Bay Area Is Like Hollywood for Startups, Says Seattle Entrepreneur Who Moved to San Francisco

Over the past couple of weeks, I’ve been exploring the relationship between tech startups in Seattle and investors in the San Francisco Bay Area. We ran a story about what Seattle entrepreneurs can do to attract more attention from Bay Area VCs, and then a follow-up about whether there might be a brain drain of early-stage startups from Seattle heading south in search of funding. The pieces have generated some pretty spirited feedback.

One of the most provocative responses I got was from Shan Sinha, an MIT alum, former Microsoftie, and co-founder of DocVerse, a collaborative-document software firm originally based in the Seattle area. This summer, Sinha and fellow co-founder Alex DeNeui raised $1.3 million from Bay Area investors and relocated their company to San Francisco. Sinha has a very interesting take on Seattle versus San Francisco, for early-stage entrepreneurs. “After reading your article, most of the folks seemed to espouse a viewpoint that there is no advantage to being in the Bay Area and that starting a company and trying to raise money from Seattle is straightforward. There also seems to be a second thread through your anecdotes attempting to espouse that Seattle investors were plentiful and competitive,” he writes. “Our experience did not support either of those observations.”

For balance, I should point out that I recently spoke with data-visualization firm Tableau Software, which moved from the Bay Area to Seattle a few years ago because its founders wanted to live here. So it’s not like there’s an exodus of startups in one direction, or any big trend yet—these are just individual cases. (But I am curious to hear what others have to say, particularly those on the early-stage side of things.)

Sinha wrote, “We moved to the Bay Area for the same reason why people move to Hollywood to make movies. The Bay Area is for startups what Hollywood is for movies. Starting a company is hard enough, not being in the Bay Area is just introducing another hurdle in an already risky endeavor. Why not eliminate as much risk as possible? Any reasoning to justify not being in the Bay Area is a rationalization, in my opinion (often times valid… like “my family is rooted here”… but nonetheless a rationalization that must be overcome).”

He then fleshed out four concrete observations from his experience. The most interesting part to me is his discussion of meeting logistics—trying to build relationships and do deals from afar—as well as the idea that Bay Area VCs move faster and may be more willing to take risks. But I’ll let Sinha speak for himself:

— “Bay Area investors are made of a different ilk than anywhere else. In our experience Bay Area investors just moved at a different velocity. There were some exceptions…we did meet some amazing folks in Seattle

but on balance, Bay Area investors just moved faster. When we got our first term sheet, and I got back in touch to gauge interest in joining the round from other tier-1 VCs and angels we had been speaking with, I would have a meeting set up in 2 or 3 days from Bay Area folks. Seattle—the fact that we received a term sheet got little notice in the Seattle community. Meetings were still taking 2, 3 and sometimes even 4 weeks to get together. By that time, we’d moved on and were discussing other opportunities.”

— “Logistics are difficult. Regardless of what the media makes it sound like…fundraising does not happen in a scripted way where the entrepreneur comes in and pitches, and the investor decides yes or no. Reality is that it is a fluid process. You meet one investor…if they like you, they seek social proof. So they introduce you to some of their friends. You meet with them…you meet with someone else that knows them, so they can whisper good things to the primary investor. You spend time keeping them in the loop about what’s going on…and one day something emerges. This process requires scheduling and rescheduling. You don’t want to make a flight from Seattle to San Francisco just for 1 meeting (though we did that a couple of times). You want to pack as many meetings into 1 or 2 days as possible. But each meeting is rescheduling…they may not be available that day or they have a partner meeting. Flying back and forth to handle all of that is not trivial and can add up quickly, not to mention the wasted time when 4 meetings in one day become 1 or 2. Being a 30 minute drive away gives you the flexibility to move more reasonably. You don’t have to wait to come down to the Bay Area only when you have 5 or 6 meetings scheduled together.”

— “The amount of capital running around is unparalleled and comes with a certain risk tolerance. The Bay Area had about $10 billion of invested venture capital in 2007. Seattle had approximately $1.25 billion invested last year. That’s an order-of-magnitude difference. That’s the difference in populations between New York City and San Antonio, TX. Probably because of the availability of this capital, the people you meet with are eager to find other investors to go along. At some level, investing in startups felt more like a ‘pastime’ in the Bay Area for the folks that we met, if that makes any sense.”

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