It’s a bit of a David and Goliath story.
There is a massive divide in how much money can be raised, and at what stage it can be raised, in the San Francisco Bay Area (Silicon Valley) versus pretty much everywhere else. You may expect it to be similar in other major economic centers the NYC (Tri-state) area, DC area (DMV Metro), Seattle area, or Boston area – but it decidedly isn’t. Not even close.
If you’re a startup outside these areas, you’re most likely able to raise at most 2x your ARR, even after proving at least some product market/fit. In the Bay Area, you can probably raise 10x. Further, without an ARR, you probably can’t raise at all without already bootstrapping, spending your own self-invested precious capital, or raising from Friends & Family.
It’s a serious disadvantage.
This asymmetry also creates arbitrage for Silicon Valley itself. They can find nascent good ideas, build a competitor, raise way more capital at early stages, and obliterate competition elsewhere.
Things are changing with startups becoming more distributed, either work from home or based elsewhere – but the money situation isn’t going to change for a very long time.
The point? Try to raise out of California if you can. Raise early, raise often, never stop raising. Someone who out-raises you has the leverage to out-compete against you, too.
