Geography is Not Destiny

In the previous post, I was at pains to point out that some New Zealanders think of the US as a single market.  That is a mistake – but there are circumstances where geography is important.  

This post is, therefore, a more ‘practical’ one in that we will discuss some do’s and don’ts for determining where to start your business.  This is tactical, and I hope that the advice here will make your life a little easier.   

When thinking about where to put your company, think about where your customers are, where your competitors are, and the location of adjacent industries.  This last one is particularly important because hiring good staff from adjacent industries is a quick way to scale. Hiring from competitors can be complicated – adjacent markets that have similar business models can be a better path.  Note that we often over-emphasise taxes and regulations, and while these are important, I think the location of potential talent is the most important criteria.

This is a short list of considerations:

• Look for an airport that has good – and cheap – connections.  For instance, you can get most places in the US from Love Field in Dallas on Southwest for less than $250 each way.  Flying out of New York on American or United is likely to be more like $500+ each way (obviously with huge variations for the usual reasons).  
• The highest salaries are in San Francisco, New York, Seattle and Austin (if you’re in the tech industry), so avoiding those markets will save you a lot of money.  No – they are not the only places where there is strong tech talent – Denver, Houston, Charlotte, Nth Virginia, Nashville and Atlanta are examples of cities that have good pools of tech employees.  Don’t cheap out – you will probably not get the skills you want in the cheapest locations – but there is plenty of space in the middle. www.bls.gov is the best place for stats on salaries and the availability of specific skills.
• Consider the ecosystem of your product or service.  For example, San Diego is the home of Qualcomm, one of the pioneers of cellular phone tech.  If your product or company needs engineers who know mobile phone tech, then San Diego is a good place to consider because you will find mobile communications engineers there.  If you are in chemicals, then Houston has an ecosystem of chemical engineers because of the petroleum industry.  
• But don’t make the mistake of thinking that all the best software engineers are in Silicon Valley. That is not necessarily the case, and anyway, you will have to compete with the likes of Google and Facebook to hire them.  Instead, think about the industry you are targeting. If you do go to San Fran to visit though, look up the Kiwi Landing Pad to meet up with fellow Kiwi tech heads: https://www.kiwilandingpad.com/.  
• Think about the time zones – particularly if you are providing a service. Locating customer service in California means starting work at 6am to cover 9am on the East Coast.  For customer service, also think about language. You can find good dual English/Spanish speakers almost anywhere now, but Florida and Southern Texas are the deepest pools of native Spanish speakers.  
• You want places that are friendly to business, with fewer regulations and with lower rents, taxes and other costs.  But in the end, this isn’t the most important factor. Two of significant businesses I have worked with are based in New Jersey and California respectively – both at the wrong end of the red tape and costs scale.  One company was focussed on the Pharmaceutical industry – and within about 100km of our New Jersey location, you could meet with about half of the global pharma companies. The other company was based around mobile phone tech, and therefore Southern Cal was the best location to get engineers.  In both cases, the business needs overrode financial considerations.
• Get advice about the right corporate form to use, and how that company will be owned or related to your NZ company.  Corporate form is complicated – LLC, S Corp, C Corp – all have advantages and disadvantages. How the US company interacts with the NZ company will also be complicated; for example transfer pricing will be something you have to grapple with.  Your end game exit will drive some of the strategy here: some US investors are wary of investing in companies where the Intellectual Property is not held by the US company. No, that doesn’t make any sense, but it is something to consider if your plan is to sell to a US based investor.
• There are incentives available from cities and states to help you set up in their location.  Don’t think that you are too small. Every city has a business development office that can give you information.  Incentives are usually based on employment – if you are setting up a customer service operation and will hire 10 people, you will absolutely get the happy treatment from the Mayor’s office – no politician in the US can afford to look cavalier towards new jobs.  Kiwis are bashful when it comes to asking for money from politicians – but there is real help available, so I recommend you reach out to the business development team at City Hall. You’ve got nothing to lose.
• Finally, for your own sanity, look for somewhere that is within a short connection from one of the cities that AirNZ flies directly to.  Draw a 2-hour flight range around Houston or Chicago for instance. Cities within 2 hours of Houston include Atlanta, Austin, Tampa, Dallas, Nashville, St Louis and Kansas City.  Denver and Albuquerque are 2 hours 15 minutes. For that matter, Houston and Chicago don’t require any onward connections – what could be better than that.

Most people asking me these questions just want to cut to the chase – where would I put an office?  And of course, after reading the above, you know that it all depends. But here goes with some personal biases and pattern matches:  

• If you are focussed on the West Coast, then LA county is not as bad as it might seem, and there is a big tech scene in Santa Monica.  The South Bay area is 15 mins from LAX, and a relatively easy place to find technology, marketing and digital talent. There is also great coffee at Two Guns Espresso (owned by Kiwis of course).
• If you are setting up a Customer Service base then consider Houston, where it’s cheap to do business and it’s easy to get to from New Zealand.  The time zones work and so does the availability of dual language speakers.
• For a business where you expect to do a lot of customer travel, then Denver or Dallas are good options.  Denver is right in the middle, so it is easy to travel places and they also have a growing tech scene around Colorado University in Boulder, and the location is beautiful.  Dallas might be the cheapest travel location in the US given the Southwest base at Love Field.
• If you are not specifically focussed on Wall St as a customer, then it is hard to recommend a base in the New York area.  It is eye-wateringly expensive, and you will be competing for talent with the biggest firms in the country. Wall St can pay unimaginable money to good engineers.  If you have to, then the best coffee is at Happy Bones and DUB Pies.  San Francisco has the same problem; why would a great engineer work for you when they could work at Google or Facebook.  So unless there is a specific requirement, you should avoid these markets.
• I’m biased against the brutal winters of Chicago, and it’s expensive to fly from, but there is good tech talent there and you can get anywhere in the world from O’Hare Airport.  
• I’m also biased against the brutal summers in Atlanta!  But it is a great place to do business. Hartsfield Jackson airport is the busiest airport in the country, for instance there is a flight about every 45 minutes to New York.
• You should also seriously consider secondary cities.  Nashville, Charlotte, Jacksonville, Memphis and Phoenix are all great cities to live and do business in.  They offer strong incentives to new businesses, they have good airports and they all have strong talent pools in different areas.    

You can see quickly that there are some practical ways to narrow down a list quickly to places that you might want to be.

Finally, I want to put in a huge word here for KEA.  KEA is a network of over half a million New Zealanders living and working around the world.  Become a member, and use the network to find local Kiwis in the locations that you are looking at, and meet with them locally to get the true lay of the land.  The Kiwi diaspora is a resource that we do not use enough.

Next up: the importance of focus.