There has been a lot of talk recently about the “best” place to start a startup. Elad Gil’s controversial thread on Twitter made a compelling case for why the Bay Area should continue to be the location of choice for founders.
I think some theoretical nuance and practical observations are missing from the conversation, which I hope to add here.
I’ll start by saying that if you are a famous second-time founder with an existing network of talented engineers who will immediately leave their jobs to work with you, or you are a genius technical founder who can attract engineers who want exposure to your technical skills, or you have some other ‘unfair’ advantage in recruiting, there is no better place to start a startup than the Bay Area.
Otherwise, there is no particularly good place to start a startup, and life is going to be hard.
Some background on the Bay Area: the Bay Area benefits from what urban economists call economies of agglomeration – that is, benefits that accrue when firms and skilled workers are located in close proximity. This is what Gil was largely talking about in his thread: “[e]ngineers, sales, PMs, others who have worked at breakout companies all based in [the] Bay Area, [e]arly customers (influencers for consumer, buyers for enterprise) all based in tech clusters, [and s]mart angels & venture capital is here, & smart service providers for legal, real estate.” This creates a positive feedback loop, just like network effects in software that all founders are familiar with, causing the magnitude of the benefits to increase as time goes on.