Silicon Valley Is For Scale (Not For Search)

Silicon Valley is paradise for late stage startups. Tons of investors. The highest concentration of experienced talent. An entire region built around scaling technology companies.

But these same advantages are disadvantages in the early days of most startups. Silicon Valley might actually be the worst place to start a startup, despite being the best place to scale a startup.

To understand why, let's define "startup."

I like Steve Blank’s definition:

An early stage startup is a temporary organization designed to find a repeatable and scalable business model. Everything is uncertain in the early days: the product, the customer, and the business model.

In those very early days, it’s critical to talk to users and build something that they want.

Not to raise money. Not to bulk up the organization with talent. Not to start scaling.

Premature scaling is the cause of death for most startups. It's why the startup mortality rate is so high. Symptoms include running out of money, blaming timing, and having unit economics that just don’t work.

If your market is tech companies or high-income tech workers, you can find customers in Silicon Valley. Otherwise, you need to find customers elsewhere. For example, imagine you're building a product for local business owners. I've spoken with hundreds of local business owners within Silicon Valley. They're more averse to working with startups than their counterparts in other places. That's because they’re always being bombarded to try startup products. You'll see a similar problem if you're building a consumer product. Consumers in Silicon Valley aren't representative of the general population.

Silicon Valley is also famously expensive. Expensive housing, expensive offices, and expensive talent – double almost anywhere else. This might be fine after you’ve raised lots of money post product/market fit. But it’s disastrous beforehand. High operating costs will shorten your runway. Silicon Valley is also plagued by a culture of people quitting early-stage projects to work on startups that are ready to hyper-scale. Employees in this environment tend to choose the startups that will deliver the most rapid increases in the value of their equity. But it takes hard work, and years, to find a model that will deliver those results.

But what about the benefit of having the highest density of technology experts?

The internet has spread this benefit globally. All of the top venture capitalists and startup founders have posted dozens of interviews, videos, and blog posts. You can study them to absorb those lessons on demand, from anywhere in the world. That’s way more efficient than the old way of trying to live near them.

This isn’t to say that Silicon Valley doesn’t have any benefits. It does.

But most of that value becomes available after you find PMF and are ready to scale.

The companies that aren't ready to scale bear the high costs of Silicon Valley, only to watch their talent defect to those that are ready. They get distracted trying to signal success (for status within the tech world) instead of building something people want.

So, if you’re building a startup with global ambitions that has validated PMF and is ready to scale, Silicon Valley might be the best place to be.

Otherwise – save money, retain core talent better, focus on customers, and buy yourself more runway. Iterate your model outside of Silicon Valley until it’s time to scale.