Tuesday, October 10, 2006

Location, Location, Location for your startup

Just this week, I came across across startups all in the same space - offering a platform to host consumer videos on the web (yeah like youtube and Google video) namely metacafe, videoegg and iflim but whats fascinating is one more aspect they have in common.

metacast moved from Tel Aviv and Videoegg moved from CT, both to silicon valley where iflim and youtube are already based.

I decided to start my startup from Boston suburbs which was home for me and I had the comfort level to know the hiring market and believed I had my network.

I traveled through my first 140 days and raised most of my money from Silicon Valley. After I scaled my company to 10 people, I spent bulk of my time traveling to the valley as we were a Palm based company and Palm was located there.

Does location matter to a startup? Heres my take on it:

Bootstrap where you are most comforable:

You should startup where you believe your chances of success are high, in terms of your comfort level to build the core team, market validate and raise initial capital.
Boston is great for starting up because of the local colleges, most of which have a program to encourage interns with startups.

Disperse across geographies in today's global world?

In todays global world of technology, people are less tethered to their offices. We did hire coupel people from silicon valley and let them work from there. But I believe in the early stages, a cohesive team thats proud of a common vision is what really makes a company. Its common to build an offshore facility in India or Israel, but adding each location does add its overhead and there are the people aspect of communication and identities which comes right after say 8 people.

Build where it makes sense for the business:

Team: A company should be built where you can hire the core development team, and where you are closer to your customers.

Customers: So, if your customers are large financial firms, Boston or NY may make sense. Especially for large companies, its a relationship game of nurturing relation between the actual people working on the implementation in the company and the startup people.

Also, you can get a pool of talent with experience in that space if there are more companies in finance space nearby.

Funding: I find startups moving to silicon valley because there is more liquid money there. I think it makes sense to move there only if customers and hiring also makes sense. Yeah, some investors invest only locally, which is more true for early stages. I raised my second round $5million from west coast again. Yesh, I did meet VCs in Boston, NY and only those I had referrals into out of West coast. But I believe, geography of company should not be based only on investors.

To that argument, did metacafe raise $14million only because of their silicon valley move? Did videoegg move only to escape the noreasters? I believe they have moved to where they will be closer to their customers - large media companies, large web properties and ability to hire people from them.

As a kid, I have been fascinated by a narrow congested street in Chennai, India called "Ritchie street" which is full of small shops all selling electronic parts, circuits, chips etc. I got my dream to become an entreprenuer one-day as I walked Ritchie street looking to buy circuit kits to make a calling bell or a radio or the latest voice synthesizer chip to make a circuit. There is no difference between any two store there, but every seller is very optimistic. If a store didn't have what you wanted, they'd send a boy running to another store to buy it and bring it to sell to you -to own you as their customer. All of them being in the same place created a market, so we knew the one place to got for such items.

Maybe silicon valley has created that for net startups, and now videos, the fastest growing content on the web!


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TasteTV said...

A very interesting observation about "following the money" to its geographical source (from Kevin at TasteTV.com)

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