We just finished GAN’s first Momentum Tour, a four-stop global tour with events in Pittsburgh, Hamburg, Lima, and Manama.
The entire purpose of this tour from the very beginning was to help startups operating in places like these — smaller markets that aren’t considered the world’s major tech hubs — to have additional connections, tools, and resources to build and grow their companies, wherever they are. Which, by the way, is GAN’s mission.
To that end, over the course of each stop, more than a dozen startups shared their experiences of what it’s like to start and run a company in a smaller city. Out of every startup that spoke on stage across the entire tour, only one said they would consider moving their company to a more traditional, larger tech hub. And, when you hear the takeaways below, it makes sense. Companies, by and large, want to stay where they are.
Reflecting back, here are our biggest lessons that might answer why.
Where Smaller Markets Win
Salaries are Cheaper
Mark Thomas of the Pittsburgh Regional Alliance shared that the average tech salary there is $118K versus about $170K in cities like San Francisco and New York. In Lima, investor Alejandro Ponce mentioned that the average tech salary dips below $100K. That means that companies’ hard-earned capital can be put to work for much longer.
Culture is Strong
Our Peruvian friends claim they have the best food in the world (and the assertion is well-founded). Hamburg has great film and music scenes. The entire speech from the Pittsburgh Mayor’s Chief of Staff Daniel Gilman focused on their city’s guiding principle, “If something isn’t good for one person in the city, it’s not good for any person.” These cultural attractions and wider investment from local and regional governments keep startups engaged and attracted to the places where they already live.
Talent is Available
One of the most common frustrations people shared about San Francisco and New York is that there seems to be a “negative employment rate.” Meaning, there tend to be too many open positions for the number of people actually living there. But in Pittsburgh, Hamburg, Lima, and Manama, that doesn’t seem to be the case. The CEOs we heard from all said that it was at least moderately easy to find the talent they need. This was especially true in Pittsburgh and Hamburg because of local universities pumping out new students. And, Hamburg additionally benefits from the existing media and arts scenes that have attracted talent for so long.
There’s a Real Sense of Community
In Bahrain, when I asked the startups why they’ve all decided to stay in-country instead of moving to Dubai, Saudi Arabia, or even London, all three founders said it’s their family support systems that keep them right where they are. Hussain Haji of Inagrab/Dalooni, Hala Sulaiman of AlRawi, and Yasser Abdulaziz of Malaeb all told me that they felt like if they left Bahrain, they’d lose one of the most important parts of their lives — their families’ close, personal support. Of course, this makes sense in cultures where family connections are even more valued than in other parts of the world. But, it’s no matter what social support system you rely on — family, friends, faith communities, or otherwise — staying where you can maintain these relationships can be vital as a founder. Kelly Collier, who runs corporate innovation for UPMC in Pittsburgh, also got up on stage and shared one specific thing about the city — its strong community. People there tend to have each others’ backs. It’s a place where people feel like they need to truly support each other because, if they do, everyone will grow.
Still, There Are Tradeoffs
While all of the benefits of a smaller city sound nice, not everything is easier in a smaller market. Here’s what’s different about starting up outside of a major tech hub.
Going Elsewhere for Initial Capital
In Pittsburgh, Zach Malone, an investor at Draper Triangle, pointed out that there are a lot of investors in the region focused on “growth capital” but there are not a lot of investors focused on “seed capital.” So, if you’re starting a company in Pittsburgh, it’s important to know that you’ll likely need to travel outside of the city to get that initial capital. In Peru, Alejandro Ponce also told us that, if you’re going to get any sort of funding, your company has to scale outside of the country almost immediately. Meaning, if you have a company focused on helping mortgage brokers, like our pitch winner in Peru Rebaja Tus Cuentas actually does, they need to build in Peru and another country from the start if they’re going to get any sort of investment. This isn’t bad. It’s just a reality if your company is going to be headquartered in a smaller tech hub.
Needing an Existing Ecosystem
In order to have successful startups, these smaller tech hubs have systems in place that feed the startup ecosystem. Like I’ve said, Hamburg already has a booming arts and media industry. It’s that industry that’s powering the next wave of media startups by providing mentorship, talent, and capital. Or in Pittsburgh, there are two large universities that are providing talent to the startup ecosystem. And in Bahrain, the government is hosting meetups and funding investment vehicles to support startups. These networks must exist or receive increasing, continual investment to retain startups in order to provide the necessary connections and capital that keep founders afloat.
You Have to Think Regionally or Globally From Day #1
This isn’t just true for Peru like Alejandro told us. It’s true in many smaller areas. You have to build a market outside of your home town or region from the very beginning, simply because your market likely isn’t large enough to provide customers and revenue for you over a long period of time. And, investors know it. Which means they, like Alejandro, will be hesitant or even entirely resistant to investing if you if you don’t already show that you have an audience outside of your home ecosystem.
It Can Be Harder to Become a Unicorn, But It’s Not Impossible
I don’t think the goal of most startups should be to become a unicorn, and I said so when kicking off my introduction at every stop. So, I’m not advocating for that as a focus. But it can be more difficult to become one when you’re not in a larger area. Still, it’s not at all impossible. A founder in Hamburg got up on stage after I’d finished speaking and said his goal actually was to become a unicorn and that he plans on reaching unicorn status. Given what I’ve heard about his company, he likely will become one. So, though I still don’t think that the startup world’s overwhelming focus should be on every company becoming a unicorn, I’m a bigger believer now — after hearing from him and meeting a few others on the tour — that many companies actually are on the path to reaching this goal.
And, We Need Everyone’s Help
I love that every stop of the tour included voices from corporations, investors, startups, government representatives, and economic development staff sharing what’s so great about their cities. Still, not a single one of them claimed to have a silver bullet for startup success. When we heard from Charlotte Ducrot in Lima, she ended by saying that, if cities like Lima hope to be successful, it will require help from everyone. Startups need to build investable products that can scale. Institutional Investors need to be open to meetings, even with founders who don’t seem to have a chance. Angel investors (i.e., wealthy individuals) who have had previous success need to mentor. And economic development groups and governments need to continue to make cities places that people actually want to work.
All this is to say, it’s everyone’s responsibility for ensuring that startups are ultimately successful. And that’s what I’m walking away from this tour with — renewed confidence that it can be done, and that we’re all needed in order to help startups succeed, wherever they are, big or small.