There has been a recurrent question in discussions that I’ve had recently with potential investors, other web executives, and partners. That question is, ‘does an emerging tech company need to be in the Bay Area to have a chance of success?’?
There are two sides to this issue; the first is that there are several advantages to being in Northern California. There is an abundance of funding sources out there and they all seem to prefer to invest in the area. There are also a great number of tech companies already established out there so the opportunity for partnerships may be easier due to location. Finally, because there is a rich business base in tech there is an incredible amount of services and resources that are competing for mind and dollars of the tech community (note SEO/SEM consulting firms – there are only a few in Texas so they are in high demand. In the Bay Area there are so many that they are fighting for clients).
On the other hand there is also a tremendous amount of competition BY the tech firms for technical and marketing employees so wages are high and it appears that turnover may be a challenge there. The area also acts as a fairly ’small town’ so secrets are not so easy to keep. For example, last week I was at a popular Woodside breakfast place and it was very telling to see who was meeting with whom.
So… what does this mean for us at iTaggit? Well, over the next few months we are going to attempt to build a stronger corporate presence in the bay area while maintaining our base of operations in Austin. We have a fantastic, dynamic workforce and we need to develop the tech infrastructure for Web 2.0, 3.0, 25.0, etc. right here. We believe that we can combine the best of both environments to deliver a better solution for our users and a lower cost of operations for our investors. We’ll see how it goes and I’ll keep you updated as best that I can on my blog.
6 responses so far ↓
What’s wrong with Austin? « FoundRead // January 10, 2008 at 1:33 pm
[...] founder, David Altounian wrote on his blog recently of a question that many startup entrepreneurs have to [...]
cbgrace // January 10, 2008 at 5:43 pm
David, It’s like this…many of the hi-tech companies here in Austin source other big hi-tech companies, it makes sense for them to base out of Austin when thier biggest client is Dell and Dell is based here in Austin.
daltounian // January 10, 2008 at 5:53 pm
That makes sense for B2B companies that support the local companies such as Dell, AMD, etc. Does this also apply to B2C companies?
And for those companies that are founded to support the local big guys, how hard is it for them to expand their geographic reach?
My post isn’t to say we shouldn’t be in Austin – we definitely should – it’s a great city with a great workforce and quality of life. My post was due to a recurrent comment that I’ve heard from partners, advisors, and some VC that there is a difference between Silicon Valley-based emerging tech companies and non-SV companies. What, if anything, is missing?
Gordon R. Vaughan // January 11, 2008 at 1:46 am
Yeah, this is a question I think about a lot. Having lived in both Houston and Austin, the environments are fairly different yet both have a lot of plusses.
On the other hand the big minus – which to be fair is probably a big minus just about everywhere except Silicon Valley – is that people just don’t “get it.” This is perhaps less true in Austin nowadays.
Entrepreneurship, at least tech entrepreneurship, is far too intangible for the average person to see as an opportunity.
Besides, folks most places just aren’t opportunity-driven the way they are in Silicon Valley. Considering how cheap computing, bandwidth and so on has gotten, you’d think there’d be startups sprouting up everywhere!
Obviously, there’s still a lot of work to be done developing strong support networks even in big, pro-business cities like Houston and – dare I say it – Austin.
jreneau // January 18, 2008 at 1:27 am
David, I’ve run into the same mentality with MindBites. There is clearly a bias with bay area investors that you must be in the bay area to succeed as a web company. This feels similar to what I experienced while at FreeMarkets though, during the bubble. And during that bubble, and in the waning moments of this one, they may be right to some extent. During both of these bubbles, when the formula for “success” as a business meant having an innovative idea (not hampered of course by a business model), getting a lot of early adopter press, and then getting bought by one of the big players, being in the bay area probably is required. But to me, this version of technology more closely resembles the fashion industry than it focuses on long term business success.
It is hard to get some people to listen, but technology has always been a herd industry it seems, at least since the late 90’s. When the dust settles, the businesses that survive will be the ones that add real value to customers, work hard and smart, and grit it out. I fundamentally don’t believe you need to be in sf to do that, and in some respects I think being there would be a distraction.
To me, Austin is the perfect place to launch a consumer web company. It is a great place to live with a progressive culture, a solid technology base, and an eager and (relatively) inexpensive workforce. The only reason that Austin is not rivaling the valley in terms of consumer web, is the lack of a single home run, like a yahoo or google to start the beginning of a “cluster” (as Michael Porter would put it) around consumer web. It will come though. In the meantime, I will be happy to work hard with our great team, live in an actual house, and eat cheese enchiladas and margaritas 2000 miles away from the valley.
sandrar // September 10, 2009 at 8:34 pm
Hi! I was surfing and found your blog post… nice! I love your blog.
Cheers! Sandra. R.