I’d be willing to bet you’ve heard some version of this on Twitter: “Move to San Francisco.”
Apparently it’s all you need to do to succeed. You move there, breathe in that SF air, and then you sell your company for a hundred bajillion dollars.
Although SF is a great place to build, I think that advice is increasingly wrong. Not just outdated, but actively harmful for many founders.
Here’s why.
The disadvantages of building in San Francisco
$50 coffee. The cost of living forces founders to raise more money earlier than they should.
Inflated valuations (by 104%) make exits harder and compress returns for everyone.
California does not align with QSBS incentives, materially reducing founder outcomes at exit.
Wealth and policy uncertainty create long-term overhang, decreasing network effects as $1T in wealth has left in the last few months.
Pedigree substitutes for understanding. Dense networks increasingly behave like echo chambers. Consensus is rewarded more than originality.
Investor proximity encourages fundraising before validation. It becomes harder to know what is real traction vs. performative momentum.
Talent is abundant but overpriced, transient, and constantly in motion. SF pays 33% more than Indianapolis. Loyalty is harder to build when every team member is being recruited weekly.
The advantages of building away from San Francisco
5$ coffee. Lower burn rates extend runway and learning cycles.
Scrappiness is not optional; it is enforced by the environment.
Founders are forced to validate with customers before pitching investors.
Capital efficiency is built through constraint, not claimed in conversation.
Being underestimated creates asymmetrical upside.
Less competition for talent, and talent is often underpriced relative to output.
Proximity to untapped industries and customers sharpens product decisions.
AI dramatically increases the ROI of selling software into historically slow-moving industries based outside of SF.
Adoption accelerates when the value is 10x instead of marginal.
Less noise from people "playing startup."
Execution > optics.
Geography used to be a moat for capital. It no longer is. You can see this firsthand with companies like EquipmentShare, Columbia, MO-based, who just IPO’d, surpassing a $7B valuation.
But geography is still a moat for cost structure, culture, and customer truth. San Francisco optimizes for access and consensus. Many other places optimize for durability, originality, and economic reality.
That does not mean SF is irrelevant. In fact, SF may have the most opportunity, but the odds of success are on a case-by-case basis. Talent is equally distributed, opportunity is not. But the default advice to “just move to SF” is lazy thinking. You don’t have to be in SF to believe big.
The better question is not where are the investors, but where do you have the highest chance of success. That answer, more often than not, is where your gut tells you to be.
