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There are a number of factors that govern where you found your startup. The most defining criteria include the location of your customer base, the size of the local talent pool, the presence of an ecosystem, and the availability of funding options

Weighing all these various factors is important while picking the right location to start up.

Customer location

The location of your customer is one of the most fundamental factors governing the location of your startup. However, this is only true for startups that have a niche focus.

For instance, a fintech startup offering a product for stock traders might want to set up shop in New York given its proximity to the Wall Street traders.

Similarly, a startup that acts as a marketplace for movie extras and producers might consider setting up shop in LA given its proximity to the Hollywood crowd.

If your startup caters to a national or international audience, then customer location ceases to be the primary governing factor for your business location.

Talent pool

There are two reasons why a large enough talent pool is good for your startup.

Firstly, this gives your business a large size of potential workers to choose from.

Also, a large enough supply of workers can help drive down the cost of acquiring them.

For instance, it is cheaper to hire English speaking workers in countries like India and the Philippines compared to China simply because of the size of the worker pool with the requisite skills.

Presence of an ecosystem

One thing that goes hand in hand with the talent pool is the presence of an ecosystem.

A large talent pool attracts numerous businesses looking to hire them.

This attracts more skilled workers to the location looking for jobs and this helps build the ecosystem further.

However, unlike the availability of a talent pool, a mature ecosystem tends to drive salaries up.

A large ecosystem fosters a community of well paid talented workers and this income level tends to shoot prices of commodities up further.

As you can see from this map, the District of Columbia has the highest average salary for IT jobs in the US at around $95K. This is despite the fact that California, which houses the Silicon Valley, has the highest number of IT jobs.

This is because there are a number of IT jobs located in DC owing to this being the capital city. The relatively smaller talent pool here has contributed to a higher average salary for IT workers.

Funding options

This is a relatively smaller, yet incredibly important factor influencing the location of your startup.

Regardless of whether you are seeking VC funding or a bank loan to run your business, it is important to deal with stakeholders who understand the industry you operate in.

For instance, Facebook would have never succeeded as a business if they had chosen to seek a bank loan.

Only a Silicon Valley investor would understand the dynamics of a social media platform and the need to put growth before monetization; factors that were necessary to make the startup successful.

Picking the right location

While the factors listed here are universally important, there are certain unique factors that can also influence your decision.

For instance, you may pick a location simply because that’s your hometown and you are comfortable working from here.

Other times, you may pick a less favored town simply because it has better weather in general or is closer to the timezone your customers work out of.

There are pros and cons to every location and so there is no right or wrong answer to picking any location.

This article should however provide you with a helpful guide on how you can go about selecting or eliminating the locations you have in mind for your business.

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