The Value of Choosing San Francisco as a First-Time Founder
People need to understand why keeping your small founding team all together in the Bay Area is the best thing you can do to give your company the chance to be massively successful.
Distributed work is good; maybe it’s the future to scale talent acquisition; nevertheless, keeping your founding team together, possibly in the Bay Area, is the top priority to maximize your chances of creating a massively successful company. If you have met Lombardstreet Ventures before, you know we love investing in distributed teams; that’s our investment thesis since day one in January 2017, but there are some circumstances when distribution slows your company’s effectiveness.
The Founding Team in the Same Room
Launching and making a startup successful is hard, and doing it while everyone is in different time zones is even more challenging. Remote work is not for everyone and, more importantly, is not ideal for every stage of company life. Getting everyone—especially the whole founding team—in the same room is an exceptional advantage, especially during the early stages. In the first 3-4 years—and sometimes even more—the company’s life is primarily based on experiments, and the ultimate goal is looking for Product Market Fit and the way to grow at scale. Directions can change quickly based on the data gathered from the market. Sometimes your product adoption grows and then stops. Sometimes the growth rate is not enough. Sometimes you grow but don’t monetize. In those cases, having the founders in the same room helps analyze and decide what to do in hours instead of days or weeks.
At the beginning of the journey, also, living in the same apartment can be of help. The proximity among people is beneficial when the company still discovers what its customers love the most and why they need the company’s services.
Why Silicon Valley is Different
Not every place on earth offers the same advantages in terms of network, tech community, and focus, and despite what you can read in the press, San Francisco remains the best choice.
That might not be valid for all the verticals, but for sure, it is perfect for everything that is software-centric:
SaaS
Enterprise software and B2B
Developer tools
Open source, in general
New B2C or B2B2C tech-enabled markets
AI-based solutions
Don’t be confused by big names moving outside the Bay Area or making their headquarters in the cloud—like Andreessen Horowitz announced recently. The plan, in that case, is different, as are the goals. The reason behind that might be taxation, less bureaucracy, scaling the business model, or, why not, a more entertaining life.
Let’s say it: San Francisco, most of the time, is dull for anyone outside the tech space, and Silicon Valley is even worse. It’s a community of people strictly focused on building, finding new ways, cracking the system, and ultimately improving their products and growing their business. It’s not generally composed of people interested in money and getting wealthy fast, even if money is often involved in one way or another.
It’s definitely the place where you want to be if you are a first-time founder with no connections and no previous notable achievements. In that case, San Francisco, Palo Alto, and the Bay Area, in general, are the best place to prove your product’s validity, meet investors, get feedback from peers and customers, and learn from hundreds of people better than you in one of the multiple skills you need to perfect along the way.
One thing I observed over the years is that in the Bay Area, feedback is not based on opinions but on experiences, failures, and successes. And you must be careful when seeking advice because not every suggestion is worth it—even in a place like that. I learned that what you look for is not people who have time to spend with you, but those who have not, people who are busy and obsessed with what they are building, and nevertheless, they can find thirty minutes for you.
In San Francisco, if and when your product can demonstrate initial traction, people get suddenly excited by what you’re building. Most of the time, something unusual starts happening spontaneously: they are willing to introduce you to other people, and those people do the same until you reach the right ones: valuable mentors, rare angel investors, and iconic founders. There’s no platform to help you dig into the ecosystem, so you need to get out of the office and meet people.
In my career, I’ve seen tons of excellent products failing miserably just because the founders weren’t in a place where good data and enthusiasm could move fast enough from person to person.
Keep Going
To make an impact, together with initial traction, you need capital, velocity, and not just that when things become tough to manage. In such a case, having a co-founder can help you to keep pushing. Sometimes even that is not enough, and you need some fresh air, someone who can help you find people with positive thinking and hands-on experience not to give up. “Keep going” is something you will hear often talking to people in various situations.
In San Francisco, you can have thousands of other founders living the same experience or that had a similar situation years before. They all push beyond limits most of the time, in one way or another, and if you understand that asking for help is part of the journey, you are in the right place. Every great founder learned how and when to ask. Mentors and peers are the hidden secrets behind this place. Jobs, Zuckerberg, and many others all had mentors to support them to keep going.
The most persistent duo I know in San Francisco are Aghi—Augusto—Marietti and Marco Palladino, founders of Kong Inc.
I strongly suggest watching this recent interview by Mike Volpi—Index Ventures—with Aghi Marietti, especially if you are a first-time founder or an immigrant to the United States:
I knew those guys when they were twenty years old, and I was crazy enough to invest in them but not wise enough to quit everything I built and convince them to let me join the team.
Keep going, that’s the spirit you can find spread out in the Bay Area, and that’s how you build a trillion-dollar company. It’s not in everyone you can meet, but lots of founders share this attitude—stickiness, resilience, and devotion to their goal. You can achieve that everywhere in the world, but it’s a lot easier if everyone else around you is doing the same.
If you lose, fine, but you want to lose after you really give it everything you’ve got.
Underestimating the Pain
People often underestimate how hard it is to build something like Kong from scratch. They raise some capital, maybe at a reasonable valuation because they come from a tier-1 accelerator or have some metrics to share with investors. Still, very few of them think about the pain and the sacrifice that building such a company will be. Choosing the best place on earth for business, capital and talent is just a tiny step to take compared to what your next 10-15 years will be. That’s not a guarantee of success, but it can make the difference between giving up and creating a unicorn.
That’s what we look for as venture capitalists, and that’s why at Lombardstreet Ventures, we always prefer to invest in Silicon Valley companies—not just US companies.