Where is the best place to launch a startup company? Conventional wisdom is: NYC, Silicon Valley, and Boston. But is this answer right?
I’ve been thinking about this for years – first when I was a commercialization manager at a the University at Buffalo’s technology transfer office; second, when I lived in Boston commuting over an hour each way and working in venture capital finance and intellectual property law for a massive, soul-crushing international law firm; and third while working for a NYC-based tech company to help launch a startup focused on inventory distribution, media, data and analytics in the hospitality space.
I think the conventional wisdom is wrong – for five reasons.
#1: Better Use of Cash Resources. I’m about 50% Scottish – which means I’m genetically predisposed to being tight with money – so when we signed a lease for Manhattan office space in 2010 for $80 per square foot (that escalated to $100 over the five-year lease) I cringed mightily. It was nearly $1 million per year spent just in real estate. The company was growing rapidly and had money to burn, but I argued – and lost – that we should find space elsewhere – my point: wouldn’t that $1 million be better spent on R&D, marketing, or really anything else that generates revenue? I’ve met many startups in NYC that didn’t have our company’s cash-generating capacity and they still spent massively on real estate – and I wondered: what are investors thinking? We’d need to sell 200 data subscriptions to just cover the lease cost. That’s staggering! I wouldn’t want my money spent that way. Upstate NY? We have office space for $10 per square foot – 90% cheaper – or 20 data subscriptions – much better. This includes top-notch co-working and incubator spaces like NextCorps in Rochester, NY that just opened a premiere incubator space in the renovated Sibley building. Another great spot is the Troy Innovation Garage in the Capital Region. UVC has collected dozens of expense-saving spaces to help launch a startup, which can be viewed on the UNY Ecosystem Map.
#2: Global Talent. One of the main reasons our company (and tech startups in NYC) spent so much money on real estate was to attract talent. If you have a nice view of lower downtown and glass walls surrounding your conference rooms – so the thinking goes – you’ll get the best employees. And to be truthful – I liked the midtown office we had in NYC. It certainly impressed me. But it always struck me as ironic that our chief software architect lived in Florida, the chief UX designer lived in Baltimore, its head attorney – me – lived outside of Utica, and many other of its top employees didn’t live in NYC. They were spread across the country – and eventually the world. We spent almost all of our time on Skype. Don’t get me wrong – in person is better – but how important is being in NYC’s midtown when you can have the best employees or contractors anywhere with just an internet connection and occasional in-person meetings? You can easily have the same global talent pool as an Upstate NY startup – just buy a subscription to Slack. Or better yet – show the potential employee what they can buy for a house in the Utica area compared to Silicon Valley.
#3: Loyal and Cost-Effective Talent. While I started as its head attorney, I quickly became the company’s handy-man – working on product and business development among many other tasks – because we often didn’t have many positions filled – which is the second irony. You have a headquarters in NYC because you want access to NYC’s talent pool, but can you keep that talent? There isn’t a lot of company loyalty. All your employees go to the highest bidder and so there is a constant revolving door (and escalation of costs in hiring new talent to replace the old talent). Upstate NY has talented employees – especially in customer care and other operations roles – but because the cost of living is a fraction of other places, they are happy with far less pay – and, while there is no “loyalty” metric, my observation has been Upstate NY employees are far more loyal to their companies. Plus, in a recent survey conducted by Upstate Venture Connect and John Zogby Strategies, findings show CEOs of Upstate NY’s high-growth companies are paying their employees more than Upstate norms. Download the full report here.
#4: An Eager-To-Help Startup Infrastructure. In Boston there are “open hours” at incubators where anyone can come in and discuss their ideas and get advice from venture capital and law firms for free – and I often would represent our law firm. Talk about a zoo. It felt like we were on the aft deck of the Titanic as it made its final plunge into the water and there was only one life boat remaining. Lines of people waiting and jockeying for position – net/net: you’re a dime a dozen. In Upstate NY there is an unsurpassed group of mentors, community supporters, networks, and incubators – like UVC’s UNY50 Leadership Network – successful entrepreneurs, investors and corporate professionals who are eager to help you succeed. You’ll feel like a star.
#5: Under the Radar. Want to avoid scrutiny while you test your concept? It’s a common practice in Silicon Valley, Boston, and NYC to be in “stealth mode” at the early stages of a startup so that competitors (or potential competitors) don’t see what you’re doing – and so that if you fail, no one notices. That’s almost impossible to do when you are in Silicon Valley. In Upstate NY no one will be looking for you until you are ready to be noticed so you can test your concept and grow under the radar before you launch your global conquest.
Justin Call is a Legal Counsel for TRAVELCLICK; CEO of Go Figure and Founder of idoolocal. Share your comments with Justin and the Upstate ecosystem by offering other reasons why Upstate NY is the best place to launch a startup.