Startups: Should I stay in Melbourne, Australia to create a startup or move to Silicon Valley?

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JASON LEMKIN

The cost of running a start-up in San Francisco is 2x Paris, London, almost anywhere. It’s really nuts.

So at the end of the day, you should only move to SF if the value of those increased costs are much higher than 2x. So maybe if you can grow 30–50% faster by moving to SF, you should (the compounding rate of that overtime will much more than double the value of your business).

But that’s hard to predict. So before you know for sure – when is it worth it? A few quick things to think about:

  • Are most of your partners and/or customers here? If you work with Salesforce, Facebook, Google, etc. … you should be in SF. You cannot built great partnerships remotely. Same if a plurality of your customers are here.
  • Are you doing true enterprise sales — bigger ($100k+ deals) that require a true sales process? I’d strongly suggest moving here. The talent base is much, much deeper. But you can sell a $19 a month product from anywhere with a good sales talent base (i.e., good colleges). Any major city. In fact, selling a cheap (e.g., up to $299/month) product from the Bay Area is probably a strategic disadvantage over the long run. It will probably put too much stress on your CAC if you have more than 10 or so SMB reps in the SF Bay Area, as you really go to scale. Early on it’s fine, though.

I actually don’t think engineering is a good reason to move to SF in and of itself, 8 times out of 10. Yes, there is so much great engineering talent here. But the level of competition is so insane. You are better off being one of the hottest start-ups in Waterloo, Boston, London, etc. Don’t move here just for engineers, unless you are hyper-funded and truly want to poach from Google and Facebook. In which case. Maybe do it.

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Published on June 11, 2017
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