Where to Start
Fred Wilson blogged today about how areas outside Silicon Valley seem to have an inferiority complex about whether you can build a successful start-up if you aren't in the Bay Area.
I agree with Fred that you can be successful almost anywhere, as long as the area has what you need (more on that below). Realistically, there have been more really big wins in Silicon Valley than elsewhere, but Fred lists plenty of non-Silicon Valley big successes in his post. And, there are many more. Silicon Valley will probably always have the most as that's where there is more investment. But, it also has the most competition for people and capital. So, your chance of success might be higher there due to the overall critical mass there, but you also have a higher chance of being beaten by a local competitor. I think that in terms of odds, it's about even.
So, don't blindly move to Silicon Valley because you think that's where you have to be. You almost certainly need a sales and/or business development presence in Silicon Valley if you are in the information technology business. That's a big market, and there are many big partners there. Plan on having someone with those skills based there, or traveling there very, very frequently. But, what about where to base the rest of the company?
1) Founding team location. The founders are the most important people in the company. They have the vision, make the biggest sacrifice, build the culture, and provide the early momentum. I don't like virtual companies where people are scattered all about from the start. You lose many of the benefits that being small and nimble provide you as you spend time and money getting together. It can work, but the odds of success are lower. You probably can't move all the founders to one place without upsetting family life, etc. That wears on the founders, too. Hopefully all the founders are in a place that meets the other criteria below.
2) Access to qualified people. You'll need to build a team, and you don't want to count on people all having to move to some remote location. Your company should be based in a place where there is a pool of qualified people that have worked in similar companies. And, you'll need people at all levels and across all skill sets -- engineering, sales, marketing, operations, etc.
3) Access to capital. Most investors like to invest locally, so it will be much easier to get funded if there are sufficient local VCs or angel investors to give you a good chance of getting funded. Areas that have a good base of VCs include Silicon Valley, Boston, New York, Austin, Atlanta, Washington DC, Seattle, North Carolina, Chicago, and more.
4) Feeder companies. I find it very helpful if there are other companies in your area that are in similar or adjacent markets to yours. This helps with the talent pool, but it also means that all other service providers (lawyers, accountants, bankers, real estate brokers, etc.) understand the basics of your business model. And, feeder companies are great training grounds for your future hires.
5) If you aren't in a major area, it's really helpful if you have good access to an airport that can get you there quickly.
There are probably other factors, so feel free to comment with your thoughts.
The most important thing isn't where you locate, it's the quality of your idea and of your founding team. If that's strong enough, you can be successful. And, being a strong player in a less-frequented location can actually make you stand-out much faster.