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Is the location of a young company / startup relevant in today’s digitized world to succeed?

Written by Mo
Sep 18
Tags: Is, Location, relevant, to, succeed, Technology, Cycling, Sports, Blog, Binando, #mo, #moritzpfeiffer
7 min read


The questions of all questions

A lot of entrepreneurs are thinking of where is the best place to be for my company? Is it going into the city center of a big city like Berlin, Munich, Vienna, London, New York and so on or do I have to go to the Silicon Valley or is a B- or C-City better to save money or is a complete remote company also enough to go?

My opinion is it depends on what you want:

  • Some would prefer a highly representative building directly in the city that looks impressive for customers, partners, other startups and friends.
  • Some would think that it’s better to go to a coworking space for networking and cheap shared desks or rooms
  • Some might think everybody can work from home to completely save the office costs and time to travel to the office

Possibly with all of the above approaches it is possible to build and run a company and earn money, but could they all become a big success? The success is like you describe it for yourself. Some prefer a non-profit organization with the highest possible social impact, some want to be a unicorn as soon as possible for a fast exit and others prefer to be profitable from the beginning on to grow by their own and I think not everybody wants to build a unicorn – it’s just like you define it.

Networking is important for success

A new research, Informal Innovation: Entrepreneurship and Informal Communities, released by the Economist Intelligence Unit, confirms what everyday experience might have already suggested: informal professional networks and communities are more important for entrepreneurial success than formal structures such as incubators and accelerators. It also states that for 78% of Startups, Networking is vital to entrepreneurial success. So possibly, we should better decide a location with good networking opportunities instead of sitting all the time at home for getting the work done.

There are plenty of well-known events for informing and networking like Web Summit, Mobile World Congress, Cebit or CES and due to the mentioned research, you don’t need to feel bad to visit those events and fairs regularly as it is important maybe to get to know the right community for you and your business. In my opinion, it’s good to go to such events from time to time to network, get new inspiration and breakout of the daily business. But I would never hop from one event to the next all year long, as for a young company it is also very important to use your available resources efficient and the best way possible, you are not a corporation with thousands of employees who needs to be busy.

In well-known Startup Hubs like Berlin or Munich there are also a lot of “smaller” events like Fuck-Up Nights, Pitch Evening here and Pitch Evening there (of course sponsored by a big Corporation), the next Networking Event 3000 and so on. Of course, I visited some of those events as well and will do so in the future. But what I recognized very soon is that you meet a lot of the time the same people in the same area at different of such events. As above mentioned it is important sometimes to break out of the daily routines and thus it is perfect to go on to the next networking event, but for a startup it is also important to execute a lot and fast and that means: work, work, work! There is no work hard play hard, just work hard 😉.

Other key factors for success

Why do startups fail? Because of a bad team, bad idea, bad product? No. The most critical point is that they have no or not enough sales. So, the most critical factor are customers. Do you have a perfect product-market-fit? Are your customers willing to pay what you need to survive and grow your company? And then afterwards there come factors like founder problems, bad implemented product or wrong technology, not enough funding and so on.

To get customers your location could be a very important point. E.g. if you have a B2B-Product for Industry customers that needs to be sold by person and not the internet than it is good for the first sales if you are based near a city which has a lot of industry. Like in Stuttgart, where my startup Binando is based, we have a lot of automotive industry. So, in case you are aiming for a mobility solution or something else in the automotive area, then Stuttgart would be a good location as it is easy to get contacts in that area soon. If you have a B2C App maybe it is very good to be in a startup hotspot like Berlin, London or New York where you can share the app with lots of startup people who are open to new things to get fast feedback, which you can use for improvements and adjustments and thus make your product better.

In the case that you develop the next best technology to fly to the Mars or you want to heal cancer you probably need a huge amount of funding before you can expect revenues. Depending on the technology you develop there may be different best locations to go. Definitely you should find a place where investors get what you are planning to do and are willing to support you and of course have the money what you need. According to Ernst & Young most of the venture capital comes from the U.S., followed by China, Europe and India. So, to start a fancy technology startup, Germany is probably not the best location to start your business, I would rather go for example to the Bay Area for example to start the next moonshot. Because in the Bay Area people think big, believe in you, have the necessary capital to support you and brought out lots of successful companies in the past years. But there are also examples for great companies from locations you might think you will not grow a big successful company.

Top countries for total venture capital invested

Top countries for total venture capital invested

A good example for such a company might be TeamViewer. Well known for its secure remote desktop access and support solutions. The company is based in Göppingen, which is based around 50km east of Stuttgart almost in the middle of nowhere. Regarding the last publications TeamViewer generates almost €200 mio in revenue and was acquired for about $1 billion after 8 years of releasing the first software. So, you see, depending on what you are aiming for there should be no borders for your success, you just need to figure out what fits best for you and your targets you want to achieve. Based on your targets you may look if the location where you currently are seems to be right to start and run your business or its better to move to a place, that fits better for what you want to create.

Go and start!

But there is one thing to remember: Studies come out all the time like where it is best to start and run your business. Different people using their own criteria make determinations as to what is "best." Is it any wonder that you get completely different lists of which are the best location to start with? Maybe one of the lists, or even part of one of the lists, is really where the smart money would be. But how do you know which selection of cities or states or even industries will be right? The obvious answer is that you can't. You already live in some place. You probably have friends, family, economic ties, and many other reasons why you are still there. You've built experience in a specific line of business already, even if it wasn't some grand plan. Maybe it’s also the place to start your business right away.

To sum this up: it won't be perfect. Nothing ever is – including the "best" places to start a business. The advantages of a good fitting location can be special knowledge of an area, relationships with existing people and businesses, a stable life to help offset the instability that being an entrepreneur can create, and personal resources.

Hopefully the post was interesting for you and you enjoyed reading it! Have a great time until the next post will be published next month and enjoy hustling, relaxing, chilling, sporting, travelling or whatever you plan to do!

All the best – Mo ❤

P.S.: If you have questions, suggestions, criticism, an idea for a great new topic or just want to have a cup of coffee or a glass of wine or you want to work out with me please do not hesitate to contact me.

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