Out of sight & out of mind. The no-coast startup.

When talking to local entrepreneurs, my feedback is always different than talking to people who live on the coasts. The coasts, for reference are really US West & US East. More and more the coast type feedback could also apply to those in Boulder.

I’m going to start saying no-coast instead of the midwest because I think the overgeneralization is more fair than less.

It feels as though the best way to build a valuable company in the no-coast is to build a company with a lot of revenue and IP that outperforms industry benchmarks. If you can do that for a sustained period of time (5-10 years), where you are is less important with each passing day.

That said, here is some feedback I commonly share with early stage no-coast teams working hard to get off the ground.

Expecting coastal valuations can be damaging in the early days

The main reason for this is that the angels/seed VCs you’re probably talking to are part of a unique geographic network. Unless you have offers from coastal investors setting a price, it’s not useful to benchmark yourself against peers in other geographies.

The actual reason for not benchmarking yourself against coastal companies from a valuation perspective is not that about your company. It’s about the cost of time to assume you can re-educate or change the default knowledge of a no-coast community.

You only have so much time to get money into your company and that’s a more complex problem from my perspective, accepting that valuations are largely geographic in the early days.

There are exceptions, but they are exceptions. In the early days I’d advise companies to think about 1) what makes it more likely to get a financing done vs. 2) what makes it less likely to get a financing done.

Unfortunately when considering 1, many companies select to move to the coasts. This move also makes 2 feel somewhat silly. In order to build a no-coast startup you need to want to do it because it’s a deficiency in the early days if you need to raise capital. If we can accept that and move on without revisiting the decision, it’s possible to build a great no-coast company.

Until you can say “it worked” in past tense, it’s ok to accept that it may not.

Most companies operate at a valuation discount until they’ve earned the right not to. Sometimes companies operate at a premium price because of a number of factors.

Until you have the revenue performance to demonstrate that the future your company is building is real, it’s ok to represent it that way to team members and investors.

Until you are firing on all cylinders and everything is on auto-pilot you’re like every other early stage company in the world, trying to figure it out.

The risk is generally higher in the early days building a business in no-coast because there is less early stage optionality.

You are out of sight and normally out of mind for most of the technology industry. That means you aren’t seen at dinner parties, networking events, an opening of a new civic center or at the movies. Not being seen can oft mean forgotten.

Physically seeing someone on a regular basis does have a lot to with an idea or a thought being top of mind. This can be combatted over short periods of time by being really good at PR but that’s not something most small companies have in the budget.

If you’re building a no-coast business, prior to having a great company your valuation will likely be lower than your peers on the coasts and the risks to your investors will be higher because there are less ways to get out quickly if you have to.

On the contrary…

If you build a great company, customers and investors will find you. If you support customers well, your zip code matters very little.

Your challenge as a tech startup is to become top of mind because you are relevant in the tech stack in the context of how the internet works. Not whether or not you are seen at a dinner party.

If you’re building a no-coast company, it would appear the best way to have a great outcome is to simply focus on building a great company. Same as anywhere else.

This post was largely written while thinking about the topic after reading Stubborn Attachments.