Why the Bay Area isn’t necessarily the place to be

I really thought this was a great recent post on the 37 Signals blog, explaining some of the reasons you might not want to build your tech startup in the Bay Area, and its something I wholehartedly agree with.

The dominant Bay Area business approach is raising a few million in Venture Capital, hiring 15 employees and getting a nice office, not worrying much about actually generating revenue, all in the hope of getting acquired in 18 months by Google or Yahoo. I know because I’ve been down that path more than once.

This model obviously works spectacularly well for some people, but they are not recipes for building sustainable businesses.  I won’t repeat the entire post, suffice to say that it does a good job of articulating why I’m bootstrapping Uprizer Labs in Austin, and quite happy to stay here for the time being.

Don’t get me wrong, I’m not saying that there is anything wrong with venture capitalists, all the VCs I’ve worked with over the years have been good, honest people who genuinely want you to succeed.  Obviously their model works too, otherwise their limited partners wouldn’t be entrusting them with billions of dollars, as they do.  And some business can only work with the kind of cash injection at the outset that venture capital provides.

But the problem is that venture capital can allow entrepeneurs to delay or bypass the critical initial stages during which you must really validate whether there are customers out there for what you are building.  If you do that, then really all the venture captical does for you is to pay you a salary while you march towards failure.

With my current project I made the decision early-on that I would go out and find customers for what I was building before I even started to build it.  That is what I did, and I was fortunate enough to find two great customers who have worked with me as I build SenseArray to ensure that it meets their needs.

Knowing that there are people out there ready to write you a check once you’ve built what you are building gives you a great sense of comfort, which I’ve sometimes lacked even after I’ve raised venture capital.  I can’t guarantee that I’ll be successful this time around, but so far I couldn’t ask for things to have gone any better.

Leave a Reply

Your email address will not be published.