One reason the Bay Area is so expensive is that the way to make a successful startup is to make the right product, not to pay employees less. So cheaper locations have no advantage.
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Except you get a longer payroll runway on the same capital which gives you more chances to figure out what the right product is.
In principle that could make a difference, but empirically it doesn't. Probably because good founders can usually raise more money if they need it, even if things aren't quite working yet.
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... Or a smarter employee (assuming he is being paid more) can write a more optimised code or convince/convert/target a higher value customer and hence returns higher bang on the buck spent on him or run faster experiments.
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This seems more like a confirmation bias where to prove Bay Area is the only place to build products, people will produce any literature to prove their point. The reality might be stark different
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Interesting...This is the first time I would disagree with PG...and somewhat agree with you thanks to the Nassim's BlackSwan
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you've stressed start-up prudency in the past, no unnecessary expenditures i.e Yoga studios or overly expensive offices, does that still stand? If talent and product are what it really comes down to.
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Raising and product development, or especially technical R&D are incredibly different skills though that require mostly separate bodies of work. Raise more money = now you have two problems
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Huge confirmation bias
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usually. and this assumes that employees come out whole.
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By "empirically it doesn't", you mean the numbers of succeses? Would love to see the numbers on failures who specifically blamed location and payroll costs over lack of product value.
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I'm also interested in seeing these numbers if they've been compiled by anyone.
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The majority of investors are so risk averse or socially compliant that they often miss opportunities that make total and complete sense. Lots of betas where you would expect alphas.
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