is very supportive of the startup community, and Target is very supportive of DevOps. In March, we're having our first enterprise startup conference (http://enterpriserising.co). Over the next few years, I think we're grow into our niche. I hope so!
I've only been involved in 2 funding efforts for the companies I have worked for, but did not find it true that potential investors will refuse talks just because you are not incorporated in Delaware.
There were some who requested that we incorporate in Delaware as requirement of the deal, but that is just a matter of making the change. I've never seen anyone unwilling to start discussions just because some paperwork will need to be done.
The advice I have received from my own legal counsel was to incorporate locally until that time that a Delaware move made business sense. Of course, that was my counsel in my situation. If your goals and business differ, you may receive different advice.
Of course they'll talk to you. The question is whether they'll write the check.
Re-incorporating from another US state is not too hard and expensive, although I have seen it hose some companies (for example, Rhode Island is a particularly bad state to be incorporated in). Re-incorporating from another country is much harder and can delay things by a couple months, which is long enough for a deal to fall through.
The important thing is to be physically near investors. They'll want to drop by many times during the life of the company.
The comment about SR&ED is somewhat incorrect. It's not exactly difficult to fill out timesheets, even for "thinking". It's just research into a specific topic. I worked for a Canadian startup for a time and I spent a few minutes each week updating my SR&ED spreadsheet for the work I did that week.
There's a pretty big pool of talent in Waterloo (as well as Toronto and Ottawa) and there's many startups in here as a result. While the pool is smaller than in SV and there's less access to capital, there's some good accelerators around and space costs far less.
Starting your business in Canada also limits your exit options, or makes them a lot more difficult. As someone who just survived an acquisition that required the entire engineering team to relocate from Toronto to NYC I can tell you that it's much harder to move a company across the border than you'd think.
I'd have to imagine that the burn rate in Canada is going to be much lower than in San Francisco in terms of cost of living, paying people, etc. Not that it totally negates SF's advantage of course.
I would guess it's because it's relatively close to both Seattle and Redmond so you have ex Amazon and Microsoft employees who are willing to work there. Actually I think that Microsoft already has some offices in Bellevue. Plus, it's way cheaper.
For what it's worth, I currently work and live in Seattle but I would completely prefer living and working in Bellevue.
