Our Startup Would Probably Die If We Were In San Francisco

Jul 24, 2014

EDITORS NOTE: The following is a guest post by my good friend and old co-founder Jon Wheatley

A few months ago I wrote why we were moving our business from San Francisco to St Louis. It was highly controversial. Now that I’ve been here for a few months, I thought it might be fun to work out exactly how well Need/Want would be doing if we hadn’t moved here.

I did a like-for-like comparison. Combined rent/mortgage payments + office space for Marshall and I is $2,500 per month in St Louis. For the equivalent apartments & office space in San Francisco we’d be paying roughly $14,550 per month.

Because we want to bootstrap the business and not take investment, this is huge.

That’s an extra $12,050 per month we have for advertising, salaries, R&D and other misc expenses.

When you factor in the extra cost into our accumulative monthly numbers you’ll see the difference it makes.

St. Louis vs San Francisco visualized

If we hadn’t made the move to St Louis we’d be in serious trouble. We’d be almost $20,000 in the red and be struggling to make rent each month.

We’re at the point now where we’re bringing on additional sales and support help. If we were based in San Francisco that wouldn’t even be an option without raising money.

If we hadn’t made the move to St Louis we’d be on a completely different trajectory.

Cheap cities are good for startups.

For the record it probably would be possible to make this work in San Francisco but we’d have to sacrifice a lot. Marshall and I would have to share a small studio or 1 bedroom apartment and forgo the office completely. The cost of hiring people would be greatly increased so we wouldn’t be able to do that for a while and if / when we got to that point we’d be competing with every other startup in Silicon Valley for talent.

Without raising money it would be very hard to compete on salaries and perks. We’d be fighting a losing battle for talent.

There might be a higher density of talent in a big city like San Francisco but there’s also a higher density of companies competing for that talent. If you’re based in a smaller city like St Louis and you’re working on interesting things, attracting high quality talent is an order of magnitude easier.

If you found this post interesting you can follow us on twitter @jon and @marshal.

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