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Startups: Get Creative When it Comes to Where You’re Located

By March 22, 2016Article

There’s often a perception in the startup world that you need to be based in Silicon Valley to succeed. This feeling has persisted despite other startup hubs popping up around the world in London, Toronto, Tel Aviv, Sydney, Bangalore and Paris, to name a few. Why does Silicon Valley continue to prevail as the ultimate tech haven? Perhaps because it’s still true … in part. 

If you’ve read the title of this article, you may find that statement counterintuitive; but it’s inarguable that Silicon Valley is the most robust startup ecosystem in the world. In Q3 of 2015, venture capitalists invested $7.9 billion in companies based in the Bay Area. 

Silicon Valley is not always the right place for every startup. Why? Because your company needs more than just funding, and there are other places in the world that can provide top talent and a fresh atmosphere. While startups for the foreseeable future will continue to look to Silicon Valley, considering your location options can be beneficial to your business success. 

Where’s the talent? 

Silicon Valley is known for having some of the best engineers in the world, and people travel across the globe to be a part of the action. However, with all of the existing technology that makes it easy to connect with colleagues no matter where they are, it’s not necessary for employees to relocate anymore. 

Many of the engineers working at the top startups in the Valley actually come from the University of Waterloo, in Ontario, Canada. The University of Waterloo is the second largest electrical and computer engineering hub in North America, after MIT. Because of all of the talent coming out of that region, we’re now finding that there are many successful startups that have chosen to hire talent in Ontario and grow their businesses there.

In recent months, Google expanded its Waterloo Region office into a space three times the size of its previous space. In the past 10 years, the company has expanded from just four employees in the region to 400 today. The new space has capacity for more than 1,000 employees, demonstrating Google’s commitment to growing in the province. 

Kik, a Canadian-made mobile chat app with 200 million registered users, based in Waterloo, stated that “[Waterloo is] the best source of technical talent in the world.” They’ve also opened offices in San Francisco, New York and LA to meet some of their company’s other needs. Kik chose to grow its headquarters in Ontario so it can stay close to where the talent already is. E-commerce startup Shopify has grown its presence in Waterloo, alongside its other Ontario offices in Ottawa and Toronto. 

It’s no longer necessary to relocate to the Valley to gain access to the best talent. Opening up your recruiting process to new markets could be the additional push a company needs.  

Can you lower overhead? 

While hiring is a main concern, finances are potentially even more important. It’s already a challenge to be constantly raising funds, and high overhead costs don’t help a company’s bottom line. 

Salaries in Silicon Valley are understandably high due to the competition and cost of living. The average software engineer’s salary in San Francisco is $108,555 USD a year. In New York the salary drops slightly to $103,103 and in Texas to $96,235. Go north to Canada, and that number drops significantly. In Ontario, the average salary is $69,470 USD, and Ontario boasts the highest educated workforce among OECD countries. (Source: November 2015, Economic Research Institute, Salary Assessor) 

According to Numbeo, rent prices in San Francisco are 217 percent higher than in Toronto, and grocery prices are 73.31 percent higher. These numbers can have real implications on your budget and make it worth considering what makes the most sense. 

There is, undeniably, a massive amount of potential venture capital in Silicon Valley. VC funds invested $11.3 billion in 962 U.S. deals in the fourth quarter of 2015 alone according to PricewaterhouseCoopers and the National Venture Capital Association – $58.8 billion for the year. With so much potential funding available, it makes sense for Canadian startups, especially for those in the software or consumer products and services categories, to have relationships in the Valley. 

Several levels of government in Canada support the importance of working with Silicon Valley and offer opportunities for Canadian startups to make connections in California. One event, 48 Hours in the Valley, introduces 20 of Canada’s hottest startups to Silicon Valley’s top mentors, investors and executives over two full and fast-paced days. Startups such as Bridgit, Financeit and Jobber have all been able to build relationships in California that have changed the game for these companies. They have been able to return to Ontario with funding opportunities, refined strategies and new mentors. 

While Silicon Valley is still the world’s number-one tech hub, having a company’s entire operations there doesn’t always make sense. Look for creative ways to be a part of the Valley while locating where the talent is and the costs are more affordable. With the world’s tech culture booming, there is more than one way to succeed, and opening up your options could make a difference in a company’s growth and success. 

Stephen Thompson is consul and senior economic officer for the Ontario International Trade and Investment office in San Francisco. He promotes Ontario in the U.S., assists American companies to set up operations in Ontario and helps Ontario companies forge partnerships and export to the U.S. The San Francisco office covers California, Arizona, Nevada and Hawaii. You can connect with Stephen on LinkedIn.








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