Being in Silicon Valley as a Founder – Pros and Cons

Many founders working on early-stage startups seem to want to move to Silicon Valley. The biggest hurdles are usually visa and money. But is moving to SV actually worth it? I’m not a SV veteran, I’ve only been here since 2008, but over the past years I’ve spent a fair amount of time living outside of SV. I believe this helped me gain some perspective on what Silicon Valley can and cannot provide to founders.

Common Misconceptions

Let’s first look at things that people believe to be advantages of being in SV, but which in my experience also have a flip side. I see these as not inherently positive or negative, but depending on your situation they may be worth considering.

Raising (seed) money is easy. It’s true that the amount of capital available in SV is huge, but raising money is not as easy as you may think (or as the press makes it out to be). One reason for this is that lots of startups are competing for the money. Expectations of what companies are required to show are constantly shifting. Manu Kumar has an excellent post on how seed rounds are looking more like series the A rounds a couple years ago. To have a shot at raising a seed round in Silicon Valley you better have a post-MVP product with traction and promising metrics. Having a pitch deck or an MVP without customers doesn’t usually cut it. So, SV is a great place to raise money only If you’re at the right stage.

Lots of events and communities. You can attend startup mixers, meetups, hackathons and pitch competitions all day long. You’ll have beers with founders who are usually looking for co-founders or trying to sell their product. In my experience going to these events is mostly a waste of time. The time is better spent building your product and talking to users. Also, don’t expect to meet any influential people at such events. Most of them are too busy to attend and have realized that there is little value to be gained. 

The best talent is in SV. Silicon Valley companies and famous bay area universities attract people from all over the world. True, but that doesn’t immediately benefit you or your startup. Sought-after people have dozens of excellent opportunities and you would need to offer something pretty special to attract someone to your company over the other gazillion startups out there. Expect to pay salaries or hourly rates that are 3-5x above the rates in other parts of the country (or world). You may actually be able to attract better talent in areas where people don’t have as many options as they do in SV.

Positives

Karma really exists in SV. I’m constantly amazed at how helpful people are, particularly those that I expected would be too busy to reply to me. I’ve asked favors of influential people who had absolutely zero reason to talk to me, but they still did. This is something that newcomers, in my experience especially those from a sales background, seem to have a hard time getting used to. They try to strike a deal whenever someone asks them for a favor. I think this culture is pretty unique to SV and I haven’t seen anything comparable in other cities or countries.

Selling to startups is easy. I often hear people discouraging startups from selling to other startups. I disagree. It’s bad if your total available market consists of startups only, but there is nothing wrong with having startups as early adopters and then moving upmarket. In accelerators like YC it’s extremely common that startups start out selling to the other cohort and alumni companies. There’s no better place to sell to startups than SV. Getting meetings is relatively easy, and companies are open to trying out and implementing new solutions, helping you to iterate quickly on your product.

It’s easy to relate to people. Living in other parts of the world I found it very difficult to explain what exactly I am doing to others. In some places I got tired of explaining and settled with “I’m an engineer and work for a software company” or something similar. Most people just aren’t familiar with the concept of a startup. In Silicon Valley you could probably strike up a conversation about churn rates with your barista (not that I’ve tried…) and she’ll tell you that she’s working on her own mobile app during break time. Knowing that people understand what you are doing is a very comfortable feeling. Not being able to talk to anyone about your problems can be quite depressing.

Negatives

High burn rates. Medium rent for a 1BR apartment in San Francisco is about $2,500 to $3,500 (source) and increasing. There are cheaper options, such as living in the east bay, but since almost all meetings happen in SF you would be commuting all the time. That time/money may be better spent on your product and commuting is among the most significant factors of work and life dissatisfaction. If you’re in the early stages and haven’t raised a big chunk of money then these are serious expenses. Startups are a marathon, and lowering your burn rate may just make the difference between making or not. The Airbnb story is a good example of this.

An influx of people who want to make a quick buck. Even in the relatively short time I’ve been in SV I’ve seen the crowd in SV change. Many of those who used to go into Finance are now going into startups hoping to make a quick buck. I’m all for more people getting into the startup ecosystem and bringing positive change, but it also seems like startups in SV have become a more hostile environment as a result. Legal disputes between founders and people trying to trick each other with strange non-standard equity clauses seem to become more common. As startups are entering mainstream media the situation will likely worsen, and SV is the place that will feel it the most.

High Pressure. At Stanford we have something called the “duck syndrome”. On the surface it looks like you are gliding along effortlessly, but in reality you’re vehemently paddling underneath. Talk to any startup founder in Silicon Valley and they’ll tell you how they’re “crushing it”.  In reality most founders work crazy hours and things aren’t going nearly as well as it may seem. But you’ll never find out about that. As humans we tend to compare ourselves to those around us. In SV this can lead to extreme stress and pressure. Founder depression is common and not to be underestimated.

For anyone who has made the move, I’d love to hear your experience.