Starting up a new online app tech company, where to locate?

[BrianHG]

Ok, say I have enough money, 8 figures usd, and I want to create a new company which will engineer and market a new app and hardware in the realm of music and fitness.  For an idea of scale, the company will begin with around 25 full time employees plus around 25 interns.  Where should I locate in California, as all the high tech industries many third party corps I require ties with are located there.

Or, should I stay in Montreal, save a ton of money on HQ.  Though 95% of my business is English in this French province, I can still find local talented English engineers for my department heads.  Though, now, my life will have numerous flights to LA and I wont have access to the same set of board of directors which can open important doors getting good access to the right third party corps which in the long run, may make or break a true success.

Is there anywhere better in North America to locate?

[AG6QR]

I'm not an entrepreneur, but I've lived in the SF Bay area for quite a while.  I'll offer a few thoughts.

LA is the center of the media, entertainment and music industries.  There is also a lot of aerospace and related work in the area, which means there's a pool of qualified hardware/software engineers.  San Jose is the heart of Silicon Valley and the electronics and software technologies.  So I was intrigued by your statement that you'd be flying to LA, since I'd expect flights to San Francisco or San Jose to be more useful for meeting with electronics industry people.  Is it that you plan to meet customers in LA?

In the Bay Area, there's a huge pool of qualified technical professionals in software and electronics hardware.  But there's also a huge pool of employers.  That works both ways.  You can find workers, but if you don't treat them well and compensate them well, they can easily find other employers. 

The cost of living is incredible in the Bay Area.  Check out home prices on Zillow.  It's hard to find a modest house for a million dollars.  It's hard to rent an apartment for 3,000/month.  Salaries are commensurate.  Facebook's median salary is $240,000.  Office rent is expensive.  Taxes are high.

So be careful with the math.  How long do you expect your 50 workers will have to work before your company starts making enough sales to turn a profit?  It seems to me that it would be very easy for 25 employees plus 25 interns to burn through six figures of capital in less than a year.

But despite the high expenses, many companies do quite well by locating in the area, because the talent pool is great, and there are a lot of benefits to being in a place where there is so much electronics industry.  There are a lot of parts and service companies to support the electronics industry -- it's easy to get prototype boards in you hands right away, for example.  The sales reps for all the high tech test equipment will be wining and dining you, and demoing all their latest gadgets. 

Where else to consider?  Perhaps a smaller college town which has a good engineering school?  Raleigh/Durham?  Minneapolis/St. Paul?  Austin, TX?  Ithaca, NY?  Champaign, IL?  There are lots of similar places that have small concentrations of technically educated professionals.

Good luck, wherever you decide to locate!

[ez24]

As a Californian, I suggest NOT going to Calif   Just too expensive and crazy and getting worse everyday.   I hear Atlanta is a good city for tech. 

[BrianHG]

So I was intrigued by your statement that you'd be flying to LA, since I'd expect flights to San Francisco or San Jose to be more useful for meeting with electronics industry people.  Is it that you plan to meet customers in LA?

Actually, that was a mistake, I did mean in the silicon valley area, however, you now made me re-think a few things.

I am in an awkward position.  My technology is modern high tech and relies on some interconnection with Google's new Youtube subscription service, Apple Music, and other streaming services, however, once these connections are established and I have beta release versions ready, it will be more important to have connections in the music and entertainment industry as my main product is not the finished software as it's being given out for free, but, the entertainment media services which it packages.  As for salaries, I well know that my payroll alone will be approaching the 8 figure range, but, it will be worth it.

[aargee]

* cynicism * 
Do what most other tech companies do... “base” your company somewhere in the world where you can get out of paying any taxes.
Where you make your stuff is another issue....

[nctnico]

* cynicism * 
Do what most other tech companies do... “base” your company somewhere in the world where you can get out of paying any taxes.

Precisely. Locate the HQ in Amsterdam (NL) and work from there. Only the sales people need to have contacts with the music industry.

[Alex Eisenhut]

* cynicism * 
Do what most other tech companies do... “base” your company somewhere in the world where you can get out of paying any taxes.
Where you make your stuff is another issue....

In a townhouse in Lichtenstein, like Subway?

[NiHaoMike]

I have to agree that the heart of the Bay Area probably isn't a good place for a startup for the reasons listed. But maybe the outskirts are worth considering?

LA is obviously known for its bad traffic.

Austin (when I was there at least, not sure if things have changed in 4 years or so) also has bad traffic, although nowhere as bad as LA. It is unusually sensitive to the weather in that it doesn't take much rain to slow things down. Can be a factor if predictable schedules are important.

San Diego's traffic generally is better than Austin's and (strangely) is affected little by weather until conditions get really bad.

[Lord of nothing]

In Vienna (Austria  ) we are the City with the highest score for the best city in the World. 

[BrianHG]

Arrrg, apartment rental pricing in San Francisco is absurd.  To match what I have in Montreal, it's almost 10x the monthly living cost.  It is at a point where I might as well spend 1m$ on a house and sell it when I'm done.

LA apartment rental is half as much.

Office space in LA is not too bad as downtown LA is only 2.5x the price of Downtown Montreal.  San Francisco is at least 5x, but nowhere near the 10x as compared to apartment rental.

A comparable house is only 2.5-3x priced in both LA or SF compared to Montreal.

[ez24]

San Diego's traffic generally is better than Austin's and (strangely) is affected little by weather until conditions get really bad.

Check out San Diego (2nd largest city in CA).  Of course there is a weather tax and unfortunately it is high because the weather is good.  Low humidity.  Lots of tech business here.   On the news a few days ago they said LA has the worse traffic in the world (I believe so).  BUT LA has a subway system.  San Diego has a trolley system that does not serve the tech areas.  Software engineers can afford to live near their work.

[ez24]

https://www.cnbc.com/2017/07/27/tech-jobs-silicon-valley.html

[BravoV]

Just a simple question, does your business really, I mean really-really depends on the location ?

As you're Canadian by your flag, remember BlackBerry in the old days when it started against settled giants like Motorola, Ericsson or Nokia ? Although we don't discuss it's current state  , just the beginning to get the idea, or even better inspiring.

My 2 cents.

[ez24]

Just a simple question, does your business really, I mean really-really depends on the location ?

I think the US is the cruelest "free" country in the world - I just do not understand why you would not give Canadians a chance?

There is a topic on shady crowdfunding and a big San Diego company has gone out of business so there are people in San Diego looking for work if you really gotta go.  Also Qualcomm is laying off 1500 people so it might be a good time to relocate to SD.

Be prepared for the cold weather, it can get to 50F, and hot weather (sometimes it hits 90F).  You really need AC for the couple of hot days a year.  The mosquitoes can drive you nuts,  last year I had two of them (number one reason I cannot get away).

[BrianHG]

     I've been told since my product will be piggybacking on music streaming services like Apple Music, Spotify, Amazon Music, Google Music, and I'm also connected to the health & fitness industry, I should forget Montreal and head for California, though my patents passed in US & Canada and are pending in 10 additional countries, English is the first market I will enter.

     As a small startup, being in Montreal, doesn't mean I cannot create the ultimate software and hardware, it is just more of a hurdle to get through some doors, especially until I get some serious followers VS being local in the tech hub & more direct access to those who play in this landscape.

[ez24]

...and head for California

When you do, think of mass transit.  Be kind

[BrianHG]

...and head for California

When you do, think of mass transit.  Be kind

Except for business trips, I'd plan on being in cycling distance of my office (I realize my personal rent just might have doubled).  I cannot sit in a car every day.

[james_s]

It has always kind of surprised me that so many tech companies headquarter in the most absurdly expensive areas. Yeah there's a pool of qualified workers, but surely a company could open a branch in some heavily depressed region where housing is dirt cheap and lure loads of people out to wherever that is, paying a salary that affords them a very good standard of living while still being much cheaper than the current tech hubs. Some place like Detroit could just about be revitalized if a couple of established tech firms opened an office there. Plenty of people, especially younger folks are willing to relocate.

[EEVblog]

* cynicism * 
Do what most other tech companies do... “base” your company somewhere in the world where you can get out of paying any taxes.

You can't just "get out of paying taxes"
If you shuffle your money to a tax haven then :
a) it's usually not "zero tax" but "low tax"
and
b) It's hard to get your money back out of that country without paying taxes

But anyway it probably doesn't matter because a company at this will almost certainly have zero income, so zero income tax to pay.

[EEVblog]

Ok, say I have enough money, 8 figures usd, and I want to create a new company which will engineer and market a new app and hardware in the realm of music and fitness.  For an idea of scale, the company will begin with around 25 full time employees plus around 25 interns.

To me, seeing numbers like that up front sounds like you are doing it wrong, and you'll likely just piss away the money for no good reason other hiring people to meet some arbitrary quota you set up.
Hire the best people first to form a core group, then work from there as required.

[EEVblog]

Ok, say I have enough money, 8 figures usd

Is it your own money, or investors?
That makes a big difference.

[JohnnyMalaria]

Research Triangle Park, NC

The triangle is defined by three major universities, Duke, UNC and NC State, so there's a large pool of very bright and talented young things. Traffic is *easy*, the place is clean, inexpensive and very business friendly. The airport (RDU) is almost provincial, certainly nothing like JFK, PHL, LAX etc etc, but American fly daily to London and Air France fly daily to Paris. You get to bypass the horrors of domestic airspace during blizzards and other causes of hellish delays. You can't beat it if you expect to travel to Europe a lot. 7 hours compared to the eternity from the west coast and less jet lag.

[BrianHG]

Ok, say I have enough money, 8 figures usd

Is it your own money, or investors?
That makes a big difference.

Both, but, there are requirements which I must adhere to.
Because of what I need done, no matter what I do, I will need a minimum staff since a major portion of the work is directly related to man/hours just to get me off the ground, however, luckily, this bulk of employees is lower paying roles.
I'm not pissing it all out in one shot, the funds set aside needs to last years as I only expect to begin to generate revenue 5-6years in.  This is a long haul project and I've budgeted for 10 years before generating a profit.

And obviously, there is a lot I am not saying here but I've carefully weighed what I'm going and the next 10 years will be worth every bit by a land slide.

[BrianHG]

Research Triangle Park, NC

The triangle is defined by three major universities, Duke, UNC and NC State, so there's a large pool of very bright and talented young things. Traffic is *easy*, the place is clean, inexpensive and very business friendly. The airport (RDU) is almost provincial, certainly nothing like JFK, PHL, LAX etc etc, but American fly daily to London and Air France fly daily to Paris. You get to bypass the horrors of domestic airspace during blizzards and other causes of hellish delays. You can't beat it if you expect to travel to Europe a lot. 7 hours compared to the eternity from the west coast and less jet lag.

Thanks, I actually used to have a partner back in the mid 90s in Raleigh Durham North Carolina.  It is actually a really nice area and the winters were really mild, just the occasional rare heavy snowfall which would have melted away in 1-2 days at most.
(This is a little humor, but true)  I would have to import my food though, and/or open a small restaurant to my needs.  When I first invited my partner Jeff and his wife to Montreal, they freaked out at how good the food tasted...

[CopperCone]

gary, indiana

[JohnnyMalaria]

I would have to import my food though, and/or open a small restaurant to my needs.  When I first invited my partner Jeff and his wife to Montreal, they freaked out at how good the food tasted...

It's changed, especially downtown Durham. Once a southern pretender to Detroit (no-one would set foot there), it's now an amazing cultural center with all kinds of restaurants, music venues etc . Durham is also now the home of Moogfest.

[Koen]

What do the investors recommend ?

[BrianHG]

What do the investors recommend ?

You can bet I will be maneuvered after I present my first 2 solutions.

[EEVblog]

Research Triangle Park, NC

The triangle is defined by three major universities, Duke, UNC and NC State, so there's a large pool of very bright and talented young things.

That's a good suggestion. If you want engineering "intern" talent then that could be a deal breaker for them. They likely already live on campus.

[EEVblog]

Because of what I need done, no matter what I do, I will need a minimum staff since a major portion of the work is directly related to man/hours just to get me off the ground, however, luckily, this bulk of employees is lower paying roles.

Sounds like uni student territory. That suggestion about locating near a university(s) is worth consideration.

[BrianHG]

Because of what I need done, no matter what I do, I will need a minimum staff since a major portion of the work is directly related to man/hours just to get me off the ground, however, luckily, this bulk of employees is lower paying roles.

Sounds like uni student territory. That suggestion about locating near a university(s) is worth consideration.

You are exactly correct, I will have a team of 40 interns after year one.  I will keep the top 5 for full employment the next 1.5 to 2.5 years after the bulk work is done.

Because of Montreal's layout & density and public transit system, if I were to locate downtown, my interns would be within around 3 metro stops of at least 3 universities, 3 colleges and many numerous technical institute schools in hardware, software, music, arts.  My problem is that there is a language barrier as I will be operating in English and except for software development who basically are usually bilingual, the other sectors have a limit on their English abilities.

[nctnico]

Some universities have space for startups. This may be worth looking into as well.

[BillB]

NCSU is a strong engineering school, and have dumped a ton of money into their Centennial Campus "Innovation Hub"

https://centennial.ncsu.edu/centennial/springboard.php



 

[ez24]

My problem is that there is a language barrier ....

Now I understand why you want to move.

The World Economic Forum just released their 25 most high tech cities in the world. Three Canadian cities below made the cut: Montreal was #18, Vancouver #14 and Toronto, of course, is #9.

from

http://www.planetweb.ca/news/3-canadian-cities-among-25-high-tech-cities-world/


FYI  when I said "be kind" and locate near mass transit,  I meant for your employees not you 

LA has good mass transit (and will get better with the Olympics), you just have to do your homework in finding a central location.

[BrianHG]

My problem is that there is a language barrier ....

Now I understand why you want to move.

The World Economic Forum just released their 25 most high tech cities in the world. Three Canadian cities below made the cut: Montreal was #18, Vancouver #14 and Toronto, of course, is #9.

This is why I must leave Montreal, Quebec.:
http://www.planetweb.ca/news/not-available-quebec-class-action-suit-vs-spotify-amazon-etc/

Toronto is a valid location to open my business.

[ez24]

This is why I must leave Montreal, Quebec.:
http://www.planetweb.ca/news/not-available-quebec-class-action-suit-vs-spotify-amazon-etc/

Now I double understand.    Before I thought you were nuts.   

[Bicurico]

Please take no offense in what I am going to write next.
I feel bad for writing it, but I thought I should honestly tell you what crossed my mind when I read the following statements:

"Ok, say I have enough money, 8 figures usd, and I want to create a new company" --> that's US$10.000.000
"the company will begin with around 25 full time employees plus around 25 interns" --> that's around US$1.250.000/year in salaries (considering really low wages)
"I only expect to begin to generate revenue 5-6years in." --> in 6 years you have spent 7.500.000 in salaries (not considering other operative costs like: accounts, rent, cars, travel, energy, computers, etc.)
"This is a long haul project and I've budgeted for 10 years before generating a profit." --> optimistically, from your own data, you will run out of cash on year 6 - how will you carry on until year 10?
" 'Is it your own money, or investors?That makes a big difference.' - Both, but, there are requirements which I must adhere to." --> I am not sure about your investors, the requirements and if your are fully aware of what you are gtting into

So what I am I thinking?

1) No way you plan an IT project 6 years before you can show "the product". Not having profit is one thing (think Amazon or Facebook), a different story is spending up to US$10.000.000 in 6 years, without having a product.
2) You said you are giving the software away for free - "the product", I would guess is paid premium service (or whatever). All of this needs MARKETING. Do you have an idea how expensive marketing is? I would dare to say that your 8 digit budget is not enough to start a propper online advertising campain to get enough followers.
3) You said your service depends on existing music streaming services (like Apple). If you have a clever idea, even if it is patented, at the end of the day, you depend on others? Hopefully I got that wrong.

A break here: are you really sure about your business?

And now the final bomb:

If you came to me with a brilliant idea and convinced me as an investor to loan you money to make this idea go real, I would STOP AND GET OUT at the moment I knew you would ask in a blog like EEVBlog where you should base the headquarters!

If you don't know, get someone who does know. Do your homework, study all pro's and con's, but don't trust any forum opinions (including mine). If people on forums would know the right answer on how to setup and run a busines, these people wouldn't be on forums - they would be business consultants!

Anyway, forgive me if this contribution felt harsh or negative. The intention is good and I want you to make sure you know what you are getting into. Anyway, I wish you all the success!

Regards,
Vitor

[Bassman59]

It has always kind of surprised me that so many tech companies headquarter in the most absurdly expensive areas. Yeah there's a pool of qualified workers, but surely a company could open a branch in some heavily depressed region where housing is dirt cheap and lure loads of people out to wherever that is, paying a salary that affords them a very good standard of living while still being much cheaper than the current tech hubs. Some place like Detroit could just about be revitalized if a couple of established tech firms opened an office there. Plenty of people, especially younger folks are willing to relocate.

That idea always sounds appealing, and I think Detroit specifically is one of the cities actually benefitting from such efforts. (I was there on tour last summer, and spoke to a few friends who live there, and they are all really excited about what is going in there, despite the best efforts of the state politicos to squash things.)

Other areas that we might consider to be ideal for such terraforming have too many strikes against them.

Ideally, you need a well-regarded Land Grant or other research university in the city. The university acts as a hub. Students are available as interns, graduates (especially in-state students) need local jobs, there are partnerships available between the university and local businesses, etc etc. University areas also tend to have the sort of cultural attractions (rock clubs, museums, symphony halls, good restaurants, etc) that many people want. But there is and has been for a some time this trend of state governments defunding their public universities. Rising tuition makes college less affordable, and students are wary of taking on significant debt.

Even if a person considering a move to a new city doesn't have children, the quality of the schools in that city and state are important. If there's the perception that the schools aren't any good, no matter what kind of tax incentives a city or state may offer to potential employers, the employees cross that city off the list. This is especially true of the high-skill/high-education engineering talent that these cities are trying to attract.

And finally, I think that many professionals look at the number of potential employers in a given area when considering a relocation. Nobody will move to come work for you if you are the only game in town. If you close up shop, what do your employees do? Engineers want another engineering job, and if none are available, that's not good.

[BrianHG]

@Bicurico, you are severely underestimating the amount of fund I have at my disposal.  My product is demonstrable within 1 year, ready for release by year 2, & has a 2 year free demonstration period for each user.  (This means 4 years without seeing a penny in revenue.)  The patents and sophistication and initial input investment is scaled such that no one in their right mind would be able to compete with that 2 year free trial period as they too would need to do that previous 2 years of work, and once I'm established, it will be too late for any competition anyways & I'll sue them for patent infringement as well.  For the majority of my users, an approximate 15-30 year subscription per client is expected, well worth the free 2 year trial period to lock them into the addiction.

As for HQ, I only asked here as a feeler.  My homework isn't finished.  I will be getting access to experienced knowledge.

[Bassman59]

This is why I must leave Montreal, Quebec.:
http://www.planetweb.ca/news/not-available-quebec-class-action-suit-vs-spotify-amazon-etc/

Crux of biscuit: "Basically that means that companies are not allowed to give you free trial and then automatically convert you into a paying customer - that is against the law in Quebec. Quebec wants the world to respect their authority or else."

I do not see anything wrong with the requirement stated in the first sentence. Too many companies take advantage of consumers by using the free trial period and hoping that the user doesn't cancel the service. Maybe the customer realizes a couple of months later, after seeing a credit card bill, "oh, I subscribed to this? I don't want this!" and they cancel it, but that service now charged for two months that the customer may not have even used. Maybe the customer is the type that looks at a detailed credit card bill only once a year and goes, "Oh, shit, I'm subscribed to THAT?"

Put another way, I don't see why the onus should be on the consumer to have to cancel a service. The service provider should have to tell the customer, "Your free trial expires in 15 days. If you would like to continue, click here. Your credit card will be charged $9.95 per month. If you do not wish to continue your subscription, no response is required. You will not be able to access the service after XX/YY/ZZZZ."

Yes, we all know that people are busy and don't pay strict attention to all of the services for which they sign up, but that doesn't mean that corporations should be able to take advantage of their customers.

Let me put this in terms every EEVBlog reader will understand. Autodesk offers new EAGLE users a 90-day free trial subscription, after which time the customer will be charged $15 per month. Autodesk won't inform their new users that their credit cards will be charged, it'll just happen. What do you think the response of this community will be to that practice?


As for the second sentence, "Quebec wants the world to respect their authority or else," that's editorializing horseshit. What the Province is saying is that, "If you wish to do business with citizens of Quebec, you must abide by our consumer protection laws. Where your corporation is domiciled is irrelevant."

I honestly don't understand why some people think that consumer protection is a bad idea. Consumer protection agencies and laws exist because corporations have been caught screwing over customers. And it's obvious that there are many corporations who see no problem with such practices, and there's no way that they're going to police themselves.

Please, tell us the name of your new app/service, so we can be fully informed consumers.

[BrianHG]

@Bassman59, I am all for fair and open policies for my apps and services & I am all for consumer protection.  Quebec has a habit of doing weird attacks and restrictions to large worldwide consumer products, not just what was written in the link I attached, just because they don't have a proper french version available.  If a fundamental function of my app/service works specifically with Spotify, and Spotify does something new the Quebec government doesn't like and gets further restrictions locally, my business may be F---ed.  I cannot risk that.  Anywhere else in Canada is safe from this BS.

[ez24]

"Ok, say I have enough money, 8 figures usd, and I want to create a new company" --> that's US$10.000.000

Could be US $ 99,999,999   so if we send him $1 then he could write 9 figures.   My guess is 99 million is a good start.   My bet he is talking 50 million ?

[CatalinaWOW]

Having been on both ends of this problem, make sure that wherever you pick has good air travel connections.  Evaluate frequency of flights and directness of flights to your destinations (presumably Bay Area and LA) and COST.   Some otherwise attractive locations have airfares 2-5 times those of more favored locations.