Accelerated Second City Office Expansion Due to the Talent War

With the ongoing war for talent in startups, especially in the money centers of California and New York, there’s going to be an increased focused on expanding to another city, with a separate talent pool, earlier in the startup lifecycle, when compared to historical standards. Traditionally, it wasn’t until a startup reached a critical mass in their scale that they would look for a second full office, not simply a light-weight sales office (e.g. Google has a massive engineering office in New York City). As for Atlanta, I know of at least two fast-growing software startups based in Florida, one based in South Carolina, one based in NYC, and two based in San Francisco (Square has an office in Atlantic Station in Midtown, Atlanta) that have full engineering offices in Atlanta. This trend is only going to accelerate.

Here are a few reasons why startups with expand to a second city faster than historically:

  • Talent pools in a geographic area are only so large, creating excessively high demand for talent in the money centers like San Francisco and Silicon Valley
  • Money centers also have exceptionally high costs of living and housing prices, making it more desirable to have a significant office presence in a second city where costs are lower (Trulia is based in San Francisco but has hundreds of employees in Denver)
  • Video conferencing (e.g. Google Hangout) and cloud-based collaboration apps are better than ever, making it easy to work in separate physical locations
  • Acqui-hires are more common now, making it more likely startups will look for acui-hires in other cities to be the basis for a new office location

Second city office expansion is already taking place faster for startups, but entrepreneurs aren’t talking about it as frequently as they should. Look for it to be even more commonplace over the coming years.

What else? Do you think there will be accelerated second city office expansion due to the talent war?

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