When launching a venture, an often-overlooked decision factor is geography and the impact building a company in a specific location can have on future growth. Many entrepreneurs simply build where they live out of ease, or look to the Bay Area as the "do or die" place to be.
Ultimately, those options may lead to the right outcome, but as with every other core decision, a rubric and serious thought should be applied when deciding where to build a business.
1. Ask "why here?" and identify a core competency.
Every city has a competitive advantage of its own. It could be access to capital, density of startups, cost of living, or even an industrial density. For example, New York and Houston make a lot of sense for fintech and energy startups respectively.
Make sure you know why you’re building your company where you are and evaluate other potential locations.
2. Make sure it’s sustainable for your company.
Additional geographic factors — like costs, access to capital, or access to talent — may make some locations unsustainable or significantly increase your risk factor. This doesn’t mean pick up and move, but it’s important to know these factors up front and apply that information when deciding where to build your business.
3. Make sure it’s sustainable for YOU!
Seattle may be the best place for your company due to a competitive advantage, but if living there is something unsustainable for you or your family then it’s a poor choice. Entrepreneurship is a very long road, so it’s important to set yourself up to stay motivated for years to come.
Personally, I started Travefy — an itinerary management and client communication platform for travel professionals — as a student at CBS. The tri-state area had always been home, however, previous work experience as Senior Policy Advisor at the U.S. Small Business Administration took me across the country and opened my eyes to other entrepreneurial ecosystems. Many of these ecosystems had strong technical talent from local universities, ample investor resources, and robust government incentives to foster job growth.
At that stage, Travefy was focused on consumer sales, so a targeted sales geography was irrelevant. Conversely, talent and costs were paramount. Leveraging these experiences and personal networks to access other ecosystems, I ultimately recruited my technical co-founder and built up our initial team in Nebraska.
This has been a winning decision that has enabled us to recruit strong talent and stay competitive with a cost basis less than half of what it would be in the Bay Area or elsewhere. Moreover, we’ve benefited enormously from local incentives like state grants and state investment funds.
Even now as we’ve expanded back to the East Coast (where I’m now based) to scale business-to-business sales, this initial decision has been a critical factor in our journey.