Does Your Startup Need To Be In San Francisco?

0:00We're working together. We're in the same room right now. Yes. We get to live in the same area even though our personal decisions about where we live are wildly different. We have very different lives. I don't have a yard. I have kids too.

0:13All right, this is Michael Seibel with Dalton Caldwell and today we're going to talk about does your startup need to be in San Francisco? Oh man, we're just we're wading into the to the debate of the of the moment. So why don't you kick it off? You've got a controversial view. How about this? Yes. Usually in these videos, you and I just agree on everything. I do. It's boring. We disagree. Strongly. We have a different opinion here. I'm confident you're wrong. Okay. Good start. So let me start by saying I don't think everyone's startup needs to be in San Francisco to be successful. Oh, no. And that you could build a successful startup and not live in San Francisco.

0:55Please. Okay. Please share. So a lot of the reasons that folks read the discourse about San Francisco, and man, there's a lot of discourse, is they're very fixated on the lifestyle of living in downtown San Francisco. They see all the photos on Twitter. They hear the stories. It's all over national media. Like my parents know all about San Francisco politics. My dad's like, so how's it going in San Francisco? right like okay so for me personally i actually prefer to not live in a dense city yeah i like living in a place that is warm and bright and sunny and i can walk around and like the birds are singing and like yes there's trees everywhere um i kind of like living in a boring place personally i'm speaking for myself where there's not a lot of distraction and i can just kind of focus on the work I'm doing than, you know, really intense stuff going on around me all the time.

1:50Also, as you know, you know, I got small children and just for my lifestyle and the happiness of my family, like I prefer to live just in a different environment. You like having a yard? I do. Okay. So I, so I enjoy those things. And then also I think sometimes what people forget, especially that aren't in the Bay Area is how the actual big employers for most folks in tech are not in San Francisco. Right down south. Google and Facebook and Apple, the Apple HQ is in Cupertino. Yes. Nowhere near the San Francisco. All those old boring companies. Yes. And so clearly in the history of this stuff, all these great companies were built outside of San Francisco.

2:27Like if we actually look, how many of the most epic companies in the world in tech were actually built in San Francisco? Yes. It's actually not that many. And so to argue that every company has to be in San Francisco is factually wrong. Fair. And here's why you're wrong. Okay. So I live on Market Street in downtown San Francisco. Fair. Just to be clear. Okay. For me growing up, living in a city was aspirational. So I spent my high school and middle school years in a suburb of New York. And when you do that, you know. That means New Jersey, right? New Jersey. Whenever someone says a suburb, I'm from New York.

3:07Well, where exactly? We're Connecticut. They're like, well, you know, upstate. Yeah, yes. Middle school and high school in New Jersey. And when you're growing up in a suburb of New Jersey, you know where you are is not where the action is. It's true. You know, almost by definition. And at least for me, I perceive getting to the city as part of growing up, becoming an adult. That was a big part of kind of my mentality. Two, I like nice restaurants and nice bars. and those things don't exist in the suburbs. I know someone's going to be in the comments saying like, but in my suburb, there's like, no, no, it doesn't.

3:48Sorry. It's just good for where you live. Another thing that I like, especially as a startup founder, I liked having a chip on the shoulder. I liked being in a place where there are things I couldn't afford, where there were places I couldn't go unless I was more successful, where I could kind of see what success could get me. and I always felt like the suburb tried to hide that away like everyone was in the same kind of house in the development and like we all have our own space we can't see each other like I liked seeing what if we were to make it what I might be able to get that was really amazing also I spent my first kind of nine years living in a city in Brooklyn so I was used to living an apartment.

4:31That was never weird for me. And there are a bunch of amazing newer companies, Uber, Airbnb, DoorDash. I don't know those companies. Well, DoorDash was Palo Alto Food Delivery. That was their original name. So they didn't move there. They didn't start there. And they moved. They moved. So I think that my core point is that the city is the better place for a young startup founder to get ahead. Now, this is kind of a fake disagreement because if you kind of have been parsing our words carefully, we're talking about living in the Bay Area. So I'll ask you straight up, Dalton. Would you recommend someone starts a startup outside of the Bay Area?

5:17Yeah. Well, I genuinely would not. We agree. So the part we're agreeing with is that, again, think about it. We're working together. We're in the same room right now. We get to live in the same area even though our personal decisions about where we live are wildly different. We have very different lives. I don't have a yard. I have kids too. Yeah and so what's cool is we get to work together. Yeah. And we get to work with all these amazing people and yet we have very different choices on how we want to live. Yes and that only would happen here because this place attracted both of us. Yes. And I think that what's not spoken about enough and it's a point you make a lot is that there are certain cities that are just better and there are certain regions that are just better.

6:01We can talk about all the reasons why, but if you want to be the best in finance, you're probably going to find yourself in New York. Or maybe London. Or maybe London. Yeah. If you want to be the best... Not London. Okay, anymore. You're in essence Brexit. Yeah. Brexit kind of fucked that up. If you want to be the best in entertainment, you're probably going to find yourself in LA. And the reason why is because when you want to be top 0.001%, you want to be around other people who are trying to be top 0.01%. And I think both of us wanted to be top 0.01 % in startups. Yeah. You're from Texas. Yeah.

6:39I'm from fucking Jersey. Like, we didn't grow up here. Yeah, that's true. We made our way here. And when you're here, you get to consume all the other people like us who are looking to be the best and willing to get in the car and make our way here to do it. So I think that's a huge, huge factor. Yeah. And I just think a lot of the folks that I talk to, they have the opinion from reading Twitter and reading all this stuff that they all need to agree with you on this point. And that like if moving to San Francisco means. If they live downtown, in the Tenderloin. It means you have to make some really serious.

7:12If they protest on the weekend. Yeah, but again, I talk to people when I fund people for YC, and I think they have a lot. A lot of people have a lot of anxiety about these issues. And again, what they don't realize is, do you know how many people live in East Bay, and they live in the peninsula? It's a huge area. It's a huge area. Yeah. But we all get to work together. Yes. But we get to make our own decisions. Yes. We get the benefits of living in the Bay Area and having the network effects of the city. Yes. Without all living in like the, like our lives are not the Twitter thread. No. showing photos of what's going on in downtown San Francisco.

7:44One, I think that like what's tricky is that they're all of these embedded interests who I think are influencing startup founders, right? They're the politicians who are like, oh, come to my city, come to Miami, because like we're trying to make it startup friendly. Those politicians, what they're looking for is tech jobs. What they really need is a Google office. Like they're not going to get the Google office by having a startup culture, but they're politicians. They don't realize that. There are other people who are just looking to kind of flame folks on Twitter. And right, like the easiest way you could do that is start posting shit about San Francisco socks, right?

8:21And then get into some debate. And I think the smartest founders look past that. They look past all these like stupid debates. And one of the things I think they see about the Bay Area is the network effect. So why don't you go into like, what's going on here? Like why are billion dollar companies just seem to keep popping up after decade after decade here? Well, I think, look, network effects are powerful. We know this. This is the thing that makes things like Airbnb work, like Uber work, like all the startups, network effects are like really powerful. That's why Facebook has any value at all is network effects.

8:54And basically what's weird about network effects is if you're not benefiting from them, you don't know what you are missing. And a lot of the times when people want to talk about, well, I don't need to live there, blah, blah, blah. Okay, that's fair. You won't know what you're missing. It's all the things that won't happen. It's all of the people that you won't meet, all the chance encounters you won't have, all the employees you won't have, like all these surface areas for luck. You know, I like to talk about how to maximize luck. You know, think about how many people, again, let's talk about non-tech.

9:27If you want to make it as an actor, think about how many people their story of their big break is that something happened in like Los Angeles or New York. Yeah. Or a band that moved to Los Angeles or New York. When the actual moment happens, when someone spots them or finds them, or like that lucky moment, whatever that is, the work that they did before that was to put themselves in that position. And so no one is going to take someone that's outside of this area and tell you this is what you're missing out on. Can I say something that's even more? I think the people here sometimes don't understand the network effects they're consuming.

10:00You and I both saw a lot of people leave the Bay Area during COVID, all of them came back. And they all said this. They don't say that as publicly. They don't say that as publicly. They all came back, yeah. And all of them said the same thing, which was basically like, I missed the community, but I never really understood that I was consuming the community. I thought I was working all the time and da, da, da, da. But like, I actually was consuming a community of people who are really into startups. And when I moved to Seattle or Austin or New York or da, da, da, da, that community wasn't as strong and I missed it.

10:31But isn't it weird? And there is tech there. Yeah, but there's tech there. And there is good lifestyle there, but that's not startups. Startups is different than tech, yeah. And I think that what's so funny is that you know this is counterintuitive and hard when the people who don't consume the network effects don't know it exists, and the people who do consume the network effects sometimes don't realize it exists either. So this is a subtle point. It makes sense that people would be confused by this. And then when you add in some choice photos of San Francisco, and it makes sense why people would say, why don't you do this anymore?

11:00What I will say, though, to kind of like finish this point is I think one of the slightly dangerous things that kind of sneaks into the startup game that also causes people not want to come here is that people don't realize that they need to be aiming for greatness. I always like to equate this back to sports where it's like there are so few spots in the NBA, let alone on the all-star team, let alone the Hall of Fame. The bar is so high to get into the NBA that anytime you're a basketball player anywhere, you want to be the best basketball player. On your high school team, on your AAU team, on the invitation, you want to be the best basketball player anywhere.

11:44because you know that like the average NBA player was the best basketball player like anywhere. And I think that sometimes startup founders miss this point. And they're kind of like, I want to be in the game versus I want to win the game. And I think that like it's really easy to say, well, you know, I can be in the game in Austin. I can be in the game in Seattle. There are investors there. There are people there. I can be in the game in New York. And I wish that we were more honest that like, yeah, you can play basketball for your high school team. But that's not, that's necessary but not sufficient to make the NBA.

12:26If you want to be a great founder who really impacts the world and helps lots and lots of users, you have to aim for great. You can't just aim for being in the game. And I actually just bring it back to statistics and odds. So let me be really precise. Because I can imagine how some people will respond to some of the things you're saying here. And they're going to throw anecdotes at us. They're going to say, there's this and there's this. Shopify is in the middle of the... And it's true. I have nothing to take away from those things. MongoDB is in New York, and I've been told that by every fucking New York founder for a decade.

12:57MongoDB! Yeah, great. And again, good for them. Like, rock and roll. They're doing well. But the point is, we're actually trying to impart advice to increase your odds of success. Exactly. Because just like with people that want to become Hollywood celebrities or rock stars... It's hard. There's certainly anecdotes of people that were discovered and everything slipped into place for them. Yes. But if you actually just look at the numbers of how you increase the odds of success, moving to an area, moving to the big leagues was a key part of it. And so I would just encourage folks that are unsure about this debate or they don't have their mind made up to realize that the anecdotes are true, that you can do a startup outside the Bay Area.

13:37Of course. And maybe there's a really good reason you want to do that. I don't know. Sure. Maybe there's health reasons or family. Great. Of course. But if all you want to do is play the odds and optimize for success, I can't really understand why you wouldn't want to be here. And that's not anecdotes. That's numbers. That's just numbers. Yeah. You know, it's funny because I was thinking about this in the context of casino where I'm like, imagine you sat down at the blackjack table, but you didn't know basic blackjack strategy. You didn't know to double down, when to split. You can still win. You can still win.

14:10You can't, but like, it is so easy to get that one hour of instruction and that increases your odds so much. Getting into the Bay Area is so relatively easy to all the other things you have to do to succeed. Choosing where to live is so relatively easy to all the other things you have to choose correctly. Why not pick up the easy wins? It's an easy percentage multiplier. And I'm like, this game is so hard. You might as well take the easy one. like. So to wrap it up, we have a strong disagreement. I think the suburbs are horrible. You clearly like them. By the end of the day, there's room for both of us.

14:52Yeah, we're both in the same ecosystem, right? We're both working together. Who knew? Yeah. And we're recording this video in the freaking suburbs, too, which is hilarious. We are. You're right. We came to my zone to do this video. We came to your place to do the video. Oh, man. All right. Great chat, Dalton. Thanks.

15:15It just reminds us of this specialonen