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I think 2017 was around when it stopped being an obviously good idea for startups to be in the bay area, but it’s been somewhat obscured by a massive surge in availability of cheap seed funding.
148 replies and sub-replies as of Feb 25 2019

The incredibly high cost of living, power of FB/Google/etc, and a few cultural issues (e.g., short tenure for people at most jobs), have finally become a counterbalance to the bay area’s incredibly strong network effects.
There are still some things—e.g great startup executive talent, particular kinds of engineering talent—that are much harder to find outside the bay area.
I still expect a significant % of the $10B+ startups will get created here, so it makes sense for investors to still focus here. But I bet a lot of the ~$100M startups will happen elsewhere.
And not concentrated in any one place, but just sort of diffused everywhere. I doubt there will ever be another American city that will eclipse SF for concentration of software startups.
Another option is for startups to have a presence in the bay area and a majority of employees elsewhere.
We’ve noticed more and more YC companies coming here for the program, raising money and building a network, and then going somewhere else. Which makes sense—the fundraising environment and network of the bay area remain unparalleled.
And to state the obviously biased but still true belief: I still think companies should come to the bay area for YC!
I’m might do just that. Nothing wrong with it being a creativity launch pad. Obvi if your state figures out affordable housing, then SF would be awesome again.
Thought the same idea and while SV might be good for networking the funding might be better if you relocate to other places after YC to get another round of invest. Less competition and expenses
should YC open more locations? :P
I hear the same thing everywhere....
I don't think YC is practical for multi founder teams in their 30s or 40s to check out if their families lives.
I agree with the fact that YC’s services are unrivalled, but it’ll be nice if the team would organise pop-up seasonal YC programs around the world and funnel the successful companies to few locations for Demo day.
Would YC ever consider opening satellite accelerators in cities with a smaller (but still notable) startup presence? Say, like Austin?
My guess would be LA for the next place
Next place is a network of people, not necessarily manifested in geographical terms
What about have satellite locations across the US. N also to put emphasis on specific areas, i.e. if set up Raleigh/Durham have known pharma reps, Detroit have automotive reps, New York, music industry reps, and so on?
While everything you say is correct, talent density + network effect + money availability still trump everything else. Saying as a co-founder in the Bay who advises several startups not in the Bay.
I am beginning to be skeptical about talent density in the Bay Area, between absurdly low probabilities of being hired after being invited on-site, and top companies already absorbing much of the top people
I see as very relevant a sort of path dependency, where founders are mostly working already in the Bay Area because software companies are mostly there and start companies where they live
Too narrow thinking. Seed capital needs to get out of Bay area as well
If a startup can bootstrap for 40% less investment in a new place, seed capital needs to figure out a way to bring talent there. Singapore is a great example
Well YC portfolio @gitlab is a great example of using the remote team model! Will be interesting to see if their model will scale once the company starts hitting 1k or more team members. Any comments @sytses?
Applied 5 times🤦🏼‍♀️👏🏻
Bring YC back to Boston. kthanxbai
I run into problems these days because of the wage gap between eng roles at Bay Area companies and locally in Nashville. I'd love to work for a Nashville startup, but it means a huge pay cut from working remotely for SF companies.
Perhaps the YC needs to branch out. Why not revitalize another part of the country?
we should catch up & talk about this. Many seed funds have adjusted over the years to these geo/cash realities.
A lot are coming to Charlotte.
True, the Bay area and NYC are not the only places for funding anymore, but still the best places for B2C. Atlanta unfortunately doesn't have the same ecosystem for consumer tech.
Will YC revise it's policy of pushing startups to relocate to the bay and not have remote workers? Will YC work with VCs to eliminate their insistence of companies moving to the bay?
Any methodology for a foreign startup to raise in the US? Still hard for now! @sama
Where are they going to? Is it fleeing all the other big cities also?
Would love to see a percentage breakdown of where they return to. Presumably places like Austin, Portland, Seattle, NYC, Chicago, etc. But I imagine we'd be surprised by some of the results.
You might also be surprised to know that most of them don’t stay in any of the US countries you mentioned but outside US..
Cities. But surprising, but I'd expect US is 70% at least.
This doesn’t make that much sense. It’s expensive to move and recruit talent to move elsewhere.
Doesn’t this effecticely mean that you managed to successfully scale YC (and Bay Area mindset) beyond its geographical constrains? The area still benefits from the financial relationship and the knowledge even these companies are remote.
This is how we’re doing it 👌🏼
A sound option esp early on in order to maintain momentum. I wonder tho at what size does this towards a more centralized approach.
Another pattern we’ve seen (and had luck with) is top eng talent trained at SV companies that no longer want to live here. Big arb for projects that can manage distributed teams.
I get more and more inquiries of startups wanting to build engineering teams in Colombia lately, 2017 sounds about right.
What about startups outsource the development of the MVPs? It's now VC guys’ good joke that founders gotta have their dev team burning the cash before any business could happen. Back in days VC guys were so serious about this. Isn't it?
You don't need to burn cash to build an MVP. If you do, you haven't built an MVP. Owning and being able to control/change your product rapidly is super-important.
Yup. That’s the plan. And after years of experimenting, we think this is entirely possible.
Many YC companies have found a home in Guadalajara. This model makes sense not only because of burn, inmigration, common values and a reasonable market for testing/developing a platform. @boletomovil, @skycatch, @carbonrobotics, @Unima_ , Sunu to name a few.
Or when after a decade of denial VCs finally realize the obvious: it makes a lot of sense to build distributed startups.
It’s called a ponzi
Is Upwork also distributed?
400 people in 3 offices. 1,000 people working from home / anywhere. So more of a hybrid like Basecamp, not totally office-less like Automattic.
Cc @somakc per our convo the other day...
This is our approach and works a dream 🙌
I work for a company based out of SF with 90% of engineers remote.
How is looking for miniorites out there.. have you seen a improvement?
I agree and think we will see a continuing trend of non centralization in any one City, etc
It will be, but probably we won’t see it
Chiangmai felt like Silicon Valley Thailand with spots like @punspace
Quit trying to make $10B. Start trying to save 7B. Here's our little piece of that.
Full Circle Filament - Pitch Deck
decacorn is the new unicorn.
Agreed. There will also be startups with “hybrid growth” by starting elsewhere, then opening a Bay Area office to tap into key talent. Birmingham, AL-based @Shipt followed this model. Launched in 2014, SF office in 2015, acquired by Target for $550M in 2017.
You just gave me my startup goal. 100M for our startup would be a great achievement and doable
I hope things are changing. A common conversation with investors for startups in Reno/Tahoe goes something like "we won't even consider funding you unless you move to the Bay". It's a catch-22; when and where does the equilibrium change? 😐
It is hard to find talent outside of SV that worked in SV. Promoting the idea that SV has some type of lock on this stuff is no bueno.I personally have work with people from up there that are "elite" ..truth be told. Not so much. I can't extrapolate that to everyone but nor can u
But these are things that are starting to buck up against quality of life - access to quality schools, recreation, affordable housing, etc. Money flows and will follow talent to new clusters.
Situation in the Bay Area makes remote work obvious —especially in tech b/c of: - higher tenure for people - better access to talent (bigger pool) - lower costs of living Access to VCs is not as hard anymore: they're used to remote/travelling, they understand it better now.
Maybe it's not as bad for US startups, but I witnessed my Ukrainian friend having troubles raising in SV while having $1M ARR. While SF-based folks get money easily based just on team and idea.
Bay Area NIMBYs think they are protecting their investment but they’re slowly corroding the economic competitiveness that undermines their home values
It is not just google/fb. They have profitable businesses. It is the other startups propelled by vc money who have to yet encounter the gravitational reality of operating a real business that make it hard for other startups in the area who are trying to operate rationally.
So why aren’t more startups trying to help solve these problems and help make the Bay Area an attractive place to live/work ?
I’d like to add overall competition for talent as well. Not just from the juggernauts like FB/Google.
This is exactly why we moved our company from SF to Fargo, ND. $1M in funding can buy you about 5x the runway here - which is more likely to survive long enough to succeed?
Hi, what are the other locations you’re seeing? Thanks!
An interesting problem we're facing. It's also much easier to recruit talent in the bay area. Travel for CEOs to meet with investors is also expensive & time consuming. Chatting with a fellow CEO at JPM this year ~ he said he spent over 100K a year just to be in SF for meetings.
For a small start-up that's a meaningful amount of cash. Also with a small team it's difficult to be gone ~ it's nice to be able to have coffee with/ pitch an investor in the am & meet with the team the same afternoon. I'd say once a Co. isn't relyant on VCs is the time to move.
That’s not even the cost of a junior in the software word. Sounds like a big number by itself, but a very small number in the context of a company.
it's a lot of runway for a cofounder living lean themselves (~2-3 years even with current bay area CoL).
In that case it is unlikely that you need to fly to SF every week from somewhere else
if you hire employees elsewhere (more affordable) and mostly work in-place with your team, then flying to SF from elsewhere to meet investors becomes a thing you have to do
The poin I was making is that VC SF money + living lean + small team elsewhere + going to SF each week and spending 2k each visit are an unlikely combo of circumstances
they can still be a sequence -- small team elsewhere + living lean + going to SF each week --> leads to SF VC money; happens quite often. and going to SF each week becomes a costly but necessary part of moving to the next step
Since the 90s, it's been hyped that we'd be in a virtual world where location was irrelevant.
Just for him or him + team? If just him that seems like excessive spending
It does seem excessive. He did have a long way to fly + hotel + local transport etc.
Totally. But that’s even more than me and my fiancé spent yearly living in downtown SF with two dogs!
Definitely seems excessive - At about $1k per trip (assuming domestic - this is what it worked out to for me), that’s 2 trips every week?!?! Which doesn’t make sense. Clearly something unique to his/her situation that I’m missing
Right - He wasn't based in the US so that, I am sure, is part of it. He could have exaggerated as it was over drinks and appetizers. But he was clearly frustrated and it was in the context of discussing additional expenses that occur when a company is moved from SF.
Easier to recruit talent? I though there was a major shortage of software engineers and the ones around are way over market cost. Am I off base?
Ah - My industry is biotech + optical engineering & a dash of software. SF has 3 top-tier universities within 30 min, two more within 1-2 hrs. LLNL is just 45 min away. It's is a major biotech hub, not just software. That said our 1st software eng. turned down Tesla to join us.
One of the rarely discussed benefits of both being in the Bay Area and/or being in YC is the ability to quickly access and onboard a network of early customers. This is hard to do in many cities without some sort of tie to a network of companies open to working with a startup.
That’s right.
This is true but unless the Bay crowd is your optimal customer demo it can provide a false positive for when trying to expand out.
This is the most obvious difference between building in Stockholm and SF, easy access to lots of enterprise customers in the Bay Area! Mainly b2c and smb unicorns from Stockholm.
for your digest
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I would challenge the assertion of 'cheap seed funding' post 2016. See very recent posts from @fredwilson @avc and @mdudas
I'm noticing more startups taking the “pre-seed” approach too.
What’s that
LA's pretty great for hardware, way more mechanical / aerospace / manufacturing engineering talent down there, but I suppose for software startups the bay is probably still more concentrated. Real estate and salary burn is a big hit up here. Cost of living sucks.
VC's need to get out of their comfort zone. Not every Goliath is going to come out of your hometown, eventually you'll see a divestiture of talent from SF as the cost of starting becomes prohibitive. Way easier to have a family / american dream in Portland, Seattle, LA, Austin.
It's strange to me that bay area VCs haven't become massive YIMBYs to cut labor costs
They all own real estate.
they are in the sense that most are pro immigration and are interested in lowering housing costs. but they're not in the sense they don't want major increase in corporate taxation or other means of income redistribution which allows a place to become affordable
I can't think of a single VC that has done anything public to repeal laws that prevent more housing from being built.
vc's tend to not be activist about these things
VCs I've met in the valley don't care about the American dream, family, etc... they just want returns. They're perpetually living in comfort zone, but perceive themselves to be under threat due to having a car 6 months older than friends and rivals..
What are your thoughts on top 3 places for startups if not looking for seed funding? We’re going with “decentralized & nimble” as we build out.
Come to the Triangle. Austin is great too.
The Triangle is awesome 😎
What’s that
Raleigh NC area
I lived in the triangle for ~5 years. It was still a very quiet place except for a little noise in Durham and downtown Raleigh. No where close to bigger metros.
When does it start to be an obviously good idea for startups to build a remote company?
s**t** **l*e* FTW
Except for cannabis startups maybe?
There are actually several of those here in Denver. We were a market leader in that sector before SF for obvious reasons
Why not have more YC campuses other than Bay Area ?
has always been spot on about staying away from the Bay Area madness
But isn't that marred by the high costs of running a startup in the Bay Area that has sort of stopped effective usage of those cheap funds due to high OPEX
I live in Singapore. It baffles me why Singapore is equally if not more expensive vs SF. Probably no other city like this in entire SEAsia.
Is it housing that's expensive? I thought the govt has a locked in market on land usage, so it's cheap for permanent residents - but maybe my understanding is wrong?
No it’s not. Just couple of points. But bad really. Also since the population and market are only 5/6 million, there is no large market for businesses.
Well I would also say that a lot of the proof of concept software that is built by SF startups is only geared towards SF techies so that market is also like <2M ppl 😂
Sounds about right. 2014 it was still considered counter-consensus to point out that 50%+ of seed LPs money goes straight into Bay Area real estate via offices and housing... cc @balajis
It's really great to see most seed funds in the bay area taking international founders more seriously because of this.
it’s been a lot of fun digging into the different states, cities, and ecosystems to learn about the specific benefits they offer founders — typically related to some industry or vertical. we are learning a ton about cities all over the country w/ @upsidefm
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the startup investment landscape is changing, and world-class companies are being built outside of silicon valley. we find them, talk with them, and discuss the upside of investing in them.
This is true for other big cities. If London won't create a £10B+ company, it's still inefficient use of capital by employees and founders to base there, raising price. Super interested in the companies helping build distributed orgs in 2ndary cities. That revival will be great!
We are seeing this now in Downtown Kitchener with Square, Faire and Bunglow. Terminal helps this happen. Very cool.
The foremost reason for startups to being there in the first place was because VCs required them to be there. Has that changed?
Why is the Bay Area bad for statups? It's the most supportive and informed culture for startups in the world, no?
I'll be the cynic: Maybe other cities' councils are *glad* that startup culture doesn't happen there because of the inflation it causes in the local housing markets (and the social issues and housing spiral that causes).
I've a feeling I'll be eaten alive for that suggestion. ;>
Still not seeing it. In Israel, possibly the top startup hub outside the bay area, legit founders fight hard to secure a $2m round A that in the bay would've been trivial (and probably $5m) for a similar company