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Should You Move to Silicon Valley?

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Don’t be lured by the hype. Think logically and consider all the advantages of other locations before you make a move, advises Sramana Mitra.

By Sramana Mitra (Founder, One Million By One Million)

I run the only global, virtual incubator for startups in the world. As such, we constantly get questions from entrepreneurs around the United States, and around the world, about moving to Silicon Valley.

My take on the subject is that Silicon Valley is expensive, the talent war challenging for startups without major VC backing, and it is not necessarily easy to survive the early stages of such a move.

Imagine, you have no funding, and you have to pay $2000 a month in rent just to live, and you have to convince some other engineer dude who has fifteen job offers including one each from Facebook, LinkedIn, and Google, to join you to help finish your product. Rehearse the pitch in your head, and please come share it with me. I’d like to see how it plays.

Remember, you have no funding. You cannot pay this person. You have two things: vision and personal charisma.

Do you have what it takes to convince one, two, three people to work for you for equity IN Silicon Valley?

The answer, in most cases, is no.

Companies that move with traction end up having a better success rate. This of course, doesn’t apply to the Y Combinator startups. But if you are a regular transplant into Silicon Valley, and you come here WITH a validated business, your chances of survival are higher. For one thing, you can potentially raise some funding, and please remember, raising funding – including angel funding – requires traction these days. People don’t fund concepts much, unless you are a serial entrepreneur on your third venture and have made money for investors before. Wait, but in that case, you would be able to invest in your own bootstrapping stage. You don’t NEED outside investors till your experiments are somewhat mature.

Also, consider the option of staying where you are, or if you need to move to the US market, choosing a city that is less competitive. A couple of interesting case studies:

We also have examples of companies thriving in Arizona and Chennai … and many other places. Arizona-based InfusionSoft raised funding from Silicon Valley’s Mohr-Davidow Ventures, but by the time they did so, they already have millions of dollars in revenues. Chennai, India-based Freshdesk raised money from Accel Partners in India, and even though they are selling to a global customer base, they have stayed in Chennai, keeping cost-structures down.

Greg Gianforte, the founder of RightNow told me years ago, that one of the best decisions he made was to build his engineering operation in Montana. Costs are low. Quality of life is high. Attrition is non-existent. Greg eventually sold RightNow to Oracle for $1.3 billion. I have called him the Montana Mogul.

Of course, people come to Silicon Valley from all over the world, and many of them become successful. That is the myth of our golden Valley. That is what draws global talent to us.

My only point is, use some logic in making the decision. Do not make a blind decision based on media hype or a cursory understanding of what’s involved.

If you come to the Valley, come prepared.

And know this, that, you can ALSO succeed elsewhere just fine.

Women 2.0 readers: What would be your advice to a founder considering a move to Silicon Valley?

About the guest blogger: Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. A Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Follow her on Twitter at @sramana.

Image credit: Samykolon.