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Fast Growing Tech Companies Find a New Home in the Rocky Mountains

Deven Parekh, Matt Talbot | October 17, 2018| 1 min. read

Following in the footsteps of Silicon Valley’s tech darlings like Netflix and Tesla has long been the dream for many startups. However, recent trends suggest that starting a company outside of Silicon Valley has impactful advantages for creating long-term growth and opportunity. In this article, we explore how Denver is proving its weight in gold for rising startups.

An exodus has begun

The Silicon Valley exodus has begun as the barriers to entry for tech companies trying to make it in the Valley are higher than ever before. Operating expenses such as office rent and employee salaries are at an all-time high. With these rising costs, companies are now more likely to prioritize investing money into growth channels instead of operating costs.  

Hiring talent is also a challenge in Silicon Valley. For early-stage tech companies, sourcing the best talent is critical to scaling. However, scouting top talent with a startup budget has become incredibly difficult in the Valley due to the overwhelming competition in San Francisco and the high median starting salary. 

These are just a few of the operating challenges that have forced startups to emerge in new markets both domestically and internationally.  

Competing with the Valley in America’s heartland

Tech companies are now proving that they don’t need to be based in Silicon Valley to grow and become successful. Plenty of non-coastal startups are making room for themselves in various cities and competing neck-and-neck with Silicon Valley-based startups.

One of these budding locales is Denver, Colorado. Identified as one of the “next in tech” metro areas by a Progressive Policy Institute report, Denver is slowly becoming a rising star for growth-stage startups.

Denver advantages

One of the top benefits to operating out of Denver is the lower cost of living (35 percent lower, in fact) than San Francisco. This cost advantage enables businesses to funnel a greater portion of capital into growth channels. Additionally, efforts by the city government have allowed startups and tech companies to flourish. From investments in the central business district to accommodate young companies, to sponsoring coworking spacesfor new startups, Denver has worked to brand itself as a “startup haven.”

It is a fast-growing tech hub, and with that, a new community of eager, tech-savvy employees. As the number of technology startups increases, so do the supporting networks in the form of incubators, networking groups and locally-based talent. In turn, this is creating a strong environment for emergent technology companies to succeed and create opportunity for the larger Denver community.  

Regional impact on company culture

Setting up shop in Denver also allows businesses to showcase their company culture, telling their story why they’re one of the best places to work, and attract the right talent from the region. In Denver, it’s more likely that startups are competing with older and larger corporations, which helps growing companies position themselves effectively as unique and innovative places to work. This would be difficult to accomplish in the Valley where employees’ expectations include free meals and onsite childcare.

Retaining talent

Building a team in Denver also provides greater ability to retain talent in contrast to the Valley, where employees are more likely to jump around between startups due to such a large concentration of tech companies. The higher retention rate mitigates unnecessary hiring, recruiting, training, knowledge transfer and other costly staffing endeavors.

We’ve noticed that employees in Denver tend to be committed to their companies and stick around for a long time. In Colorado, the state’s attrition rate was 14.4 percent as of 2017.

Challenges to scaling outside of Silicon Valley

Finding businesses with unique and dynamic growth potential outside of the Valley is not uncommon for VC firms and has actually been a priority for many. Though the lifestyle advantages are apparent, founders should still know that scaling successfully outside of the Valley is not easy and often comes with its challenges.

Access to funding, talent and clients

The majority of investors still flock to Silicon Valley to find new investments. This doesn’t mean that funds are not available in unique locales; however, companies outside of SV typically have to network harder to secure venture capital.  

The search for talent outside of the Valley can also be challenging, as the coasts are saturated with a diverse range of skilled workers. Founders can overcome this challenge by setting up closer to universities, a smart strategy with tech graduates hungry for opportunities to grow with a developing startup without leaving their hometowns. 

The ability to find and attract clients should be a key consideration when choosing a location. Outside of the valley, it is more difficult to set up meetings quickly, which in turn delays the sales process. Luckily, mobile technologies are revolutionizing companies’ capabilities for mobile work. In addition, heartland locations like Denver present new client opportunities perhaps undiscovered by Silicon Valley startups.

Overall, is Denver the place for you?

We’ve given you our experience and a quick look at some of the benefits and challenges of investing in and building a business In Denver.

While the allure of Silicon Valley may seem worth a move, founders should seriously consider emerging heartland tech hubs like Denver when starting up their companies. Lower operating expenses combined with greater access to tech talent are just a few factors driving founders out of Silicon Valley. 

The success of a company comes down to a key underlying factor: the ability to create value. Whether in Denver, Salt Lake City or Detroit, venture capital firms are finding and investing in innovators creating just that.