Should tech entrepreneurs consider establishing their companies outside of California?

Northern California has the strongest network of mentors, investors and technologist that are required to start and grow a technology startup. It has a unique environment where due to your peers creativity abounds.

Early stage companies often require seed capital. Given that most angel prefer or completely select only local entrepreneurs, startups outside of the area will find it difficult to raise capital.

California has the highest tax rate for entrepreneurs, treating capital gains as ordinary income. All things being equal, the present value of the upside of the startup is reduced for startups based in the state.

I've had several friends who started successful companies outside of Silicon Valley. One of the big challenges they faced as they matured is finding potential acquires. Potential buyers, most of which were located in SV, were worried about purchasing a company in another state that would essentially lead to a core group to be far away from the company's HQs, a concern especially as they want the acquired company to seamlessly integrate itself with the acquirer's culture/strategy/etc.

If I were starting a new tech company I would consider locating my new company where:

• The cost of living, office space, taxes, etc. are relatively low.


• There is still a pool of talented potential employees. California isn't the only state around that has decent colleges from which one could recruit programmers and other employees.


• There's an airport nearby, so I could easily fly out to meet with investors and customers.