Silicon Valley is the Mecca tech talent globally turns their faces to. Yet, if you choose to base your company in Silicon Valley, you have decided to be in one of the most expensive places in the world. There is a lot of discussion about all the reasons to be in Silicon Valley, but what you hear about a lot less are the reasons why you should stay away from it.
Teleport’s CEO Sten Tamkivi wrote a longer piece about these tough choices in a TechCrunch piece called Foreign Founders Should Look Beyond Silicon Valley back in January. As a recent follow-up, he was interviewed by Finnish Business paper Kauppalehti. See below for the video (in English) and his key points summarized by Kauppalehti’s Senja Larsen (translated from Finnish).
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1. Shorter runway
Every early stage startup founder should worry about the length of the runway – the time that the company has for the construction of the product before the cash runs out. Silicon Valley shortens that runway significantly.
2. Ridiculous real estate prices
Silicon Valley is one of the most expensive places in the world you could pick – in addition to office rent prices, a one-bedroom apartment can be up to $ 4,000 a month. The cheapest option on rent.com shows housing up to 60 kilometers from San Francisco with the price of $ 1,450 a month.
3. High salaries
In Silicon Valley, annual salaries can go up to 150 000 – 200 000 dollars, which means that personnel costs swallow up a huge chunk of budgets.
“For one million, you might only get five employees for a year. You should calculate exactly what the corresponding amount might be somewhere else.”
4. Non-attached workers
In Silicon Valley, corporate culture is different to Europe. The sense of loyalty is different – there is a high possibility of employees constantly jumping from one opportunity to the next, which puts a huge amount of pressure on the moment of hiring.
“If you’re a founder and you want to hire someone, you better have it done by the evening, otherwise they’re gone.”
5. Endless bureaucracy
You will be dealing with paper checks, sending faxes and using tools that make you feel like you’re trapped in the 80’s. In the place where the most advanced user interfaces are being created, the public services surprisingly work on completely backwards technology.
Silicon Valley is a complex environment to navigate from visas to taxes. You will have to deal with thousands of things at the same time as you fight for your company’s survival, and very often you will have to hire expensive lawyers and other experts to help you out.
6. Visa complications
Even if you reach middle ground with your visa by passing a row of skeptical interviews, you are still always at the mercy of the immigration authority that can turn you back from the border without you ever learning the reason.
7. Complex health care
If you’re not careful with your health insurance, you might suddenly be faced with a 20 000 dollar bill for a visit to a doctor. The prices of almost all medical procedures are higher in the United States – the cost of health insurance in California is around 10 000 dollars a year.
8. The place itself
Silicon Valley is super competitive when it comes to technology-related matters. But if you look outside of that narrow focus, to find effective transport or good parks or schools, the picture changes. If you’re looking for stunning architecture, theaters, music or classical art inspiration, there are probably metropolises suited better for you around the world. San Francisco offers a colorful life for the wealthy, but still it isn’t London, Hong Kong or Paris.
“Building your startup requires a lot of focus. On the other side, be honest about what kind of lifestyle you want for yourself and your family.”
With all that said, Sten still emphasizes the importance of having a link with Silicon Valley – it’s not a binary question of if you should move there or stay back home – it’s a question of how to design an arrangement that works for you and your startup. It’s possible to balance your time between Silicon Valley and other places in order to avoid the more negative sides of it while still getting the benefits of the positive things.
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