Looking for a place to launch your startup? Follow the money – literally.
Most company founders dream of taking their company public or, at a minimum, getting a fabulous offer from someone who wants to buy their baby. That’s a key thing to consider when you’re evaluating the best place to launch your company. However, startups on a razor-thin budget may need to operate in an affordable area while providing employees with a decent lifestyle. Sometimes those two factors synch up – but sometimes they don’t.
How do you decide which approach is more important to you, and which area fits your needs? We can’t tell you that, because it all depends on your priorities and resources. But we can outline some of the places where launching your company might help you align these realities.
For starters, investing information provider CB Insights listed the area among the Top 50 places for well-valued VC-backed exits. That means it’s a promising place to be when you’re looking for money, because investors are more likely to make money when it’s time to cash out through an IPO or sale. Overall, startup exits in Washington State were valued at $9.2 billion so far this year.
Seattle is considered a business-friendly city, doling out $41.1 million in small-business loans last year, according to Entrepreneur Magazine. Also, Washington doesn’t have an income tax, leaving residents with more money in their paychecks, observes George Paulsen, a CPA and tax and business advisory partner with Hood & Strong in Silicon Valley.
Texas is another state listed among CB Insights’ Top 50. Like Washington, Texas doesn’t impose an income tax. However, Paulsen noted that the state’s business tax can prove difficult if an entrepreneur doesn’t plan carefully.
Still, in Texas – as they say — everything is bigger, including the amount of money Houston doles out to its young businesses. Last year, Entrepreneur says, Houston granted more than $250 million in small business loans.
When it comes to IPOs or getting acquired, Illinois ranked fifth in the CB Insights report, generating $2.3 billion so far this year. The state had a similar ranking for the number of exits during the period.
One of the most promising places to locate is Springfield, where the cost of living is 12.3 percent below the national average, according to a Kiplinger report on the cheapest U.S. cities to live in. Additionally, tech startups can get a helping hand from the Illinois Tech Association, which aids startups by helping them do everything from accelerating their business to finding talent.
Though Massachusetts is an expensive state to live and run a business, it does rank fourth when it comes to the number tech-startup exits. Among its strengths is Cambridge-based MIT, which provides a huge talent pool for new companies. MIT Professor Don Sadoway, for example, recently landed $15 million in venture funding for his liquid batteries firm from Khosla Ventures, reports Clean Technica. Unfortunately, Cambridge scores 165 on the Sperling’s Cost of Living Index. The average for the U.S. overall is 100.
Silicon Valley is the king of locales when it comes to providing a rich technology ecosystem. The strength of that ecosystem is shown in the number of IPOs and buyouts coming out of the area. So far this year, the Valley generated $129.1 billion worth of exit value among tech startups, and ranked No. 1 in the number of exits, as well.
“The only time I see startups leave Silicon Valley is when they grow up and are able to make money and find a cheaper place to run their company,” says Paulsen. “But until that happens, they have all the VCs here to fund them, other startups to plug into and people to collaborate with.”
Unfortunately, Valley town Palo Alto ranked 310 in Sperling’s index.