Constant and rapid decision making is a fundamental part of any founder’s job description. If you run a consumer technology company, for example, should you focus on hardware or software? Is the best market for your product or service enterprise or consumers? Where are the revenue streams and can they sustain the business and continue to grow? Endless questions like these need to be answered quickly and efficiently in order to maintain the momentum.
Of all the decisions to be made within a startup, one of the most important – and potentially the most hotly debated – is where to set up shop. What city will provide you, as a startup, with the right combination of support, resources and exposure?
In reality, every location will have pros and cons but there are certain priorities which should be a primary focus when choosing where to establish yourself.
Be where your customers are
It’s incredibly important to be close to your customer base, though just how close is subject for debate. As a general rule, at the beginning of a startup’s life, they should share an environment with those who are in need of their product or service. If you’re a startup in India and your main customer base is Canada, then it stands to reason that you’re going to want to focus some operations in Canada.
Running a business half a world away is difficult logistically, but can also lead to a literal dislocation with a crucial market. For example, when an industry experiences rapid change, it can be difficult for a startup to monitor and respond from a long distance.
In the U.S., there are two main startup hubs: Silicon Valley in the San Francisco Bay Area and Silicon Alley in New York City. While there are other offshoots, these are the main honeypots for innovators and investors, and many entrepreneurs will at some point have considered or been advised to relocate there.
The old myth that you need to be in the Valley, however, is disappearing. Startups used to operate under the assumption that, in order to get customers, they needed funding and that funding was only available in Silicon Valley. Therefore, if they wanted to start a tech company they needed to do it there. This became somewhat of a self-fulfilling prophecy as thousands of startups began flocking to Silicon Valley, all competing for investor attention and gaining initial user bases which were, in truth, largely made up of competitor companies scoping out their products.
The reality of location
While there’s certainly something to be said for creative environments where innovative minds collaborate to spark further innovation, markets saturated with rival companies can be detrimental for new startups. These small, tight-knit communities are highly competitive and the top talent driving the development doesn’t come cheaply. For new startups, finding $200,000 for a developer is often more likely to suffocate growth than initiate it.
This fight for talent, as well as attention, and is why communities like Boulder, Colo., have become increasingly popular, and why Canada is fast-becoming a startup hotbed.
Location should always reflect the needs of customers, not investors. If your startup is a brilliant enterprise solution for Oil & Gas companies, Calgary is the place to be. If it’s a finance software, open your doors in Toronto, or if it is a consumer tech play, think Toronto, Vancouver, or Montreal.
Things to consider
- Canada has the amazing advantage of our location in general. Toronto and Montreal are short flights to New York City. Vancouver and Calgary are short flights to San Francisco.
- Startups don’t exist to make investors money. They provide a solution to customer pain points. Investor money is an added benefit; sometimes we all lose track of that.
- Understand where your target demographic is and start there. This is exponentially more important for Enterprise startups.
- Your business may eventually become national, or even global, but everything starts local.
Special to The Globe and Mail
Cameron Chell is the co-founder and CEO of Podium Ventures, a venture creation firm in Calgary that finances and builds high-tech startups.
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