Location Location Location? Maybe not...
Updated: Apr 16, 2020
The Search Experience works with seed to series-D hyper-growth technology companies, focusing on mid- to senior-level appointments within sales and marketing divisions. When we set up the company we based ourselves in San Francisco, because that’s where our customers were. And, whilst many of them still are, we’re also finding a growing trend for tech companies to move out of traditional hubs like Silicon Valley. We’ve hired team members in New York and have plans to hire more from outside of San Francisco. Our team travel frequently and continue to work remotely, without any drop in performance. We’re finding that dispersed and remote teams really do work.
But do tech startups still need to be based in Silicon Valley to be successful? A number of our clients are moving away from traditional hubs and finding great success in doing so. Qualtrics is one of the most notable to have significant success without a San Francisco base. Back in 2002 the company was founded in Provo, Utah, and it was from this base that they scaled and became a globally dominant force. The picturesque landscape and access to a strong sales workforce, previously untapped by major tech companies, proved ideal. Qualtrics are now part of a growing ‘Silicon Slopes’ community in Utah and they are attracting talent from out of state. They are just one example of a growing trend.
Los Angeles is emerging as a cheaper alternative to San Francisco, and with a better climate. Read here about our client FloQast and how they are a beacon for the LA Saas market. Texas is thriving, and its low state income tax rate means labor costs are lower than in Silicon Valley. Boston, with its lower cost of living, is a great alternative to New York and has a growing startup community.
Having worked with clients in and outside of Silicon Valley, I want to explore the key factors that you should consider when thinking about where to set up your business. It helps to think about who really needs to be where. It’s not just your sales force who can work remotely. Challenging traditional thinking about location, remote working, and how we use technology to connect with our teams, can lead to some surprising–and profitable–answers.
Where are your customers? What industry, vertical or customer are you targeting? And where are they located? Being near your customers helps–our clients are increasingly finding that being in their customer’s ecosystem, seen as part of their community and interacting with them on a regular basis, is more advantageous than being located in a tech hub where they are close to talent but far away from paying customers.
We’ve been working recently with OneRoom. OneRoom are disrupting the funeral industry using technology to bring families together in a time of need when geography is the biggest hurdle. They are primarily a software company, but they are pitching to the funeral service industry and so they are based in Houston, Texas. Houston is a major hub for US funeral service providers and OneRoom are finding this proximity really helpful. Not only are OneRoom close to their customers, but we’re building their team with recruits straight out of the funeral service industry. On average, a sales or marketing professional in San Francisco has between five and ten approaches for a new role each week; opening up other geographies enlarges your talent pool and decreases your competition. Which leads to our second question.
Where is your talent? Where are the people with the skill-sets you require located? People have historically viewed sales as being the role that can be remote–the travelling salesman–but when software sales are increasingly business-to-business rather than direct-to-customer (as customers expect free-to-use apps and services) this stereotype no longer fits. With the growth of collaborative technologies, it’s possible to give more flexibility to other roles–Finance, HR, Marketing, or Product Management, for example. In an increasingly competitive talent market, why not hire the talent where it is, rather than trying to bring everyone together? Fixed costs fall and flexibility for teams is maximized (see my business partner’s latest article on the importance of flexibility and independence for the newest entrants to the labor market).
Another client, Aeroqual, an enviro-tech company who use a Saas platform and cutting-edge sensors to monitor air quality across a broad range of industries, are growing their team out of southern California, because most of the environmental consultants for the West Coast are based there.
But what about tech talent? Aren’t your developers in Silicon Valley? Well yes, sometimes they are, but the rising cost of living in cities like San Francisco are making tech hubs like Silicon Valley less appealing, even for developers. Talent has historically been drawn to these hubs because that's where the jobs were, but as they become less attractive places to live and work, they will move if the jobs move. Certainly Qualtrics found this wasn’t a problem. Their staff found the quality of life in Provo far outweighed the benefits of being based in Silicon Valley.
Which states offer the most advantageous conditions? California has the highest state income tax of any state in the US, while Texas has no state income tax at all, meaning you can pay a lower gross salary in Texas and your team member nets more take-home pay. Combined with lower property prices outside of tech hubs, the advantages to moving out are clear. It pays to do your research and consider these factors. With airports now having a greater number of flights to a greater number of destinations, you can also bring your team together quickly and affordably when you need to.
From what I have seen, companies who are brave enough to challenge traditional thought processes and move away from tech hubs are finding success. Being located close to your customers can be better for your business, provide a better quality of life for you and your team, and allow cities like San Francisco some breathing space. Embrace remote teams and focus on making them work for you. You’ll find you can be closer to your customers, your talent pool is wider, and your teams are more effective.