Startup location: San Francisco or Berlin?

Exactly a year ago I met with this Location selection for startups is concerned. At that time I came to the conclusion that Zurich was definitely not the right location for a young startup, and the one that had emerged in the meantime Tax issue is unfortunately another argument for this assessment.

For the startup I'm currently working on, like most Swiss entrepreneurs, the two hotspots Berlin and San Francisco were shortlisted. Both locations have their advantages and disadvantages that must be carefully considered. That's why I'm spending this summer in San Francisco to find out whether we'll start the startup here in the Bay Area or in Berlin.

The ecosystem

One of the most important criteria for the location of a startup is the ecosystem. Very impressive: Berlin is by far the one fastest growing tech hub the world and so you are definitely in the right place if you want to start a startup. Conversely, this means that the ecosystem is still very young and many structures have not yet been established. This can be seen, among other things, in the fact that larger financing rounds (from Series C) and important exits are still a long time coming.

In the Bay Area, the Silicon Valley and the surrounding area around San Francisco includes, the ecosystem has existed for decades. There are generations of successful entrepreneurs investing their knowledge and money in new startups, the VCs all have their offices on Sand Hill Road in Menlo Park. Large rounds of financing can sometimes be completed at a breathtaking pace - if you're really good. In addition, Berkeley and Stanford universities attract the world's best academics.

The costs

This point clearly goes to Berlin. Silicon Valley and San Francisco are generally more expensive than Zurich, both for the living costs of entrepreneurs (apartment, food and the salaries to be paid. A reasonably talented junior engineer can easily charge USD 120,000 to 140,000 (plus the war of talent is very pronounced here). These costs must be taken into account when discussing the financing rounds, which are large by European standards. Under certain circumstances, a startup comes with a EUR 3 million round in Berlin further than a Valley startup that raised USD 6 million.

The vision

Although many Berlin startups have an international founding team, the scene still seems to me to have a European influence, which can often be seen in the choice of market. Apart from Rocket Internet, very few startups target the world's major markets, preferring to concentrate on Europe.

Here in the Bay Area, however, it is crystal clear that we have to think internationally and, above all, big. Nobody is satisfied with being number 2 in their home market; all startups want to become world market leaders. This “think big” culture is deeply rooted in Silicon Valley. It would be incredibly difficult to introduce this culture into Europe. If the founders think big, that's good - but if the team doesn't follow suit, the strategy probably won't work.

According to stories from European founders here in the Bay Area, a startup can definitely benefit from this great entrepreneurial spirit and implant the Think Big DNA into the company.

At least in our case, the vision clearly supports implementing it in the Bay Area.

Other factors

In addition to the most important arguments for/against Berlin and San Francisco just discussed, there are of course other factors that I would like to briefly address:

Residence permit: It's a pain in the USA, but in Germany it's easily possible for us Swiss.

Leave your comfort zone: German culture is quite similar to us Swiss, Berlin is an hour by plane (and eight hours by train) from Zurich. A spontaneous weekend in Zurich is always possible. With an 11 hour flight and the corresponding costs (and 9 hour time difference) you think about it several times. Emigrating to the USA is definitely a bigger adventure than moving to Berlin.

Speed: The startups here work at a breathtaking pace. In San Francisco I met Berlin entrepreneurs who moved their companies here to benefit from this pace, which would not be possible in Berlin.

Terms: The term sheets are largely standardized and public. Before you sit down at the table with a VC, the startup knows the conditions exactly. Months of tough negotiations are no longer necessary.

Weather: In Silicon Valley the sun usually shines at around 25°C. In San Francisco it is usually significantly cooler and, above all, windier, and often foggy in summer. Nevertheless, the weather is on average significantly better than in Berlin (after all, we are here in California).

Which location would you choose? I look forward to an exciting discussion here or on Facebook.

PS: We are looking for a CTO and a CMO as co-founders for our startup. For further information please contact me directly.