Amazon’s initiative to expand beyond its Seattle headquarters has certainly stirred up a hornet’s nest of controversy. But it also has amplified a broader trend that is under way: the need for high-tech companies, large and small, to look beyond the major high-tech metropoles of Silicon Valley, Seattle, New York City and Boston to scale their businesses.
The cost of growing a business exclusively in these tier 1 hubs is high, and the competition to attract and retain top talent is fierce. While there remain ample benefits to maintaining a strategic presence in these locations, it also behooves companies to look elsewhere for expansion. The good news is there are some very attractive targets to consider.
This rapidly growing trend is widely acknowledged. More pressure is likely to come from venture capitalists encouraging startups to explore a multisite model in order to scale in a more economically responsible manner. There has been a lot of conversation online recently calling attention to this shift.
At EmployeeChannel, we experienced this firsthand. A significant portion of the financing round that we closed this year was earmarked for expansion of our product development team. We recognized the challenges of scaling exclusively at our headquarters in San Francisco, and proceeded to explore expansion options outside the Bay Area. But in doing so, we didn’t want to sacrifice the caliber of talent we wanted in exchange for a more financially responsible growth path. Unlike hardware and systems companies, where capital expenditures often represent a major component of spending, it is employee compensation that typically represents the lion’s share of spending for software startups.
Outsourcing and offshoring were not options for us. As a mobile-first, cloud-based, AI-driven startup, we need to own our core competencies. We also desired a team that shared the same passion, commitment, energy and sense of urgency that is the hallmark of high-performing Silicon Valley startups. So, we decided early on to limit our search to either near-shore or on-shore options.
While the decision to expand outside San Francisco was primarily a financial one, we also wanted access to top talent. It was important to us to be in close proximity to world-class universities, both to fuel our rapid growth and to support collaborative research in AI competencies that are core to our product. Additionally, we wanted to leverage the same type of innovative community that we’ve enjoyed as serial entrepreneurs in the Bay Area. And it all had to come together at a startup pace.
We pulled together a short list of target locations, many with which we had some prior experience: Dallas, Portland, Toronto, Pittsburgh and Rochester. Ultimately, Rochester rose to the top of the list, in part due to my strong ties to Rochester Institute of Technology. I was introduced to Greater Rochester Enterprise early in the process, and stressed our need to move at a “startup pace.” GRE president and CEO Matt Hurlbutt and his team obliged, getting us the information we needed on financial incentives and space availability in a matter of weeks.
But there’s another equally compelling advantage in our decision to build a team in Rochester, and it is one that benefits our newest employees. The cost and quality of living are on a whole different scale. Big cities like San Francisco certainly contain an excitement that some people crave. But for a significant percentage of the work force, the allure of big-city life is overshadowed by rather grim financial realities. It’s hard to envision a rewarding future when the majority of your paycheck goes toward rent, with little left over for savings. Not quite the American Dream that keeps your employees motivated.
We’re able to offer our employees the ability to have their cake and eat it too. They can be part of the Silicon Valley startup experience, working with a seasoned team of entrepreneurs with a solid track record, without having to sacrifice their choice to stay in the Rochester area, enjoying the community and culture that they consider home. They aren’t forced to relocate to follow an entrepreneurial career path.
Read Paul Ericson’s post: “Rochester’s affordability edge.”
In May, we celebrated the launch of EmployeeChannel’s Product Development Center for Excellence at 40 Franklin St., across from the Sibley Building. The entire process took three months—start to finish—and our initial team hit the ground running, performing at the level for which Silicon Valley startups are renowned.
By expanding in Rochester, EmployeeChannel is poised to enjoy a bit of a first-mover advantage, together with companies like Brand Networks and LiveTiles. The warm reception we’ve received has been incredible, and the energy level is infectious. It’s clear that something very transformative is under way here. We’re excited about our choice of Rochester, and believe it may be a harbinger of other Silicon Valley software companies to follow. Buckle your seat belts, folks. It promises to be one helluva ride.
Mark Oney is a serial entrepreneur living in Silicon Valley. He is an RIT alumnus, a founding member of RIT’s West Coast Board of Advisors, and the senior vice president of product operations at EmployeeChannel Inc., his eighth startup. To this day, he remains an avid fan of Jay’s Diner.