Sachin Rekhi

I had lunch with an old college buddy last week and he has been considering moving to San Francisco to start his next venture. We got into a discussion of the potential advantages and disadvantages of doing so. I thought I'd throw up my thoughts on the subject for those interested.

I've been in San Francisco now for the past three years. My immediate prior residence was up in Seattle, but I originally grew up in upstate New York. I have come to love San Francisco for many reasons, but mostly because it's an ideal place to start a technology venture.

While I am clearly biased, here is my attempt at a balanced discussion of the pros and cons of starting your venture in San Francisco or the Bay Area in general.

Advantages
Discussions on startup tactics & methodologies
One of the things I appreciate most is the open dialog on the best practices in starting and running a startup. You know that if you run across a problem, you can leverage the fact that many others in the valley are thinking about the best way to tackle it, whether it's user acquisition, metrics, marketing, etc. Even more interesting is the open debate about the best methodologies for building your company, including recent debates on agile development, customer development, etc.

Network of people to help you
Since there are plentiful startups in the exact same boat as you in the Bay Area, there is an amazing network of people that can help you achieve success in their area of expertise. This could be anything from technical to product to business development to sales expertise. You can rest assured that someone has been there and done that and oftentimes is willing to help a fellow startup out in order to prevent you from making the same mistakes they made.

Access to capital
The available capital sources, including angel investors and venture capitalists, are definitely most plentiful in the Bay Area. Many investors prefer investing in companies that they are close to, so simply being in the Bay Area can often give you a leg up. In addition, since there are always startups looking to raise money here, there is a growing ecosystem of help in order to get the round done. There are people that can help you get the right introductions, refine your pitch, and help you with negotiating the best possible round of funding.

My kind of fun
When you are like me and feel like you live to work (instead of working to live), you will love the fact that you can find people to engage with you on your startup 24/7. Whether its conference, happy hours, coffees, lunches, or just geek hangout fests, there is limitless events to keep you in and around the startup sphere as much as you like. There are also great incubator-style open work spaces that are full of startups all day long that you can participate in. Some people think doing a startup can be lonely. But that is definitely not the case here in San Francisco.

Nice weather
While this may seem like a trivial one, I think having nice weather in the Bay Area is a nice plus. As many who have started a startup will tell you, your startup will be an emotional roller coaster ride with high and lows as the business ebbs and flows. If you were stuck in cold and dark weather, it does nothing but make those emotional highs and lows even more acute. California weather helps to generally keep you a little more optimistic about your startup's prospects.

Disadvantages
Group think
One of the main disadvantages of living in the Bay Area is that the startup echo chamber can often result in group thinking. This means many people are chasing the same ideas, leveraging the same methodologies, and following the same trends. While leveraging best practices in general makes a lot of sense, oftentimes the most successful startups are those that go against the grain and do something no one thought would work. In some cases it can be harder to pursue those kinds of ideas here or at least you may gravitate to chasing whatever the hotest trend is: social networking apps, mobile apps, real-time apps, location-based apps, etc.

Not a friendly incorporation state
Despite being home to a ridiculous number of startups, California is not the ideal state to incorporate. Both in terms of forming an LLC or Corporation, California is not as advantageous as places like Delaware. Because of this, many corporations still choose to incorporate in Delaware even if their primary business location is in California. Similarly for LLCs, California imposes high taxes just to get up and running, versus other states like Washington where there are no such taxes.

High state taxes
Another governmental drawback of starting your venture in California is the high state taxes. This was especially acute to me coming from Washington where there are no state taxes. But across the country, California has some of the highest. This just drives up the cost of doing business and ultimately increases your burn rate.

High cost of living
Along the same lines, San Francisco is just an expensive place to live. Regardless of whether you are in the city or one of the suburbs, you are going to be paying a premium in terms of cost of living compared to many other parts of the country. This again results in increased burn rate.