Entrepreneurship Industry News

Have you thought enough about a startup location?

Where should you start your start-up – in your home town, a capital city or a key overseas market? Should you even worry about location in the digital economy?

Too few entrepreneurs ask these questions. Typically, they start the venture in their home city because it is familiar and they like the lifestyle.

Startup location
But a poorly chosen location risks being too far from current and future clients, peer companies and mentors. Or missing out on financial incentives for start-ups to relocate.

Every start-up, of course, is different. Location makes no difference for some. For others, knowing a local market and lots of people are huge assets. Start-ups are hard enough without having to build a professional network from scratch in a new city.

Still, location matters more than many realise. Fintech entrepreneurs arguably should launch in Sydney; life sciences entrepreneurs could consider Melbourne, with its amazing medical research sector; and mining entrepreneurs often look at Brisbane or Perth.

I know what you’re thinking: it’s too simplistic to suggest all entrepreneurs in a sector should focus on a city. That’s true. Fintech entrepreneurs can kick goals from Brisbane, just as biotech entrepreneurs can make it big in Adelaide and entrepreneurs in regional towns can take on global markets.

Even so, has your start-up made a considered decision about its location? What process did it use? Has the venture thought about its needs in three years and the impact of its location then?

If Adelaide, Hobart, Sydney or Bathurst is the best place for your start-up, more power to you. If you do your best work in country towns and can’t stand big cities, go for it. But if you launched the venture in your home town by default, it’s time to think again.

1. Where are your end customers, today and tomorrow?

Nothing beats being close to current or potential customers. Emails, phone calls or video conferences are a poor substitute for personal interaction. It’s easier for unknown start-ups to persuade larger clients to take a chance on them when they live in the same city, are seen to be part of the industry and available at short notice for client meetings.

2. Where are your peer companies?

Again, it depends on the venture, but there are benefits in being in a community of like-minded companies. A fintech venture in Sydney, for example, is potentially part of a much larger fintech community than a peer company in Perth or Adelaide. That is no guarantee of success, but being geographically isolated from emerging industries can kill even the best start-ups.

3. What does the innovation ecosystem look like?

Consider an emerging mining technology venture that launches in Brisbane. It potentially has access to world-class research in Mining, Equipment, Technology, Services (METS) through Queensland universities, key industry associations and a vibrant local METS industry.

Don’t discount the benefits of smaller capital cities or regional towns that have sharply lower costs, provided these locations suit your venture.

Strong industry ecosystems create opportunities and the best ones encourage connections between large and small ventures. Being too far away from key industry ecosystems can deprive your venture of networks, knowledge, reputation and deals.

4. Are there enough resources in your location?

Consider a regional entrepreneur that has early success. As the venture takes off, it needs to go from two staff to 20 almost overnight and probably 200 staff within three years. There are not enough workers in the town with the right skills to help the venture scale quickly.

That does not mean all ventures should start in big cities. Some regional towns are fabulous for start-ups. But if the venture needs a much larger workforce as its scales up, or will require hard-to-get technical skills, a capital city location might be needed.

5. Start-up and ongoing costs

Sydney sounds great for technology entrepreneurs. Until cash-strapped founders struggle with the city’s sky-high rents and insane property prices. Or must pay staff more compared to other capitals to compensate for extra living costs.

Don’t discount the benefits of smaller capital cities or regional towns that have sharply lower costs, provided these locations suit your venture.

It’s pointless being near a community of like-minded ventures and organisations if you don’t have enough resources to keep up or cannot get them.

6. Where do you perform best?

It’s no good moving the venture to Melbourne if you desperately miss family and friends in Perth. Or move from a city to a regional town to take advantage of lower costs then struggle with a slower pace of life. Or kill your relationships because of excessive commuting between cities for work.

Some entrepreneurs excel in unfamiliar sectors and locations. They have a knack for networking and making fast connections. Others struggle in markets where they are unknown. Never discount the value of home-town networks when launching a venture.

7. Can you be a start-up nomad?

Rather than agonise about where to start a venture, consider what it takes to be a venture nomad. That is, to have the agility to move the venture or its key people to new locations or rapidly open in other countries, as opportunities dictate.

Nomadic ventures typically have a “capital-light” business model with lower fixed costs; shorter-term commitment (such as leases); staff who are eager to live interstate or overseas for part of their career; and founders who are willing to move to where it best suits the venture as it grows.

Nomadic ventures are wedded to opportunity, not location. Their ability to make locational “pivots” as new ideas and customers emerge is a competitive weapon.

8. Incentives

Too many start-ups undervalue themselves when choosing location. States such as Queensland recognise the value of start-up ventures and communities and offer financial incentives to attract them. See what’s on offer before choosing where to relocate or co-locate.

These incentives might make the difference between staying put and moving closer to a start-up community that better suits your venture.

Read more: SMH