I admit that I am a bit of a contrarian. For a long time, the contention that “if you’re doing a startup, you HAVE to be in Silicon Valley” didn’t sit well with me. Sure, talent is important– but for many startups you need only a few talented folks to prove that you’ve got something and companies like WordPress have proven that you can build a great team (literally) anywhere and everywhere (they are virtual and across the world). Sure, energy is important– but the biggest source of energy isn’t your peers– it’s the people who are finding value in your product (users and customers). And sure, you need money… Well, the Valley wins hands down here. If you need to raise money, that’s where you need to be. But more and more early stage investors seem willing to invest outside of their little patch of Californian dirt. After our stint at Y Combinator and a bit of fundraising, the decision about our startup (an employee time tracking tool) was pretty clear to us. We headed back to Seattle, where we had a rich network of geeks to work with and talk with and (more importantly) we could live cheaply and not die.
So it was with great glee that Jim Karsten took the gauntlet I threw down in my last post and mined the vaunted CrunchBase for some real live data. Now, CrunchBase is obviously NOT scientific… But it’s the biggest and most consumable dataset that I know of. Without further ado, here is a table showing startups by location and the percentage of startups in that location that have been acquired. Note: Jim has kindly put up the full scrape of data here – there are other interesting bits worth looking at.
% of Total
% of Total
Disclaimer: Yes, CrunchBase is flawed for this. No, ~5% isn’t REALLY your chance at getting bought if you start a company tomorrow, etc., etc. Please don’t troll about the quality of this data. It’s still thousands of records, which is better than the alternative.
At first glance, the key number (acquisition RATE) doesn’t seem markedly different. Heck, if you live in Virginia, CrunchBase tells you that you have a 4.3% shot at an exit… Why move to California for a measely 6.9%? But I think it’s better to focus on the fact that you’d be increasing your exit shot by *over 50%* with such a move. With acquisition rate being as vanishingly small as it is, nudging up a few percentage points is a huge deal.
But overall, as a contarian (AND as a resident of Washington State– the big winner by a nice margin), I was pleased by the results. The bottom line? It’s hard to quantify the COST of moving to a startup (months of distraction, expense, stress, loss of social network, etc), but my gut says (as it always has) that if you live in a technology hub like Seattle, NYC, Boston or Austin– hunker down and start building value- your success is based on how much value you can give versus how much you take.
Edit: some interesting insight from John Cook over here.