A common question we often receive is "My team is based in [somewhere], but I know that Silicon Valley is the real hub of startups, should we stay there, or move here?" Our response usually is: Why not both?
Silicon Valley is unmatched for fundraising, which is an incredibly important part of running a startup. Despite many funds pushing for investment outside the valley, most investments still happen here, in part because of the ease of management on the board and the ability to meet with and help the founders at a moment's notice. Silicon Valley is also incredibly valuable for finding experienced talent in PR, partnerships, and product management, and despite an increasingly-connected world, the mentorship and networking gained from in-person meetings and startup meet-ups in the bay cannot easily be replicated elsewhere.
However, talent in Silicon Valley is extremely expensive, and even at those high salaries, the heavy cost of living does not guarantee a high quality of life for your employees. Further, the continuing arms race of employee perks, combined with the abundance of opportunity and firms with massive cash reserves to spend on incentives makes it difficult to retain talent. Amongst even successful companies in the valley, the average tenure is only 2-3 years.
Furthermore, technical talent is no longer restricted to Silicon Valley. Historically, strong IT education was limited to only the wealthiest countries, but now we see that technology education growing around the world. Many large firms are already beginning to take advantage of this global workforce by opening satellite offices. Many countries offer small companies tax breaks and even grants for operating R&D locally. Further, many top engineers don't want to pick up everything and move to Silicon Valley. They would rather have a lower wage (but higher quality of life) near their friends and family. This creates a greater loyalty to your company, not only because it is a nice thing to do, but also because there aren't thousands of other companies tempting them with inflated salaries. A distributed team strategy can be as much, if not more, about retention, loyalty, and talent, as it is about cost savings.
We strongly believe that startups can have the best of both worlds by implementing a distributed team policy, with the team split between the two offices. This is particularly true if the offices are divided by function (in almost all cases, we have seen engineers elsewhere and sales / marketing in the valley). Teams still work best when they are in the same office, but communication between teams is getting easier and easier thanks to a plethora of new digital communication tools. We are strong believers in the potential of telepresence, having invested in Double Robotics in 2012. However, even conventional methods of collaborative telecommunication have shown incredible improvement, including Microsoft Teams and Zoom. These tools are more than sufficient to provide an engaging and effective method of communication between engineering teams and management. Organizing employees across multiple continents and time zones used to be difficult, but with modern tools, it has become trivial.
So how to best design a company for distributed teams? To start, we want to emphasize that a distributed team model is not the same as outsourcing. The staff at both locations should be your own employees, not contractors. This incentivizes the staff to work harder, with better incentives for performance and long-term planning. We strongly recommend having at least one founder at each location. In most cases, we have seen the CEO make the move to Silicon Valley along with some marketing staff, and the CTO or head PM lead the remote office. Just as it is important the staff be employees to create a sense of community and ownership, it is important to have leadership at that office to provide inspiration and accountability. Whereas many founders may want to tell a story that their headquarters are in Silicon Valley and their "back office" is remote, in practice, it is better to treat the remote office as the real headquarters, with Silicon Valley as a satellite office, which just so happens to host the CEO.
But where to build your engineering headquarters? The obvious answer is wherever you founded your company. If all the founders met after graduating school in Bangalore and have their families there, keep your technical headquarters there, and build your sales headquarters in the valley.
However, for companies looking to build a new remote engineering team from scratch, we recommend considering the following key factors:
Talent - Does this city offer potential to grow the team as your company grows? What are the specialties of the talent in the area? (For example, Pittsburgh has a large number of robotics and computer vision experts, but comparatively less blockchain experts). Familiarizing yourselves with the top programs at local universities can be helpful for identifying top local recruits, and where you may need to hire elsewhere.
Network - Do you have a strong understanding of the talent landscape? Will you be able to build out a team quickly? What are the cultural norms of the area?
Market - Building a second headquarters gives you insight to the unique and specific needs of the local population. Building a second headquarters in a large potential market (such as India or China) can help with growing pains perfecting product/market fit as you release your product in those geographies.