8 Tips For Building An Internet Company Outside of San Francisco

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8 Tips For Building An Internet Company Outside of San Francisco

 

 

The following is a guest post by Healy Jones.  Healy is head of marketing at OfficeDrop, a digital filing system and scanner software provider – and moved to Boston from San Francisco.

The San Francisco Bay area is the clear leader in the internet startup world. Approximately 50% of the early stage fund raising in the United States is in California, with Silicon Valley and San Francisco dominating. Some days it seems like it is impossible to start an internet company anywhere other than the SF Bay Area.east west interstate

But it can be done. Entrepreneurs everywhere are succeeding in getting their internet businesses going! I’ve polled some of my entrepreneurial and venture capital contacts outside of San Francisco to see what advice they could offer for successfully building an internet venture in their towns. The following is some of the great feedback I received. I’ve organized their responses (and some of my own thoughts) into seven tips on how to grow an internet business when you don’t live in sunny Palo Alto.

1) Cultivate the right mentors. In Silicon Valley, it’s easy to meet experienced startup entrepreneurs. I know for a fact that being around startup founders who have been there, done that can really make the startup process better. Both formal mentorship relationships and unstructured conversations with successful internet executives have helped OfficeDrop overcome significant startup challenges. Outside of the Valley you may not have access to a deep talent pool of potential mentors, so you’ll need to be nimble. Even though I’m in Boston, I’ve had great luck pinging smart internet marketing gurus in San Francisco and getting their thoughts on my marketing initiatives. You should also take advantage of being part of a smaller entrepreneurial community. Gabriel Weinberg, two time internet entrepreneur and angel investor based outside of Philadelphia says, “People really want to help you. Not that they don't in the Valley, but there is an extra component of wanting to put the location on the map.” But be careful – Linea Geiss, an Atlanta based venture capitalist, comments, “Smaller investing ecosystems mean personalities / egos get magnified a little.  A smaller ecosystem presents an opportunity to do well by securing help and backing from well-respected advisors, but also beware of the landmine of pseudo-advisors that are not well thought of in the industry.“

2) Create networking groups. You know that feeling at 1:30 in the morning when it seems like you are the only person still up working your startup dream? Well, that feeling is a little bit easier to take when you have personal relationships with other people in your area who are experiencing the same thing. If internet founders aren’t exactly falling out of trees in your city you may need to be the organizer who gets people together. Sharing in each others’ successes and learning from each others’ failures is part of the fun of being part of a startup. I’ve also learned a ton from other executives in the same lifecycle point at OfficeDrop; people who are going through very similar challenges. I really recommend organizing a group of your peers and getting together as regularly as you can. In other words, you don’t just have to hang out with people who have been there, done that – people who are RIGHT there, DOING that have a lot to share and teach as well.

3) Think outside of your town. For most internet companies, competition is national or global, so you need to be 100% aware of what is happening in your space in SF and around the world. The technology press can be merciless, so if you “launch” something that gets compared to existing solutions/other technology darlings you need to be ready to discuss why/how your solution is better. Financing sources like VCs and some angels are also pretty sophisticated and often know a lot about particular verticals they find interesting. You never want to be in the position where some smart-alecky VC associate knows more about your competition than you do. Finally, and most importantly, your customers may be very savvy on the different technology solutions available to solve their problem, and if you don’t know how to position yourself against competitors then you are in trouble!

4) High hiring standards are critical. As Dharmesh has pointed out, there is a global talent war going on for developers. It’s hard to find experienced hackers everywhere. But compromising when hiring can be a big mistake. Scott Holsopple, CEO of Smart401k, based in Kansas City,  says, “Kansas City does have very talented people, but not surprisingly they aren’t as plentiful as SF so you have to be willing to dig a bit more.  We’ve made very good hires and some mediocre hires and the differences (on the company) were startling.  Lesson - Don’t hire just to fill a need.  Make sure they have the skills you want and the personality you want to reinforce inside the company.” Being able to manage a distributed development team is also a major asset. Vikram Kumar, CTO of OfficeDrop, says “if you know how to manage a distributed technology development team then you can find great developers. However, it is a mistake to assume that you can manage a distributed team in the same way that you manage people sitting in your office. And you need to be willing to invest in communication and project management technologies.” Finally, Scott mentions finding employees who get the startup mentality can be difficult outside of San Francisco, “if start-ups aren’t the norm the culture of start-ups won’t be the norm.  This may actually make it harder to recruit because you may be seen as the “risky” job rather than the “hot” job.” Scott suggests making sure you vet the culture of the people you interview just as much as you vet their technical chops.

5) Know your local ecosystem and play to its strengths. This tip comes from Linnea “Atlanta is strong in supply chain and logistics, fintech and security. It’s a lot easier to get funding, find customers and recruit experienced employees who will get excited about and understand your vision.”

6) You need to be in the flow (and have something to say) to get press. Attend important national conferences for your industry and for the web, and don’t be afraid to approach reporters.  OfficeDrop has had luck aggressively pinging targeted reporters with story ideas, and Jeremy Levine, founder of Boston based sports stock market StarStreet Sports suggests that you can be successful if you “reach out to those who have covered similar companies.” Jeremy also adds that Twitter has also revolutionized how people not in the Silicon Valley echo chamber can get to know what reports are working on. Engaging on Twitter in relevant conversations that reporters are having with intelligent content can help get the door open. I am in total agreement with Jeremy, and have a Tweetdeck list of technology reporters who I follow very closely. Without Twitter I don’t know how I’d have a clue as to which reporters I should be approaching.

7) Capital efficiency matters. General consensus from entrepreneurs I spoke with was that getting financing is much harder than in San Francisco, so focusing on getting the most out of what you have is critical. Scott Holsopple says, “I think resource (whether $, human capital, time, etc) efficiency is key.  This may sound trite, but if you’re in an area that isn’t a hotbed for start-ups or investment your resources are likely to be more constrained.  So you have to do more with less and minimize your missteps (not that you can’t make mistakes, but you have to recognize them and limit the resources used).” Max Niederhofer, founder of people search engine qwerly in London, agrees “Focus on a straightforward model not dependent on VC financing. Get to profitability early.”

8) Tap into the growing global angel capital market but also think local. This can often be the hardest part. How do you get money when you are not in an angel/venture capital hub? Gabriel says that “I think there are lots of angels scattered around who often invest outside their cities, but are willing (and often want) to invest inside. So you just have to find them and meet with them face to face. AngelList is getting good at that, but also look at angel groups, find out who is in them and pick off the people who invest in your kind of deals. They'll often invest individually as well and will serve as an advocate for the group.” Mark MacLeod, a well known Canadian startup CFO and angel investor, says it is critical to network into local financing sources, since local momentum can build credibility with non-local angel investors. However, as many entrepreneurs know firsthand, getting funding outside of the Valley often requires more traction, so doing more with less is likely a necessary challenge.

The internet has given us the tremendous power to engage with tools and people without being constrained by geography. It would be a cruel irony if one region had a complete monopoly on good internet businesses.  Shouldn't the Internet help us build great Internet businesses anywhere?  What do you think?

Posted by Dharmesh Shah on Thu, Mar 03, 2011

COMMENTS

Great post Dharmesh. Are there any online meetups where startup founders and the like can meet and chat?

posted on Thursday, March 03, 2011 at 3:56 PM by Sal Pellettieri


Scott Kirsner's recent post asks why there has to be a pissing contest between the East Coast and the West Coast. This article not only says there doesn't have to be; it shows how to ignore the noise and get on with creating good companies regardless of where you're located. Nice Job!

posted on Thursday, March 03, 2011 at 4:05 PM by Rick Harris


Great post, Healy. The tips about forming networks and cultivating mentors are especially important. There is also something to be said about the advantage of being outside the echo chamber. Startups get an opportunity to create real value and solve real problems, instead of chasing trends and trying to be "social network for <insert-segment-here", or peer to peer file sharing for <insert-segment-here>  
 
Another nit. The post talks about 7 tips, but there are actually 8 awesome ones.

posted on Thursday, March 03, 2011 at 5:08 PM by Anand Rajaram


@ Sal P - I've been hanging out a lot on Quora recently, which is almost like a little ecosystem of startup folks chatting with each other. But I'm not sure if there is a real dedicated online network for internet startups... 
 
@Rick H - :) 
 
@Anand - Doh, you are right! There are 8, not 7...

posted on Thursday, March 03, 2011 at 5:10 PM by Healy Jones


Great topic to discuss. I am working on a solution to the startup talent war @ betacandy.com - we are likely to move to sfbay ourselves though.

posted on Thursday, March 03, 2011 at 11:31 PM by Eric Ingram


Great job Healy. Very insightful.

posted on Thursday, March 03, 2011 at 11:33 PM by Vikram Kumar


More tips, start your own Founders/Entrepreneur/Startup meetup group. 
 
Aggregate your local startup news and events like we did at StartupATX.com 
 
Do podcast interviews with your towns entrepreneur leaders. 
 

posted on Friday, March 04, 2011 at 8:48 AM by Michael Torkildsen


There is no doubt that Silicon Valley is, as we put it in a blog post (http://bit.ly/hRFvux) this week, "A big bright heat lamp for startup incubation." 
 
But the job can get done elsewhere, and I love the advice you share here, Healy, particularly your counsel to reach out -- to mentors, peers, local experts, journalists, and so on. 
 
(If your picture is anything to go on, we Canadian entrepreneurs will feel right at home in snow-bound Colorado!)

posted on Friday, March 04, 2011 at 9:44 AM by Francis Moran


Great Post Indeed.

posted on Friday, March 04, 2011 at 7:17 PM by dave055


#4 and #7 are critical

posted on Monday, March 07, 2011 at 8:12 AM by Karl Treier


Great post -- after reading a few posts bemoaning the difficulty of starting a company in areas like Los Angeles or Boston, it'd great to read a few examples of other companies "further" from San Francisco. We've been getting started in non-coastal Pittsburgh and while we've had to fund-raise outside of our local ecosystem, we've found a rich and diverse talent pool. Add to that Hacker News, Quora, and even, yes, OnStartups, and we have all that we need to build something great.

posted on Monday, March 07, 2011 at 3:07 PM by Eric Silver


Good luck Eric!

posted on Monday, March 07, 2011 at 3:31 PM by Healy Jones


Word! It is the internet after all, it's global. But yes, tougher for funding and hiring needs. What do you think of China based startups (by americans) asking for funding from american VCs? Since China is the current goldmine, I would assume that VCs will be interested, or probably more interested than usual?

posted on Tuesday, March 08, 2011 at 4:07 PM by Terri


I really don't know - one of the consequences of being in Pittsburgh is that I really don't have my finger on the pulse of what's exciting to VCs nowadays. I'm sure that there will be at least one group to be active there, though, and if they can beat -2% annual returns they'll be doing better than most.

posted on Wednesday, March 09, 2011 at 11:54 AM by Eric Silver


Awesome article. I think a lot of cities with home grown talent, i.e. Philadelphia, Washington D.C., Baltimore, Charlotte, need to listen to some of these points rather then feeling the need to skip town. Success isn't measured by your geographic location.

posted on Monday, April 18, 2011 at 4:42 PM by Dan


We are building customer engagement platform that allows you to sort through visitors to find out prospects in real time, and against our mentors advice, we are doing it out of Bangalore, India. While we have great talent available, its tough to get advice from people who have exposure to newer business models.  
cheers, 
umakant

posted on Tuesday, April 19, 2011 at 1:23 AM by umakant


One step at a time is good walking. 
mothers day flowers delivery Algiers | mothers day flowers delivery Amsterdam 

posted on Saturday, April 23, 2011 at 4:56 AM by naveen


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