This is where having a startup outside of the valley is nice. Nobody where we are (KC) really even expects stock options. We just pay a good competitive salary and don't have to compete with someone like Google paying 2x as much. We have given some people stock incentives but because we pay well and competitively it isn't the primary compensation. The costs of running a startup are so much lower here.
I'm curious why the people who are not in the valley don't go to the valley.
Is it because they:
a) aren't motivated to
b) don't know what the potential is there may not even know
what is going on. May not even know about YC or VC's etc.
c) don't think there is potential there (think it's all over hyped and focuses on a few people who win).
d) have family obligations which prevent them from
moving to the valley
e) Other reasons?
As a software developer I worked and lived in multiple states. In spite of business appeal of the valley I never went to California.
Here are my reasons (in order of declining importance):
1) Crazy real estate prices (and as a result higher salaries do not compensate for higher cost of living).
2) Higher taxes. Income, sale, and excise taxes in California are high. In addition to that, federal income tax is higher, because in order to compensate for higher cost of living I need to earn more, which brings me into higher tax bracket.
Some cities are really nice places to live with unique resources of their own. In Pittsburgh, for instance, there are fewer interesting software jobs but a beautiful city with a lot of exciting non-technical things going on, a healthy ecosystem around Carnegie Mellon, and very nice 1-BR apartments in the best, most central and walkable parts of town for $800/month. Not everything needs to circulate around the moonshot opportunities of the VC ecosystem.
I'm in New York and don't intend to go to the valley any time soon. Four reasons:
a) The compensation game is less ridiculous here. With pressure from the finance industry, all companies (including startups) tend to offer decent salary and don't over-rely on equity compensation.
b) I don't like driving. From my limited experiences, it seems that it's necessary to (occasionally) drive in the Valley.
c) SV seems way over-hyped. Yes, people are building some cool things—but far more people are just making knock-off apps and it's all a bit of a bubble. When the tech bubble pops, SV will be hit the hardest.
d) I don't want to live in a (tech) monoculture. It's interesting interacting with people from other industries and living in a real metropolis.
The Bay Area is a ridiculously expensive place to live.
I live in a small northeast city. I have a 4 bedroom, 2500 ft^2 house that cost about $200k, and is in a great school district. I'll own it outright in about 10 years.
In SV, I'd probably make 2x the salary, but my cost of living would be about 5x. The taxes are probably higher than even New York.
If you're making $100K in Pittsburgh, you're doing quite well. And you might want to increase your salary by a tremendous amount, perhaps 5x-10x because obviously some costs don't change, to justify moving to Palo Alto and buying real estate. (Yes, there are other places to live in Silicon Valley, but speaking as a homeowner here, there aren't any that are non-coastal cheap.)
Probably a similar number if you looked at it as an actual percentage of new companies. My next door neighbor is the founder of a little company called Garmin. Cerner was also founded here.
That changes the negotiating perspective of the job seeker. If you're surrounded by a rather large number of companies in that range - http://graphics.wsj.com/billion-dollar-club/ - and are skillful enough to enjoy offers from multiple suitors, you're bound to do your analysis, perhaps employing some backchannel communication.
If the theoretical maximum of company exit is in single millions, then spending time negotiating 0.25% vs 0.3% equity package is meaningless.
For better or for worse, those chances actually are related, because the #1 source of >$1BB exits is being acquired by other billion dollar tech companies, most of which are heavily networked in SV.
