More than a year ago there was a post on contentsutra and an article on Live mint on the same subject. Both the articles covered few startups, in cities like Nagpur & Trivandrum ( Including my earlier startup) and echoed the opinion that its not the location that matter but the product & the people that matters.
Let us take the example of a Start up , a mobile game developer who was among the first few companies to develop games and other applications to Reliance. Based out of Trivandrum , this company was the only one till date to win the Dhirubhai Ambani Developer Program ( DADP) twice in a row and many other awards including best mobile application from Nasscom, also they were the first to port games for reliance colour handsets. Other players in the market during this time where Nazaara & Mauj . While both Nazaara & Mauj was able to raise first & second round founding from leading VC’s , this startup remained as a small player in the market irrespective of it’s strong tie-ups with Reliance & Tata Indicom as well strong media coverage ( CNBC , leading business mags & blogs, every body had covered them). So only reason why they where not able to grow in the same pace as that of Nazara or say a Mauj is becuase of it’s location and their founders also preferred not to re-locate. Being in the mobile VAS space & being not close to the VAS head who is sitting in Delhi or Mumbai means you are loosing out on a lot of things. Firstly it requires frequent travel, presentations & follow up which could be a costlier affair for a startup if they are not located near to the operator.
Coming to my own experience, most of our alliance partners ( who forms a major part of our value chain, where located either in Mumbai or Bangalore or other big cities), which forced us to initiate discussions & finalize things over mail, phone or online conference. But most of our partnerships got delayed because we couldn’t travel down for an eye-to-eye meeting or presentation due to a lot of constraints. Again frequent travel also eats up valuable time which in turn affects the productivity of the organization ( especially if the startup is really small), leave alone the financial burden you incur for flight tickets ,stay etc. Again as we started growing from a 10 member outfit to a 50 member organisation we were searching for experienced people in senior management positions like Banking Alliance, retail etc. Most of whom we approached where not ready to move to Cochin even though they were looking forward for challenging opportunities in startups.
But being in Cochin has it’s own advantages especially on running costs,HR etc (In Cochin you can get an office space for rates ranging from Rs 27/sq ft to 80/sq ft for rent…what about say a Mumbai or Bangalore?).
Being in a small city or town has got it’s own advantages as well as disadvantages. My suggestion to startups facing similar constraints would be hold on in your existing location
( this has it’s own advantages like support from parents, network of peers to support you..etc) till you become stable & parallely you can use a one seater office + virtual office from Regus or DBS which will reduce cost as well as serve the purpose.
- Startups , Students and Universities ! - June 17, 2008
- Is locationa constraint for start ups ? - March 8, 2008
- Ever dreamt about managing failures! - March 6, 2008
You have two options either you control your business or business control you. The best business practise is controlled by business. If you have to reallocate or re arrange or change your position. JUST DO IT.
Just do anything which can bring down cost and give you competition advantage. Business is not about personal Ego.
Yes location does matter. That is the reason wannabe models and actors move from small towns to Mumbai or companies come from the US to Bangalore for outsourcing.
Similarly for a startup depending on industry location is very important. Anything to do with consumer facing business, Mumbai is probably the best. If you need to be an outsourcing company then maybe you should be in Bangalore. If you are an infrastructure company then probably Hyderabad, and so on.
Don’t take location lightly.
I just moved to Mumbai from Bangalore because my startup makes more sense here. It’s a losing battle to fight from a remote location; connecting with people is too difficult when you’re far away, plus you can’t grow the network. But there are good things that can come from small cities – Bangalore itself was small and sleepy when Infy started out.
It’s also about moving away from your comfort zone. I have lived in Bangalore for the last 12 years and have a close association with it over the last 25. I know nooks and corners of the city, roads which aren’t on the map, bus routes to yelahanka, and the all night idli and jalebiplaces in balepet. But there was way too much fall back support there. Now, I have to learn everything and it’s a humbling experience – failure is simply not an option. the “If I go down, I’ll go down fighting”…perhaps that might make the difference.
Also read:
http://www.paulgraham.com/siliconvalley.html
and
http://www.paulgraham.com/america.html
Interesting thoughts there.
1+ with Abhay’s opinion on this. Location does matter and to a great extent, and affect each and every person related to the startup. I’ve been in a situation where we lost people while moving our startup from a posh, in-city but small/cramped location to a spacious however suburban, not-so-upmarket locality, in the same city. The move saved the co. a lot of money in infrastucture, but it paid thru it’s nose in other ways. While everything did settle-down eventually, the initial 6-8 months were tough, with everyone, right from vendors, partners, employees (and even senior management) complaining about it.
However, this may depend to a great deal on the nature of business that the startup involves in. For example, if you deal with purely transcription / regional-BPO, then you could very well exist in small towns/cities, provided the other infrastructure s.a. datacom/telecom needs are met. It is sufficient, if the marketing, partner-management, vendor-management functions are hosted closer to traditional business-centres, and back-office or development functions in smaller-cities/towns. Some businesses on the other hand, may not be able to work at all in that mode.
However, this might change, if large-scale incubation clusters form in smaller cities, which are startup friendly.
I somehow prefer to take a strong opinion on this.
I have been part of a startup which prefered to start in Trivandrum from some reasons. Rest aside, we couldn’t grow to the level which we or our product deserved and if in my opinion single reason was location.
We couldn’t hold onto our ace employees, let alone pull new ones. Location being major issue. There used to be always some hesitation in terms of travelling. Now I understand that as an individual you are not averse of travelling, but would your financial situation as a startup give you enough luxury to do so. I don’t believe. Mosf ot the time you have to end up explaining people about why you are in Trivandrum because it is considered not a positive point but a negative point. This clips your brand image even before it begins to build up.
In my opinion, one should be ready to bite the bullet if one is heading to do a startup. Be closest to your customers/partners because increase in topline will justify the heavy bottomline.