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Most startups consider San Francisco Bay area, New York City, or any of the major cities as ideal locations for their headquarters. They are beautiful cities with all the fun, excitement and talent a startup needs to succeed and have fun while doing so. However, headquartering in major cities also comes with a steep price tag. The cost of living in the U.S. increased by 14% in the last three years according to the Consumer Price Index. Moreover, in major American cities, the cost of living comfortably has increased as much as 36%. Office rent also has increased by as much as 47% since 2012. Founders are beginning to consider headquartering in underprivileged and upcoming communities instead due to the high cost of living, renting and operating out of major cities. These communities, although they may lack the excitement and resources of a big city, offer affordability and unique perks that you can’t find anywhere else.
Lower Cost Of Office Rent
Many startups are still renting and furnishing their own offices despite the popularity of working remotely or in coworking spaces. The cost of renting office space in most major cities has increased noticeably in the last decade. In the San Francisco Bay area, the cost of renting an office grew by 47% between 2012 – 2017. During the same period, Seattle’s office rent also increased by 32%, and New York City rose by 22%. Philadelphia remains one of the more affordable metropolitans to rent offices having only increased by 16% during the same period.
Meanwhile, the cost of office rental in many disadvantaged communities has only increased between 1 – 5% within the same period. Founders can expect to pay between $15 – $20 per square foot for a class B space. Which is significantly less than San Francisco Bay’s current average of $59.56 per square foot.
Lower Cost Of Living
Startup teams who live and work in big cities can typically expect to pay more for the basic cost of living when compared to founders living and working in smaller communities. But exactly how much more do they pay? The cost of living has been rising consistently in the past decade. Not surprisingly, it tends to cost more to live in large cities compared to smaller communities.
According to Best Places Cost of Living Index, the national average score is 100. New York City rated 209 as one of the most expensive cities to live in. Camden New Jersey, a rising city, scored an 84, making it 16% lower than the national average, and 143% more affordable to live in than New York City. The index score is calculated by averaging the cost of groceries, dining and local purchases. For a new startup, the savings every month on rent, living, and general purchases can be used to significantly extend runway.
Easier Access To People In High Places
Being in a large city means your company is a tiny minnow in a large pond and you’ll need to work twice as hard to be noticed. However, in a recovering community, you’re considered a big fish in a small pond. Being recognized early on makes it easier to bump elbows with big players in the community. Very few people in the community are out of reach and high-level executives and city officials are often only an introduction away. Startups that rely on B2B connections will appreciate how easy it is to prospect in these communities. And if your goal is to be connected with the city government or local institutions, you’ll have a much easier time navigating the city’s politics here than in major cities.
Attention From Local Press
The local press in developing community tends to report stories on crime, drugs and poverty. However, a company choosing to headquarter in a neighborhood known for anything but growth and prosperity makes for a compelling story that will interest reporters. In a large city, you might struggle to get anyone to acknowledge your company’s existence. However, in a small developing community, you’re likely to be the talk of the town. And at the early stage of your company, having that kind of press recognition can be validating and even empowering for your team.
Opportunity To Make An Impact
Residence in recovering communities tends to be underserved and neglected in the workforce. While offering a few jobs and internships in a small neighborhood won’t change the world, it can change the narrative and attitude of that community. And for startups seeking to make a social impact or develop technologies to solve real-world problems for the under-represented population, a disadvantaged community offers the perfect opportunity to make an impact.
Underprivileged communities are becoming a viable alternative for startups looking to get as much mileage out of their funding as possible. They’re affordable and offer unique perks that can help startups grow. Moreover, the recognition from municipalities, easier access to high-level contacts and attention local press in these communities make them both welcoming and rewarding for those joining them. And for startups in the social impact space, these communities present both the perfect opportunity and the ideal challenge.
March 4, 2019 at 04:50PM
Forbes – Entrepreneurs