Why you don’t have to raise where you scale.

Denver Colorado

I have always been a “why” person. As a kid, it was “Why do I have to wear pants?”, “Why can’t I put this in my mouth?”, “Why can’t I live in a fort in the orchard?”. Now that I’ve matured and become a responsible adult, it’s questions like, “Why can’t I put this in my mouth?”, “Why do I have to wear pants?”, “Why can’t I live in a fort in the orchard?” and also, “Why do I have to stay in the Silicon Valley if I move there to build a company and raise money?”

Visiting California recently and talking to friends in tech ultimately led to me moving to California to raise money and stay in the bay area for a few years. Why? The Silicon Valley is the center of the tech universe. Projects, people, and ideas move faster here and the funding is ridiculously skewed in support of that momentum. While the cost of living here is tremendous, it’s worth it as a founder to spend the money to ensure early success through brand awareness, proper capitalization, and initial hiring. All of this is straightforward and expected. What I didn’t expect was the often strong and negative response to the idea that I intended to stay in San Francisco for a few years and then move.

There’s a disconnect between trend, conventional wisdom, statistics, and common sense here. Due to cost, the current trend is for companies to move out of the bay area, or build companies from the ground up in other venues like Boulder or Oklahoma City. Conventional wisdom says that moving to the bay area leads to becoming entrenched in its culture and methods; plus the money is here so why would you want to leave? Statistics say that while starting in the valley or growing an early company here is crucial, being here long-term may actually be counter-intuitive. Common sense says that if money is critical for growing and scaling a successful startup, and the valley is the best place to do that, then you spend your early years in the valley. Common sense also says that if scaling in the valley is hard and getting more difficult by the day, then you should move out when you’re ready to really scale. So why the disconnect?

Simple. What used to work became “what’s always worked”, became tribal knowledge, which led to the “processing fluency” problem. We see what we want to see because our brains want to take the path of least resistance. When a culture begins to prove successful growing and funding startups, commonly held beliefs quietly become rules for those inside the bubble. And, for those outside the ecosystem looking to break in, those inside the system become the gate keepers; their mythos becomes the only “truth”.

Because it “was” doesn’t mean it “is” or that it “has to be”. This statement is simple but powerful. Those in the valley and those becoming a part of its culture need to be willing to look beyond what has become “common knowledge.” For me, this means I will move to the Silicon Valley, raise the money we need to thrive and reach escape velocity, round out a core team, and complete critical, early tasks – in our case the next round of prototyping. Then we’ll move out of the valley to a place like Denver where the long-term cost of business and living is lower making scaling faster and easier. We’ll make our course known so others can follow and be successful; I see the bay area as a necessary stop in the growth journey not the final destination.

Finding a fit with investors conceptually is critical; They must be willing to stretch their understanding of what it takes to be successful and not be gridlocked in the requirement of remaining in San Francisco or the surrounding area. Finding a good fit will take time but in the long run reduce friction and increase speed. Bringing people into the fold of a company that shares the core vision is a requirement to increasing efficiency. It’s also a commonly held belief among founders that making a “yes” as easy as possible for investors is critical. While generally I agree with the notion, I do believe there are limits. Getting an investor to a quick yes by allowing them to believe something that isn’t true or by compromising the direction of the company doesn’t serve anyone. A quick yes may be a stumbling block long term.

You aren’t going to change anyone’s mind soon enough to matter. This is a hard but significant lesson to learn. If there’s a difference of opinion over something critical like whether remaining in a geographic location is a necessity, move on. Debating an investor’s point of view is pointless. Thank them for their time and move on to someone who is at least open to your perspective. Bring in a critical investor that shares your vision and use them to attract others like them. A solid lead investor is a signaling device to other investors that working with you and your company makes sense; so send the right message to the market.

I absolutely think it makes sense for a tech company to spend its first few years raising and growing in California’s bay area. I also think it’s critical to the scalability of a company to get out of California as soon as possible. Raise –> Hire –> Grow –> Complete critical early tasks –> move –> scale. That’s the process that works for us. Whether you agree with me doesn’t matter. Whether this method works for you doesn’t matter. What matters is that you should consider not having to stay in the Silicon Valley. What you should do is find investors that align with your vision and mission. Don’t “yes” yourself to a series of roadblocks.

Strava Photo courtesy of: Strava Blog

Strava Blog post on expansion to Denver Here

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