The cost of doing business is always on the mind of startup executives. Salaries, rent, and other expenses like software licenses can often make or break a company.
Much of the math comes down to how much money you can raise for your business, and startups often look to San Francisco and Silicon Valley to find the capital they need. Where the business is based would seem to have an impact on how much money it can raise: If you’re a San Francisco startup, you’d presumably get more money to cover the price of those high-salary engineers and that expensive office space.
It’s not a new concept that it’s pricier to do business on the coasts, and startup activity has been flourishing in the middle of the country as a result, from Detroit to San Antonio. But how much cheaper is it—or how much less venture funding does a startup need to raise—to operate a business in middle America versus the Bay Area?
One Philadelphia executive put pen to paper (er, finger to keyboard?) and developed a website that calculates a cost-of-doing-business comparison for various cities around America. Robert Moore, CEO and co-founder of Philadelphia-based software-as-a-service business Crossbeam, calls the website VC Arbitrage, which aims to compare what raising money in San Francisco will mean to your business if your startup is based in another city. It’s easy to think that a business operating in a city with lower costs might get less funding, or be offered a less attractive term sheet, from Bay Area VCs than one that is based in San Francisco.