Wednesday, November 14, 2007

Why Being Outside Silicon Valley is Good for Startups

One of my clients has been on an acquisition spree in Silicon Valley this fall, gathering interesting perspectives between wheatgrass and soy shakes. His notes: development cost and employee retention are two of the most significant barriers to growth for Silicon Valley startups. For these reasons many SV VCs, he says, will not fund startups unless at least 50% of their development work is done outside of California.

By contrast, entrepreneurial communities outside of California tend to have significantly less employee churn in high tech companies. How valuable is employee retention in high tech these days? Take a look at Cognos. IBM is said to love buying Canadian companies like Cognos because of their tremendous employee stickiness. Next time one of my American clients ridicules Canada's pro-employee ways, I'll remind them of this.

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