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Expensive Town, Unhappy Startups?

Expensive Town, Unhappy Startups? | Pitch it! | Scoop.it
Cost of living can be a strain on startups and can influence where they launch

Startups are usually strapped for cash. The ones promising enough to receive large checks from venture capitalists and investors are not so much jumping for joy because they’ve won the lottery, rather because they know the cash injection means an extended lifespan.

One sizable drain on any young company’s resources is the cost of living in the city it calls home. That translates to rent, as well as living salaries for employees or prospective hires that have to live close enough to make it to work every day. And equity, as magical as it is, won’t pay off your landlord.

In that sense, are expensive towns more difficult to start up in? Are startups that put down roots in high value cities putting themselves at a disadvantage? It could well be a calculated trade-off.

According to a recent poll conducted by The Supper Club – a UK-based members-only networking group for startups generating over $1.6 million – about 40% of London-based business owners have considered picking up and leaving the city to headquarter elsewhere. Why? Apparently the cost of housing in the capital city is too darn high and is driving away talent. Of The Supper Club’s 330 entrepreneur members, 79% fear that brain drain could cause a severe scarcity of skills within the next five years, citing rent costs and poor public transport.

It’s hard to believe that London – named #2 tech hub in Europe by the European Commission last April – could face an exodus of tech and business startup talent. But if costs and infrastructure are truly frightening personnel away, might the startups looking to hire them follow suit?

In the United States, the most expensive cities are New York, San Francisco, Honolulu, Washington D.C. and Boston (check out the full list HERE).

The tech capital of the world, San Francisco, is notorious for its high-costs . One-bedroom apartments there cost more than anywhere else on earth, according to a study. Some startup founders have jumped ship because they found they could score talented people in Portland, a city with a lower cost of living, and discovered that prospective employees overwhelmingly chose the Oregon city to San Francisco.

Once an industry term for small business, startups now connote an exciting entrepreneurial lifestyle more and more college educated youths are choosing -- and here's why.

New York’s credentials as a startup hub have been piling up over the past several years, thanks in large part to the so-called Silicon Alley phenomenon. Rents for commercial real estate have risen with it and young firms are spilling out of Manhattan into other boroughs, like Brooklyn. Housing-wise, New York City is not a cheap town to live in and newcomers – or city residents priced out of more central areas – are finding they’re forced to look farther and farther east for reasonable accommodations. Some move the other direction, across the river to New Jersey.

“Overall, there are no signs of the real estate industry slowing down,” says Ashkán Zandieh, founder of real estate tech coalition RE: Tech. “While interest rates are low, developers are borrowing and owners are refinancing. The most positive impact that we’re seeing is in suburban markets.”

As far as the startup scene is concerned, there’s no slowdown due to cost of living. Those that were already working in New York do not want to move and those that are interested in starting up in the City That Never Sleeps know that there is capital to be had and the volume of consumers around them creates a thriving market. The pricetag of doing business is just a fact of life, says Zandieh. “There’s a cost to play and if you want to play in New York the costs are going to be astronomically high.”

In the end, though, cost of living and desirability of location is a balancing act that entrepreneurs and business founders have to think about carefully. Sure, you may be paying high rent and the price of transport, takeout Thai food and an after-work cocktail may seem bloated, but if you’re in a vibrant and international city that offers its people a world of culture and access they cannot get in other places, you might find you’re willing to take the financial hit. If the money factor sill bugs you, it may be time to scout out other locations that, though cheaper, offer a lifestyle that’s almost as enticing.

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Marc Kneepkens's insight:

Tough choice. Startups can thrive anywhere I would say, but are all the tech and brains available? And what about connections and funding?

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Boulder, Colo., Most Popular City for Tech Startups, Study Says

Boulder, Colo., Most Popular City for Tech Startups, Study Says | Pitch it! | Scoop.it
Boulder, Colo. is the most popular city for high-tech startups, a new study says. And Fort Collins-Loveland, also in Colorado, took the number two spot, ahead of Silicon Valley and the Boston metropolitan area.


Colorado also took the second spot with the Fort Collins-Loveland area, beating the traditional California Silicon Valley cities of San Jose, Santa Clara and Sunnyvale. The Boston suburbs including Cambridge, Mass., are number four, and San Francisco is number seven—after Seattle and Denver. New York isn’t even in the top 10.


Researcher Ian Hathaway, who wrote the report—which was issued by the Kauffman Foundation and Engine.is, a non-profit advocacy group for U.S. startups—said that although he was surprised by the number of jobs high-tech startups create, he wasn’t surprised by the geographical findings.

“I study this, and I hear stories that it’s easier to create a startup wherever you live. You don’t have to come to Silicon Valley or Cambridge anymore,” he said.

Cities that are most attractive to high-tech entrepreneurs tend to have one or more of three characteristics—a highly skilled workforce, a research university or proximity to defense bases and the aerospace industry, Mr. Hathaway said.

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Marc Kneepkens's insight:

Wherever you live...!

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