The Advantages of a Smaller Startup Ecosystem

While it's easy to assume that the best places to launch startups are major cities, don't make the mistake of underestimating the potential found in smaller communities.


BEAM Team

11 Jul, 2017

The Advantages of a Smaller Startup Ecosystem | BEAMSTART News

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There is something quite scary about being a small fish in a big pond. There is much unknown. Vast territory that you cannot reach. Things that are more difficult than they should be.

Take that same small, scared fish and drop him inside of a much smaller pond and things start to change. The boundaries comfortably ease in. Things that once were out of reach are now ripe for the taking. Capabilities are expanded. Relatively, that small fish isn’t nearly as small anymore.

There is something to say about a smaller pond. And there is something to say about a smaller entrepreneurial and startup ecosystem. In the world of startups, there are obvious pros to locating in a hub like New York City, Boston or Silicon Valley. But there are also some considerable drawbacks, many of which are often solved in smaller markets. There are burgeoning startup scenes popping up across the globe for a reason, after all.

It’s all about the money

Most conversations tend to start and stop at the dollar sign. Mega-sized cities are expensive. Simple office space is hard to find, and when it is identified, there is a hefty price tag attached. Big cities are exponentially more costly than smaller markets, and not just for your business. The reduced cost of living is also a massive lifestyle improvement that bleeds into everything you do. In a smaller market, life is more affordable, requiring generally lower but relatively fairer wages. You can afford office space and stop arguing with your partners about whose elbow is bumping whose in the closet you work in. You can easily afford the three coffees a day and the beer at the bar down the block after work, too.

A small-scale seed investment that might buy you a replacement toner cartridge in New York City could be the upstart you need in a city like Buffalo. Buffalo’s class A and B office space costs 20 percent less than the national average. Their cost of living in Buffalo is 53 percent lower than Boston, 82 percent lower than San Francisco, and 133 percent lower than New York City. Cities like Phoenix, Jacksonville, Cleveland, and Pittsburgh have similar cost of living numbers.

Costar national office report also showed that Buffalo office space costs $15.83 per sq. ft. while New York City costs $65.41 and San Francisco costs $57.81 per sq. ft.

Your dollars go much further and your runway is much, much longer in a smaller ecosystem. The prize money for startup competitions isn’t bad, either.

Valued workforce

With that lower cost of living comes a lower wage you must pay employees as you start to expand and grow. However, you can pay that lower wage and still get the same level employee and knowledge capacity. In other words, greater value for your dollar. Take Waterloo, ON, Canada for example. Many refer to the University of Waterloo as the MIT of Canada. Graduates from that university are recruited from giant tech companies every year, luring them to the coasts of New York and Silicon Valley. Upon that move, they demand a much larger salary simply because of the costs they’ll incur in their relocation.

However, many don’t want to leave Waterloo. Not every person has a hunger for the big city lifestyle. Some enjoy Waterloo, the small city of 134,000 residents. If your startup was based in Waterloo, you could keep that same incredible level of expertise for a significantly lower price. In New York City, a software engineer’s median annual income is $119,412. A San Francisco software engineer earns $121,232. In Waterloo by comparison, a software engineer earns $76,481 (converted to United States currency). Not to mention, Waterloo has an incredible startup ecosystem rivaled in size by almost every city and capacity by almost none. That’s a lot of value saved that can now be put towards achieving your next milestone.

A seat at the table

In a smaller ecosystem, you’re more likely to get that highly coveted coffee meeting with that VC you’ve been targeting, or the mentor from whom you so badly want to glean knowledge and experience. Easier (and friendlier) access to people who can have a positive influence on your company’s growth, especially at those critical early stages. People tend to be more willing to help and more lenient with their time. It’s just that simple. They’re not asked for that cup o’ joe nearly as often as their counterparts in Manhattan or Palo Alto. And they also feel a vested interest and responsibility to play their part in growing the local startup ecosystem. To both the founder and the targeted mentor, there is more value.

Feedback time

Sure, in a larger market there are more people. That’s inherent in the name. For an early-stage company with a consumer-facing product, those large markets are certainly attractive. But for companies that are oriented more B2B obtaining access into companies willing to test early products and provide much needed feedback can be a much more challenging proposition. In smaller markets, capturing those highly valuable early adopters and beta testers is much more achievable

Celebrity status

In a smaller ecosystem, you’re more valued by the community and more vital to the economy. If you see growth or even just have an innovative idea that is catching on, it is exponentially easier to grab the media’s attention. And from there, it’s easier to keep feeding the beast.

A community is much more likely to rally behind a company if it is more unique to come across them. The smaller ecosystem lends a morale unmatched by any big city.

Rise of the Rest

Can you consider yourself a founder of a startup if you’ve never heard of Steve Case? Anyhow, Case, co-founder of AOL, sees the advantages of the smaller ecosystem, too. His inventive initiative, Rise of the Rest, tours smaller cities with growing entrepreneurial ecosystems on a bus to find the ideas that others aren’t garnering their due attention. He hosts a pitch competition and awards monetary prizes. Case sees opportunities in Denver, Kansas City, Austin, and Pittsburgh.

To ignore cities not named New York, Boston, or Silicon Valley is to ignore potential.

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