I had a lot of conversations after my post on Southland about why I chose not to talk up the low cost of living in the South as a reason it should attract more startup attention. I can’t tell you how many government officials bring this one up as a huge advantage over notoriously expensive places like San Francisco and New York.
In addition to low costs of living, there are very real tax advantages to being based in Tennessee or Nevada and likely other states that I know less about. And given my near constant complaining about San Francisco and California’s downright hostile attitude towards startups, you’d think that one would be appealing.
But there’s a reason I never talk up taxes or cost of living as reasons other startup ecosystems will take off: Because none of the people who really matter give a shit about these things.
Facebook founder Dustin Moskovitz said this best at one of our very first PandoMonthlys. Someone in the audience asked why he didn’t start Asana in a place like Nevada, and he was almost confused by the question. Here’s how he answered it:
The clip took on greater meaning the week after our talk when Eduardo Saverin — another Facebook founder by way of a lawsuit — renounced citizenship to avoid taxes just before the Facebook IPO. It showed a sharp distinction between the way Saverin thinks and the way Moskovitz thinks.
To put it bluntly: The kinds of people you want in a new ecosystems aren’t the Eduardo Saverins. They are the Dustin Moskovitzes. In the early days of Facebook, it was Moskovitz who left Harvard to move to the Valley and build Facebook into something great. Saverin stayed back East and hedged his bets. It was Moskovitz (and Mark Zuckerberg) who didn’t to throw banner ads all over the site to maximize immediate revenue. It was Saverin who wanted to do that. And it was Moskovitz and Zuckerberg who earned their billions by building a company.
Great entrepreneurs aim for the best case scenario and optimize for taking as much risk out of the equation as they can. Prioritizing the location of your headquarters based purely on cost aims for the worst case scenario, at the risk of putting your company farther from investors, potential acquirers, and talent — three things that could have very real consequences on your ability to scale or even just stay in business.
Note that while the irascible Bryan Goldberg is noisily leaving California because of regulations, he is building his new company in New York – not exactly a haven of operating cheaply. Rather than optimizing for cheap and going to, say, Nevada or Detroit, he’s he’s optimizing for the less arduous ecosystem where he can also have the tools he needs to build an online media company.
Ecosystems should just stop making this argument. They’re never going to get top entrepreneurial talent, and will only attract those people not aiming high enough, who are motivated by saving money, not making it, and not building something great — the mercenaries, rather than the missionaries. Take a lesson from the daily deals space which got overrun by bargain hunters and rabid couponers who would never translate to customers paying full price.
Aim for the dreamers, not the bargain hunters.
[Illustration by Hallie Bateman]