Location Does Not Matter

Jan 10, 10 in Entrepreneurship, Startups

Seems like lots of people like to talk about how important location is when starting a company. Well, here's a thought.

Back when I wrote an article on Keys to Entrepreneurial Success one of the findings that I slipped in was 50 percent of entrepreneurs ranked location as not at all important in determining the success or failure of their business.

This led me to four conclusions.

One, entrepreneurs start businesses that have an opportunity to be successful in their current locale.

Two, entrepreneurs that are busy growing a business don't care about location.

Three, the vast, vast majority of people that talk about the importance of location are not entrepreneurs that are starting companies. They are observers or people within a startup ecosystem with a vested interest and an agenda.

Four, location does not matter.

Comments

I find that the vast majority of people saying location doesn't matter are state or local government employees, or already participated in an exit, almost always during a major economic boom. Its really funny how few people attributes their success to their location, experience or an ecosystem.

Russell Jurney | Jan 10, 10 at 10:36 PM

I'm going to double reply because I'm up late studying and can't sleep, and you got under my skin, because you aren't often very wrong.

There are actually a broad variety of characters promoting location as important. All have a vested interest in doing so, just as people in less advantaged areas have a vested interest in saying location isn't important.

Ron Conway - Serial entrepreneur, most prolific angel investor on earth
Guy Kawasaki - Alpha Entrepreneur, VC
Mike Maples - Serial Entrepreneur, Innovative Early Stage VC
Paul Graham - Entrepreneur, Innovative Angel

I don't believe any of these guys were born in Silicon Valley, all came there to follow opportunity, and now aggressively promote it. Certainly none of them are 'on the sidelines.'

Academics have less of a vested interest in any one location, but are of course trying to make their careers. Top academics promoting location as important:

Michael Porter
Richard Florida
Annalee Saxenian

There are lots more.

The most common successful founder path is to work in a startup cluster, to found a company with coworkers, to raise money locally, and to be acquired locally. How you can spin that into location not mattering is beyond me, because where you are located determines what work experience you can get. Note that in your source 97% of successful entrepreneurs surveyed said that work experience mattered.

One company can do anything, and wherever you are, everyone ought to know that. You can build a successful internet company in rural Minnesota. I know, I consulted for a great company there for two years.

But people should also understand that environment factors greatly into their odds, and when they pick a market to attack whether or not it fits their regional advantage, they are choosing to succeed against all odds when they don't have to.

To follow your bullet points, I started my own research into this topic because I looked around me and I saw that:

Zero: I was going to be on the sidelines for a couple years while I got my life in order from the consequences of repeated failures, and needed a productive hobby.

One: Most of the 'startup community' around me was focused on ventures that had little chance for success in their location.

Two: As a result of this, lots of productive energy was going into ventures that weren't growing. I saw my friends running up their credit cards and getting deep into debt, using a playbook that did not apply to their location.

Three: Nobody was talking about this. In fact, everyone was pretending it wasn't happening. In fact, rich middle aged guys who made their money during the dot com boom were cheering young Atlanta entrepreneurs right into the firing lines. Kamikazi economic development through chamber of commerce false optimism.

Four: Location matters, and the sooner the community learned this, and channeled their efforts into the real economy around them, the sooner Atlanta as a startup town would improve.

Could you be Lance if you'd stayed in Louisville? I think you are a product of Atlanta. I think location matters.

Anyway, this is my two cents, and maybe I'm wrong. But I find that the more I think about what my location has to offer, the better I am at taking advantage of those things, and the better my ideas are.

Ernesto Double Reply | Jan 11, 10 at 04:14 AM

If I stayed in Louisville I would have opened a 12 step smoking cessation chain while laying down small batch bourbon barrels. At this juncture I would be poised to leverage the city's expertise in health care insurance to take advantage of all the funding getting ready to flow out of DC.

And your last point is in perfect agreement with my first conclusion.

Lance | Jan 11, 10 at 08:00 AM

So then you might say that location matters, but there is opportunity in all locations - so hone in on the one's around you?

Russell Jurney | Jan 11, 10 at 08:36 AM

That was my conclusion based on half of the entrepreneurs surveyed saying location is not at all important. The question bouncing around my head was not if location is important. The question was all these smart people that you mention say that location is important, but many entrepreneurs do not, why?

Lance | Jan 11, 10 at 08:56 AM

Why do many entrepreneurs say location isn't important? Same reason they say experience isn't important, or having funding isn't important, etc.

Entrepreneurs have to believe they can accomplish anything, that they can overcome any obstacles. If I was an entrepreneur starting a tech company in Atlanta and someone asked me if I would have more success being in Silicon Valley, I'd tell them to go climb a tree, I don't need to be there, I can do it from right here.

And as an investor, I wouldn't want to invest in a startup where the entrepreneur was telling me he'd have more success if he was in another city. Screw that.

Jeff Hilimire | Jan 11, 10 at 09:30 AM

Location is not important so long as you are with your customers when they need them, physically or digitally. I founded an ad agency 100 miles out of London to save on set up costs and made damn sure I was wherever my clients wanted me to be. It meant more travelling for me and my staff but it also meant far lower overheads.

Without the cost of the location we could start the business with just £5000 and grow it to the sale/exit value of £10m.

http://www.scribd.com/doc/24186594/How-to-start-a-business-with-no-funding-and-succeed

Jamie Riddell | Jan 11, 10 at 09:43 AM

When I first read this, I almost wanted to add:

5. Entrepreneurs are sometimes delusional

:-)

I like to think location is becoming less important. But to say it is not a factor is ignoring reality. Our department of economic development and local chambers spend a great deal of effort to convince companies that location is important and that Atlanta is the place to be. And it is.

Can you build any company anywhere? Of course! Should you? Not so sure.

This should be an interesting conversation.

Paul Freet | Jan 11, 10 at 09:45 AM

And that, my Lord, is how we know the Earth to be banana-shaped.

Somebody needs to review their statistics. If 50%
of a sample says "A" and 50% of a sample says "B", you won't be able to derive significance if you're trying to ask the question "A or B"?

What you can do is ask "what factors separate A & B?". I'd suggest you find the original data set and run some T-tests, an ANOVA, and maybe a principal component analysis. Then you might have something interesting to work with.

Michael Sorensen | Jan 11, 10 at 11:34 AM

Michael, also - they surveyed successful entrepreneurs. Sample bias. If location isn't a determining factor in your success, it just means you're outside a really hot area and made it anyway :)

Russell Jurney | Jan 11, 10 at 11:38 AM

you are wrong - location matters (period)

your wong | Jan 11, 10 at 12:27 PM

The entrepreneurs surveyed in the group were not necessarily "successful" so that was not a sample bias element. Of course, like any sample, there is a response bias.

Lance | Jan 11, 10 at 12:44 PM

"The survey researched the beliefs of 549 company founders of successful businesses in high-growth industries, including aerospace, defense, computing, electronics and health care."

Selection bias.

Russell Jurney | Jan 11, 10 at 05:12 PM

Geez Louise Russell, first you personally attack me and then question the validity of the data. Moving to Cali made you liberal.

Lance | Jan 12, 10 at 05:47 AM

I'm a bigot, but for the left. :)

Russell Jurney | Jan 12, 10 at 10:20 AM