Backupify was started in November 2008 in Louisville, KY. In April of 2010, we decided to move the company to Boston, and we officially opened our Boston headquarters in September. There are really only 3 large startup hubs in the United States: Boston, New York City, and Silicon Valley. This post is about my experience starting a company in the MidWest, and why I chose to move Backupify to Boston.
There are great entrepreneurs everywhere, even in places like Louisville. The problem is that successful startups require more than a great entrepreneur. They require an ecosystem of capital and investors, competent employees, and services and service providers that make startups easier. One common question I get is whether or not you can build a successful startup in the Midwest. Or more importantly, can you build one outside of a major startup hub?
My answer is absolutely. In many cases it won’t be as easy as building one in The Valley, but it does happen all the time. Sometimes, companies are even better off being outside the valley because they aren’t subject to the groupthink and hype that inevitably occur in startup hubs. But I qualify this answer with one key point - there are certain types of companies that are much more difficult to build in a non-startup hub.
People tend to think about startup location in the wrong way. Most people think about where they want to live and argue about why that is a great place to do a startup. The truth is, what really matters is the type of startup you do, how it gets financed, and what markets you play in. If you are playing in markets where you customer is the average American, and you need little capital, or can grow slow, or can use customer capital, then you can build a company anywhere you want to be. But building companies that need a lot of capital, grow extremely quickly (and thus need a lot of employees) or are very high tech is extremely difficult outside of major or minor startup hubs. (Minor startup hubs are places like Seattle, Austin, Boulder, etc… where it’s not as good as the major hubs, but at least you can find startup people)
Backupify was not a good fit for the Midwest because we had a difficult time finding the right technical talent, and we had a difficult time finding funding. When I first started raising money, we were able to round up about $150K on a $1M pre-money in Louisville. That was just enough money to make sure we accomplished nothing significant, so that was the initial impetus for looking outside the city. Once I did that, it quickly became apparent that we could raise a lot more money in Boston, NYC, and The Valley, and at a much higher valuation.
I look at it like playing in the NBA. Some cities don’t have a team, so if your goal is to play at that level, you just can’t do it anywhere. You have to play where there is a team.
Once I decided that Backupify could go this route, I looked at Boston, NYC, and the Valley. California is too expensive, and too far from home. I would love to do a startup there because there is so much energy and so many great people, but maybe next time.
New York City just isn’t my cup of tea. I love to visit, but can’t imagine living there with a family (although I realize lots of people do it). The startup scene is great, but the city just didn’t fit my lifestyle.
So that left Boston. Coming from a place like Louisville, Boston is the most similar. We have good talent pools to pull from because of companies like EMC, Iron Mountain, and Carbonite. There is also MIT and all the other universities that crank out engineers. The startup community here is fantastic, although smaller than the Valley. But overall, I think it was a good move for us. Boston has plenty of great investors, a great startup talent pull, and for the kind of technical expertise we needed, is on par with the Valley.
People like to argue about whether you can or can’t build startups in various cities. As someone who spent a lot of the last 6 months thinking about it, I would say it just depends on your goals and the market opportunity. Anything is possible, but some paths are easier than others.