Silicon Valley is paradise for late stage startups: tons of investors, the highest concentration of experienced talent, and entire cities built around scaling massive companies.
But it’s these same advantages that are actually disadvantages in the early days of most startups. To understand why Silicon Valley might actually be the worst place to start a startup but the best place to scale a startup, let’s first define what a startup is.
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.
And it’s in these very early days, before a startup has found that repeatable and scalable business model, that it’s critical to talk to users and build something that they want.
Not to raise money. Not to bulk up the organization with expensive talent. Not to start scaling.
In fact, I’d say that premature scaling is the cause of death of most startups and why the mortality rate of startups is so high. Its symptoms include running out of money, blaming timing, and unit economics which just don’t work.
Unless your market is tech companies or high income tech workers, the best place to find them is not Silicon Valley. I’ve found from talking to dozens of local business owners within Silicon Valley that they’re actually more averse to working with startups than usual because they’re constantly being asked to try startup products. And consumers in Silicon Valley are not representative of the general population.
Silicon Valley is also famously expensive. Expensive housing, expensive offices, and expensive talent – double almost anywhere else. This is usually fine after you’ve raised tons of money post product market fit, because the exponential payoff of the company succeeding can be way greater than the incremental addition of expenses. But it’s disastrous beforehand.
Because it shortens runway and breeds a culture of people quitting early stage projects to work on startups that are ready to hyper-scale. Employees in this environment choose startups based on perceived value increases of their equity, not doing the hard work of finding a model that works.
But what about the benefit of having the highest density of local experts?
The latest generation of media has spread this benefit globally. All of the top venture capitalists and startup founders have dozens of readily available interviews and videos and blog posts books online. You can study those to absorb those lessons on demand. That’s way more efficient than the old way of trying to live near them to synthesize the best practices of building a startup.
Literally all of the best knowledge of Silicon Valley is now available to everyone between YouTube, podcasts, and Amazon books.
This isn’t to say that Silicon Valley doesn’t have any benefits. It certainly does.
But most of their value can only be capitalized on after reaching PMF and being ready to scale. Before that, those vitamins digest like poison.
Because Silicon Valley serves as the best place to scale a startup: financing, top talent, and valuable advisors shooting to the companies ready for them. A startup is only ready to scale, though, once it has validated product market fit.
The companies not ready to scale bear the same costs to watch their talent defect to those that are. They get distracted with trying to signal success instead of building something people want.
So, if you’re building a startup with global ambitions that has a proven and repeatable model, Silicon Valley might be the best place to be. Otherwise – save money, retain talent better, buy yourself more runway, and iterate your model outside of Silicon Valley until it’s time to scale.