Does Your Startup Need To Be In San Francisco?

We're working together. We're in the same room right now. Yes, we get to live in the same area, even though our personal decisions about where we live are wildly different. Yeah, very different lives. I don't have a yard. I have kids too.

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All right, this is Michael Seibel with Dalton Caldwell, and today we're going to talk about does your startup need to be in San Francisco. Oh man, we're just wading into the debate of the moment. So why don't you kick it off? You've got a controversial, how about this? Yes, usually in these videos you and I just agree on everything. It's boring. We disagree strongly. We have a different opinion here. I'm so confident you're wrong.

Okay, good stuff. So let me start by saying I don't think every startup needs to be in San Francisco to be successful. Build a successful startup and not live in San Francisco, please.

Okay, please share. So a lot of the reasons that folks read the discourse about San Francisco—and man, there's a lot of test scores—is they're very fixated on the lifestyle of living in downtown San Francisco. Yes, they see all the photos on Twitter; they hear the stories. Yes, it's all over National media. Yeah, like my parents know all about it. Yes, my dad's like, "So how's it going in San Francisco?" Right?

Like, okay, so for me personally, I actually prefer to not live in a dense city. I like living in a place that is warm and bright and sunny, and I can walk around, and like the birds are singing, and like, yes, there's trees everywhere. Um, I kind of like living in a boring place personally. I'm just speaking for myself where there's not a lot of distraction, and I can just kind of focus on the work I'm doing, then, you know, really intense stuff going on around me all the time.

Also, as you know, I got small children, and just for my lifestyle and the happiness of my family, like I prefer to live just in a different environment.

You like having a yard?

I do.

Okay, so I enjoy those things. Um, and then also, I think sometimes what people forget, especially aren't in the Bay Area, is how the actual big employers for most folks in tech are not in San Francisco. Down south, Google and Facebook and Apple—the Apple HQ is in Cupertino. Yes, nowhere near the center of San Francisco. Boring companies, yes?

And so clearly, in the history of this stuff, all these great companies were built outside of San Francisco. Like, if we actually look at how many of the most epic companies in the world in tech were actually built in San Francisco, yes, it's actually not that many. And so to argue that every company has to be in San Francisco is factually wrong.

Fair, and here's why you're wrong.

Okay, so I live on Market Street in downtown San Francisco, fair just to be clear. Okay, for me growing up, living in a city was aspirational. So, I spent my high school, middle school years in a suburb of New York. And when you do that, you know New Jersey, right? Whenever I'm from New York, well where exactly? They're like, well, you know, Upstate, like you know? Yeah, I was in middle school and high school in New Jersey.

And when you're growing up in a suburb of New Jersey, you know where you are is not where the action is. That's true. You know almost by definition, and at least for me, I perceive getting to the city as part of growing up, becoming an adult. That was a big part of kind of my mentality.

Um, two, I like nice restaurants and nice bars, and those things don't exist in the suburbs. I know someone's going to be in the comments saying like, "But in my suburb, there's..." No, no, it doesn't. Sorry, it's just good for where you live.

Another thing that I like, especially as a startup founder, I liked having a chip on the shoulder. I liked being in a place where there are things I couldn't afford, where there were places I couldn't go unless I was more successful, where I could kind of see what success could get me. I always felt like the suburb tried to hide that away, like everyone was in the same kind of house in the development, and like we all have our own space; we can't see each other. Like I liked seeing what, if we were to make it, what I might be able to get.

Um, that was really amazing. Also, I spent my first kind of nine years living in a city in Brooklyn, so I was used to living in an apartment; that was never weird for me. And there are a bunch of amazing newer companies—Uber, Airbnb, DoorDash. I don't know those. Those well, Jordan Ash was Palo Alto Food Delivery; that was their original name. So they did move there; they didn't start there, and they moved.

Okay, so I think that my core point is that the city is the better place for a young startup founder to get ahead. Now, this is kind of a fake disagreement because, if you kind of have been parsing our words carefully, we're talking about living in the Bay Area.

Yeah, so I'll ask you straight up, Dalton: would you recommend someone starts a startup outside of the Bay Area?

Yeah, well, I genuinely would not.

We agree. So the part we're agreeing with is that, again, think about it. We're working together; we're in the same room right now. Yes, we get to live in the same area, even though our personal decisions about where we live are wildly different. We have very different lives. I don't have a yard; I have kids too.

Yeah, and so what's cool is we get to work together, yeah, and we get to work with all these amazing people, and yet we have very different choices on how we want to live. Yes, and that only would happen here because this place attracted both of us.

Yes, and I think that what's not spoken about enough at this point you make a lot is that there are certain cities that are just better, and there's certain regions that are just better when you talk about all the reasons why. But if you want to be the best in finance, you're probably going to find yourself in New York. If you want to be— or maybe LA or maybe London.

Yeah, if you want to be the best—I don't care anymore— in essence, breaks it. Yeah, but Bryce kind of [ __ ] that up. If you want to be the best in entertainment, you're probably going to find yourself in LA, and the reason why is because when you want to be top 0.001, you want to be around other people who are trying to be top 0.001.

And I think both of us wanted to be top 0.01 startups. Yeah, you're from Texas. Yeah, I'm from [ __ ] Jersey. Like, we didn't grow up here.

Yeah, that's true; we made our way here. And when you're here, you get to consume all the other people like us who were looking to be the best and willing to get in the car and make our way here to do it. So I think that's a huge, huge point.

Yeah, and I just think a lot of the folks that I talk to, they have the opinion from reading Twitter and reading all this stuff that they all need to agree with you on this point and that like if moving to San Francisco means, if they live downtown in the Tenderloin, it means you have to, yes, make some really protest on the weekends.

Yeah, again, it's— I, again, I talk to people when I find people for YC, and I think they have a lot— a lot of people have like a lot of anxiety about these issues. And again, what they don't realize is, do you know how many people live in East Bay and they live in the peninsula? And they like—it's a huge area. It's a huge area. Yeah, but we all get to work together.

Yes, but we get to make our own decisions. Yes, we get the benefits of living in the Bay and having the network effects of the city, yes, without all living in like the—like our lives are not the Twitter thread. No showing photos of what's going on in Downtown San Francisco.

Well, and I think what's tricky is that there are all of these embedded interests who I think are influencing startup founders right. They're the politicians who are like, "Oh, come to my city, come to Miami," because like, like, we're trying to make it startup friendly. Those politicians, what they're looking for is tech jobs. They're not—like what they really need is a Google office. Like, they're not going to get the Google office by having a startup culture, but their politicians didn't realize that.

Yeah, there are other people who are just looking to kind of flame folks on Twitter. And right, like the easiest way you could do that is start posting [ __ ] about San Francisco socks, right, and then get into some debate. And I think the smartest founders look past that. They look past all these like stupid debates.

And one of the things I think they see about the Bay Area is the network effect. So why don't you go like, what's going on here? Like why our billion dollar companies just seem to keep popping up after decade after decade here?

Well, I think, look, network effects are powerful. We know this. This is the thing that makes things like Airbnb work, like Uber work, like all the startups. Network effects are like really powerful; that's why Facebook has any value at all is network effects.

And basically, what's weird about network effects is if you're not benefiting from them, you don't know what you are missing. Yes, and a lot of the times when people want to talk about, "Well, I don't mean to live there," blah, blah, blah, okay, but that's fair. You won't know what you're missing.

Yes, it's all the things that won't happen; it's all the people that you won't meet, all the chance encounters you won't have, all the employees you won't have—like all these surface area for luck. You know, I like to talk about how to maximize luck. You know, think about how many people—again, let's talk about non-tech—if you want to make it as an actor, think about how many people, their story of their big break is that something happened in like Los Angeles or New York.

Yeah, or a band that moved to Los Angeles or New York. And like when the actual moment happens, when someone spots them or finds them or like that lucky moment, whatever that is, yes, the work that they did before that was to put themselves in that position. Yes, and so no one is going to take someone that's outside of this area and tell you this is why—this is what you're missing out on.

I think the people here sometimes don't understand the network effects they're consuming. You and I both saw a lot of people leave the Bay Area during the COVID; all of them came back, and they also don't say that as publicly. They don't say that as public; they all came back.

Yeah, and all of them said the same thing, which was basically like, "I missed the community." But I never really understood that I was consuming the community. I thought I was working all the time, but like I actually was consuming a community of people who are really into startups. And when I moved to Seattle or Austin or New York, that community wasn't as strong, and I missed it.

But isn't it respect there?

Yeah, and there is a good lifestyle; startups is different than tech.

Yeah, and I think that like what's so funny is that this is counter-intuitive and hard when the people who don't consume a network effects don't know what exists, and the people who do consume that perfect sometimes don't realize it exists either.

So this is like a subtle point; it's—it makes sense that people be confused by this. Like, and then you add in some choice photos of San Francisco, and it makes sense why people would say, "Why me do this anymore?"

Yep. What I will say, though, to kind of like finish this point is I think one of this slightly dangerous things that kind of sneaks into this startup game then also causes people to not want to come here is that people don't realize that they need to be aiming for greatness.

I always like to equate this back to sports where it's like there are so few spots in the NBA, let alone the All-Star team, let alone the Hall of Fame. The bar is so high to get into the NBA that anytime you're a basketball player anywhere, you want to be the best basketball player, yeah, on your high school team, on your AAU team, on the Invitational event. You want to be the best possible player anywhere because you know that like the average NBA player was the best basketball player like anywhere.

And I think that sometimes startup founders miss this point, and they're kind of like, "I want to be in the game," versus "I want to win the game."

Yeah, yeah, and I think that like it's really easy to say, "Well, you know, I can be in the game in Austin; I can be in the game in Seattle. There are investors there; there are people that I can be in the game in New York."

And I wish that we were more honest that like, yeah, you can play basketball for your high school team, but that's not—that's necessary but not sufficient to make the NBA. If you want to be a great founder who really impacts the world and helps lots and lots of users, you have to aim for great. Yeah, you can't just aim for being in the game.

And I actually just bring it back to statistics and odds. It's going to be really precise because I can imagine how some people will respond to some of the things you're saying here. Yes, and they're going to throw anecdotes at us; they're going to say, "Yeah, there's this," and "there's this," and "there's Shopify's."

Yeah, so yeah, and it's true. Yes, I have nothing to take away from this. MongoDB is in New York, and I've been told that by every [ __ ] New York founder for a decade—MongoDB, yeah.

And but the point is we're actually trying to impart advice to increase your odds of success because just like with people that want to become Hollywood celebrities or rock stars, it's hard. There's certainly anecdotes of people that were discovered, and like everything slipped into place for them.

Yes, but if you actually just look at the numbers of like how you increase the odds of success moving to an area, moving to the big leagues was a key part of it.

And so I would just encourage folks that are unsure about this debate or they don't have their mind made up to realize that the anecdotes are true, that you can do a startup outside the Bay Area, of course, and like maybe there's a really good reason you want to do that. I don't know, sure who—maybe there's health reasons or family. Like, great, of course.

But if all you want to do is play the odds and optimize for success—yeah, I can't really understand why you wouldn't want to be here.

And I think—and that's not anecdotes; that's numbers. That's just numbers. Yeah, you know, it's funny because I was thinking about this in the context of a casino where I'm like, imagine you sat down at the blackjack table, but you didn't know basic blackjack strategy, right?

So, you know, to double down, when to split, yeah, so when you could still—you can still win. You can't, but like, it is so easy to get that one hour of instruction, and that increases your odds so much. Getting into the Bay Area is so relatively easy compared to all the other things you have to do to succeed.

Choosing where to live is so relatively easy compared to all the other things you have to choose correctly. Why not pick up the easy wins? It's an easy percentage multiplier, and I'm like, this game is so hard; you might as well take the easy one.

And it's like, so to wrap it up, we have a strong disagreement. I think the suburbs are horrible; you clearly like them. By the end of the day, there's room for both of us.

Yeah, we're both in the same ecosystem, right? We're both working together, yeah, and we're recording this video in the freaking suburbs too! We came to my area.

Oh man, all right, great chat.

Also, thanks.

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Thank you.