Starting a company in Silicon Valley is stupid

One of the reasons I moved from New York City to Madison, WI is that I knew I would start another company. I wasn’t sure what it would be, but I had already launched two startups, and I could feel another one coming. It’s a sort of itch I get when I have too many ideas piling up in my head: I think to myself, “One of these must be good for something.”

People ask me how I picked Wisconsin. The bottom line is that I wanted to be able to support my family and take the wild risks that come with having a startup. Supporting a family in NYC or Silicon Valley is insanely expensive especially for someone who has no cushion to fall back on during the months when funding is tight. (Which is a major reason you see lots of Silicon Valley startups from twentysomething men with no expenses and few startups from women with kids, and heated discussion on TechCrunch about salaries for founders who can’t make ends meet.)

So, here are some things to think about when you know you are going to do a startup, and you know you are going to move.

1. The first stage of a startup is constipation, which can happen anywhere.
The beginning of a company is slow and meandering. You have pretty much no idea what the company is or what you are doing with it, or if you even picked the right partner to do it with. You sit in a room and argue for a while. And you throw in the towel ten times. And then go get it and try again. You develop a bunch of revenue models that are either so lackluster that they are not worth your time, or so outstandingly huge that they are not believable.

During this time, it does not matter where you live. You are not hiring. You are not pitching your business because you don’t have a pitch. And you are probably not spending much money because you know the near future does not include a lot of money coming in.

2. Angel funding is about fun, and you can get money in any state.
Angel funding is local. You will need to get your first funding from people who live near you. This is because angels typically do not need more money—after all, they are investing in a crazy, half-baked idea that has a one in ten chance of making any money.

So the angels are investing in a startup to have fun. They think the entrepreneur is cool, they think the idea is sexy, and they will tell their friends about it at cocktail parties. There are some things you cannot buy in life, and one of them is street cred. But angels try to do this with their startup investments.

The good news about this is that there is angel money everywhere because, in every state there are some rich guys who want more spice in their life. As a person who had to pitch her social media company in Wisconsin without using the word blog, I can tell you with certainty that angels do not need to understand your business to be able to sniff out if you’re the real deal. They invest because they like the person. You can get that funding anywhere. If you are likable.

3. If you stay small, you can stay put.
Most companies do not get huge. This is because most companies never even get off the ground. (Not that this is a huge problem. Of course, failure is productive, and you’ll learn from it.) But most companies do not grow to be 50-100 people. If nothing else, that number of employees is usually out of the sweet spot of the founders who are managing the company. So they usually sell or go under before they get huge.

If you are not going to get big, you do not need to take in venture capital. And if you are not going to take in venture capital, then you don’t need to be where the big VCs are: New York and California. There is also the talent issue – if you need 50 developers who are great with Ruby on Rails, that’s gonna be hard in Tulsa. But finding three, that’s possible. Especially if you can train one or two.

4. If you live in the boondocks, you need to fly.
There is research from Babson College suggests that traits that make a successful entrepreneur do not point to a single personality type per se—a very wide range of personalities can do a good job starting a company. But what differentiates successful entrepreneurs is networking skills.

So while you don’t need your network in your backyard (which you would have automatically if you lived in Northern California), you do need to be able to fly to your network frequently. The network you can build by just showing up in California or New York is unprecedented. And while LinkedIn is great for getting a bus dev guy, it’s not great for meeting entrepreneurs and swapping stories. You need to show up. I try to fly to each coast once a month. I book myself back to back for three days and then I return to Wisconsin to decompress.

5. Live in an expensive place only when you need venture capital.
Most of you will not be going after venture capital. You simply will not have a business idea that warrants that kind of investment. And in that case, you will be bootstrapping for a long time. And it’s a lot easier to bootstrap in a place with a low cost of living.

There will be months when you cannot pay people. There will be days when you worry you can’t pay your own bills. You will fall behind much faster in Silicon Valley than you will in Iowa. And a big reason that startups fail is because the founders don’t keep going — searching for what will work. Living somewhere inexpensive gives you leeway: a way to have a decent lifestyle while you’re gambling that a dream will come true.

And, just like Facebook, and many, many other startups, if you do get to a point where it’s time to get huge, you can open offices in Silicon Valley.

So, how do you decide where to live? Well, I took a bunch of research about what makes us happy and I concluded that living in a city where there is a low cost of living gave me more flexibility to create a life that was right for me. There are trade-offs in every city, but the most expensive cities demand the most expensive trade-offs.

And, one more thing: You should move where your family is, or where there's anyone you know and love. Work does not matter as much as being close to people you love. So if you’re still determined to do a startup in New York City, maybe you should relocate your loved ones as well.