Getting to Initial Scale

Faking Being in the Bay Area (In a Good Way)

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Jason Lemkin

There’s an endless and lively debate about the advantage of being in the SF Bay Area in SaaS.

I’ve done 22 investments.  The vast majority got started outside of SF, and all but 2 moved here.  I’ve invested in founders from Paris (3x), Estonia, Portugal, London, Sweden, Belgium, Washington D.C., Chicago, and more.  I used to be dogmatic.  Now my learnings and views are more nuanced.  I’ve boiled it down to this:

  • You can build and scale great software in any Center of Excellence.  In Paris or Stockholm and certainly in New York and London (of course) and Seattle.
  • You can sell great freemium and SMB software from any Bigger City.  If your product can be sold by new grads, and folks that don’t really need to know how to sell enterprise business process change.  The more transactional the sale, the more it’s a tool (vs. a solution), the more sales really just is sales.

But …

  • The VP-level talent pool is far, far smaller once you move from Bay Area.  If you want a seasoned Director of Demand Gen or VP of Field Sales, there are 50x more in the Bay Area that have SaaS experience; and
  • In many cases, your partners are all here.  If you are in FiServ it may not be true.  But for most business process and developer/product-centric SaaS, your partners are in the Bay Area.  From Salesforce to Netsuite to Twilio to NewRelic to Google to Facebook-for-Work to Github and LinkedIn.  They are almost all here.  And you are at a big disadvantage later, as you scale, if you are out of sight and out of mind as a partner.

So to me, IF smb AND not hugely dependent on partner ecosystem, THEN any great city can work with strong engineering talent.

startups

But, IF enterprise AND bay area partner ecosystem is important, THEN not being here is a big disadvantage.  And for me, enough so I won’t invest unless at least the CEO is here, at least her.

OK so assume you agree with me.  But you live in Waterloo, or Seattle.  What do you do?

My suggestion — Hack it.  Pretend at least until you are $10m ARR:

  • Take an office in SF now — even if it’s just two desks.   Now.  Have an office here.
  • Spend a week a month here.  I know you don’t want to.
  • Attend the key events and meetings here.  I know you don’t really want to go to them.  But you need to be present.  AND
  • By far most importantly — the customers and partners need to feel like you ARE here.  Whenever they need you.  Even when they don’t.

Screen Shot 2016-06-03 at 9.26.00 AM

This last point is far and away the most important.  If Salesforce and your Top 10 customers in tech all think you are a Bay Area company — that may get you pretty far.  I don’t mean being misleading.  What I mean is you, and the relevant parts of your team, are here so often, and whenever necessary … that your partners and top customers feel like you are just an Uber ride away.

That’s hard.  But you can do it.  If you want to Go Big.  Find a way.

 

Published on June 3, 2016
  • Lotus

    No matter what kind of business, the most important thing is building a relationship with trust and quality of products/work/services.

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