Many of you have probably read by now that I am returning from Austin to my roots in Atlanta. This will not be a personal essay about that move, which is motivated by family and opportunity, but it does give me reason to address the decision process about where to locate your startup.
Even in the early Peachtree Software days, the decision to build our company in Atlanta was not made without some careful consideration. I knew there was a Friday night poker game in Silicon Valley where all the software pioneers were getting to know each other and helping shape the industry. Deals were getting done there. The leadership centers of the microcomputer world shifted from Albuquerque to the San Fernando Valley (LA), the Bay Area, and Seattle. I believe we had as much firepower as any of our peers, but we were in the hinterlands working on products not very exciting but indeed very useful. Who knows what would have happened if we had joined the West Coast gang and been omnipresent during that formative era? As it was, we were flying out there nearly every week anyway. But, all of our leadership team had families; I had a wife in medical school; we were just old enough to have developed constraints around our lives that would have made such a coast-to-coast leap really difficult. IBM made us more central to the action when they launched the PC from Delray Beach, Florida, but, with only accounting software and the Hayes modem, Atlanta was not on the industry’s weekly must-see list. Oddly enough, our one primary competitor was in Austin, even more out of the way at the time.
Prior to Peachtree, my first job out of Georgia Tech was with AT&T’s famous Initial Management Development Program (IMDP). That was in itself a very hands-on advanced degree in business. I could have stayed and prospered there, but I’d have moved more or less yearly and eventually ended up in NJ or NYC. All my colleagues tended to live in the same “Telco Heights” areas of the cities of the year, and their personal networks were contained inside Ma Bell. There were great careers on that path, but part of becoming an entrepreneur and controlling my own geographic destiny not only was easiness on my family but the ability to accumulate a lifetime of service to my alma mater and other community affiliations. Choosing a corporate path is a personal decision, and I’ve had many people who did so tell me how much they benefitted from the frequent moves and changes of scenery. I’ve changed scenery only once – to Austin for 7 years – and that because my children introduced me to the city by graduating from UT, and I do now appreciate first-hand how that broadens one’s perspective.
My primary recommendation, however, is that if you have made the leap to being an entrepreneur and your family has bought into the idea, where you locate your effort should be viewed as a critical decision. It’s one way of de-risking the business. If you are a qualified candidate for a prominent accelerator or incubator program in your field of interest, and, if you get accepted, you should go. That may not mean a permanent move, but you have to be willing to immerse yourself for months with like-minded founders in a setting that provides added value to your venture. Accelerator programs are becoming more and more vertical and pulling together corporate and institutional support that provides investment, purchasing power, and validation. You’ll be years ahead of plan if you surround yourself with such knowledgeable and energetic resources instead of going off to a beach to work on your idea. You will gain a major advantage by watching peers in your space develop their business models, and you’ll be able to commiserate with those who speak your language. Never underestimate the potential of sharing your foxhole with others fighting the same war. And, never underestimate the advantage of winning battles in a setting where they are acknowledged by your ultimate customers and where you personally can become a hero. That’s how you earn access to the powers who will make or break your venture. And, that’s how you attract capital that is most likely to understand the problem you are solving.
It’s not always easy to “break in” to a new community. I’ve attended churches like that, where the founding families were a class above the newcomers. If you weren’t a third-generation member, you were less likely to advance in your service to the Lord. Tech communities have similar pecking orders, and some are more accommodating that others. I must acknowledge that Austin is probably more welcoming than almost anywhere else. It’s easy to get to know people and easy to get involved in purposeful activities. With modest effort you learn all the Longhorn cheers and songs and the Horns Up hand gesture, buy your burnt orange wardrobe, and blend right in. Doors will open for you, and whatever service you provide will be acknowledged. It has a diverse community of creative and technical types and an extremely vibrant startup scene. But, it’s not a town to know and gain access to corporate America if that is a key component of your business model. You have to chase Fortune 500 customers in places like Dallas, Atlanta, LA, NY, and Chicago by clever sales and marketing if you want to maintain your base in laid-back Austin. It can be done, especially if you attract the right investors who can share their relationships with you. But, if, for example, your primary customers might be Lowe’s or Home Depot, I’d think hard about locating in either NC or GA and lurking in the shadows of their headquarters, even though Home Depot does operate an analytics unit in Austin that it gained via an acquisition.
Keeping in mind that entrepreneurship is never a solo endeavor, it’s wise early on think about where you can best grow a team with the skill sets that will make your business successful. You want to offer your best recruits not just jobs but the opportunities to establish careers, even if those careers ultimately play out at other employers. If you are working in a particular sector, e.g. fin tech, go where there’s a pool of potential colleagues who already understand the basic technologies, know the layout of the industry and who are the players, have a demonstrated interest in the mechanics of that world, need no learning curve to become productive in your shop, and can help you fill out your team through their own personal connections. Attracting people to careers means providing a life style that is enjoyable, access to peers with similar interests, and accommodations for families such as schools, entertainment, and an affordable cost of living. You might fill a few jobs at the beach, but you are unlikely to create a workforce with the long-term staying power to scale up your company.
Proximity to a major research university is a huge plus as well. The two I know best, GA Tech and UT Austin, are churning out technically advanced graduates, conducting research across a broad spectrum of areas that might add value to your mission, teaching entrepreneurship enthusiastically at undergraduate and graduate levels, and attracting corporate sponsors to the community. They have associated incubators and accelerators across multiple disciplines that have successful track records; in both cases they have created a fertile environment for private incubators that further add to the heft of their respective technology communities. They also add immensely to the quality of life in terms of career building as discussed in the preceding paragraph, even for those who are not football addicts. Their support for entrepreneurship is by no means limited to engineers and computer scientists; it’s now spread across the liberal arts, basic sciences, and biomedical units as well. What better hunting ground could you find for human resources, assistance, and the motivating factors of being part of a community of achievers?
Where does cost enter the equation? You are, after all, attempting to run a business. Even though it’s incredibly more expensive to live in Cupertino than Austin or Atlanta, you may well have an idea that is most likely to get funded out there and for which the skills you need are more readily available. I have heard any number of business leaders with offices in CA say they get what they pay for in terms of the incredibly competitive work ethic there. You may just have an idea that deserves to be executed in that environment. If your goal is to star in the movies, you’d certainly punch your ticket in Hollywood and New York, right? There are startups that need to integrate themselves into the Valley culture for a host of reasons, and, if yours is one, go for it. You’ll never save your way to a successful outcome; managing operating costs becomes your focus only after you have proven you can develop a product or service for which there is real demand.
It will be interesting to see how Amazon’s decision on HQ2 plays out. They have the scale where the cost analysis really matters, and they have lots of money being thrown at them by eager states and cities, but apart from those raw calculations, you can be sure they will consider all the factors recommended above. I hope someday they reveal the elements of their decision matrix. We’ll all be able to take lessons from that.
I have nothing against the beach, or the cornfields, or the Appalachian Mountains; they have many lovely towns with fine people. But, if you are serious about being a successful founder, your decision on location will speak volumes about your ambition and your intentions.