Startup Therapy Podcast

Episode #133


Ryan Rutan: Welcome back to the episode of the startup therapy podcast. This is Ryan Rutan joined as always by my friend and the founder and Ceo of startups dot com, Wil schroder. Well, we've both lived in a lot of different places and and you specifically have lived in some of these, these meccas of startup dumb that we used to feel like we're absolutely necessary. If you wanted to be successful, you had to be in one of these few places. How how true is that still for you?

Wil Schroter: You know, I would say up until a year ago, I would have made a fairly flimsy argument that says, you could kind of live in the world, right? And there was some truth to it. But a couple of things have happened since then, things have happened and you've seen over the past couple of years this mass exodus from major cities where people all at once and this had to happen for everybody all at once in order for this to work. People are saying, you know what, what if I go over there instead and get out of san Francisco or L. A. Or new york or you know, whatever your your your mega price city was and for the first time because everyone else did it at the same time, let's face it, everyone was kind of forced to be where they were, we made it work and we broke the seal for the first time, People raised capital without leaving their apartment. It was amazing and all of a sudden all of our staff started to go in all these remote places. They'd never lived before because they couldn't, we started to go to places that we could actually afford a house, you know, and all these things started to change and it became the thing to do, the cool thing to do. And all our founder groups right now, all of the founders of the major cities are all bailing. I've actually had Ryan, one of our founder groups, sf based founder founder group in san Francisco, every single person in the group has left the city. Alright, so before we get into this next topic, I just want to let you know what we talk about here is like 1% of the conversation, you know, really, this conversation is going on all day long online at groups dot startups dot com. Where Ryan and I pretty much talk endlessly with founders about every one of these topics. So if by the end of this discussion, you like the topic and you want to dig into it a little bit more with Ryan and I just had two groups dot startups dot com. And we'll pick it up from there.

Ryan Rutan: Right? That's that's pretty telling, right? That's not a statistical anomaly, right? Yeah. That, that kind of gives you the lay of the land at this point. And, and to your point, it's it's ubiquitous now, right? And that was what we were missing up until this point was the ubiquity of that. Yeah, we were starting to see more and more remote work creep into the workplace, but they still represented a minor percentage. And then all of a sudden overnight a switch was flipped and everybody was remote fully. Uh, and there was a lot of talk about whether that would reverse once once things open back up and we're pretty well opened back up in a lot of places, and we're still not seeing the regression to the sort of troops in the past, right? Where everybody's in an office together. Um, and with good reason, like a lot of people made permanent moves based on this, right? And I remember talking to a couple, a couple of people, um, a founder, a couple of founders, a couple of engineers, a couple of marketing folks where they had decided to make permanent moves based on what could still have been interpreted as a temporary situation at that point. Um, and so, you know, you've got people on both sides of this equation, but it seems that the prevailing wind is blowing towards, we're likely to be mostly remote for the foreseeable future. Right? Which I think is exciting.

Wil Schroter: That's a good thing. And let me point out what we're, what we really need to get into today isn't big city versus Little City or anything else like that. Right? We just need to talk about the economics, right? The functional economics of what happens for the first time when you can leave a major city go kind of anywhere else and do the same thing, right? And, and not have the loss because here's what I would say If you would rewound back 5, 10 years, right? Let's go back 10 years when I first moved out to Los Angeles from Columbus. Ohio. It's beautiful in L. A. It's great. But that's not why I moved there. I moved there because they're the only way I was gonna be able to raise money for my venture was to go to the west coast, right? It was like this rite of passage, you kind of had to do it. The investors were very clear, they said, look, if we're gonna put money in your deal, are you gonna be local? And I'm like, I guess I am now, it's kind of like a beautiful house that we still live into this day of this. Um, you know, and, and we'd be starting a family. And a few years after, like, I was pretty well rooted and I still had to move, right, had to move. That's

Ryan Rutan: the biggest thing that got introduced into this equation, right? Which was that we went from not really having a choice to having these terms of where we would end up domicile in ourselves and our families and our businesses, I I was, was taken out of our hands, right? And it's now been given back to us, right? And I think that founders need to look at that as as a real gift. Um, to have the freedom of choice back in play regarding where you end up spending your time where your employees are. Uh, and you know, we did see this is probably if we go back five years, we started to see some level, it wasn't an exodus by any stretch of the imagination, but you did start to see some companies popping up in different locations, right? You know, get Austin, you've got other other secondary cities where there is a startup population, Miami Chicago. And yet they were still concentrating their employees in one location. Right? So you, as the founder may say, like, look, I don't want to be in san Francisco, I want to be in Chicago. Cool. Does the rest of your team necessarily want to be in Chicago? No. And I think that that's what this has really done for us was opened the discussion to say, look, everybody in the team can actually have some agency and choice over where they end up spending their lives, which I think we can all agree is fairly important.

Wil Schroter: The way I think about it though, I don't think so much about, uh, is san Francisco a great city? Sure, it's a great city, right? But what I think about in this in these days and times now that we have the latitude as founders to pick where we want to go. An expensive city. And I'm just, I'm just labeling it as expensive city. No one can argue that one of the most expensive cities in an expensive city is a liability.

Ryan Rutan: Yeah. Big

Wil Schroter: time. That's what I want to talk through and kind of work through is what is the liability incumbent now as a founder, if I'm making that decision, what are some costs that I'm going to incur that honestly might not be worth it? They might not have an R. O. Y. Like they used to. In fact, not only am I going to put myself in a tough position as the founder, I'm going to drag all these other poor bastards with me, these other people that came to work with me, I'm putting them in the exact same situation by forcing them into this high cost situation that they may never be able to get on the right side of. So with that, with that, what I would say, Ryan, the biggest thing we see first that everyone sees first is what is the cost of living there? It's the first thing every hops on Zillow, right? And you know, holy cow, it's going to cost me what to get what? Right.

Ryan Rutan: Yeah. And it works both ways. Isn't that funny? Like you've got people who are now fleeing going, oh my God, they're giving away houses for free in columbus, you know, they only cost, you know, half a million dollars. Um, everybody that's going the other direction is like, wait a minute, I have to pay $750 a square foot to get housing. Like this doesn't make any sense, Like I just

Wil Schroter: can't do it. Uh

Ryan Rutan: Yeah, it works both directions.

Wil Schroter: And so you see this in Guatemala, right? So, so folks come out, you know, they come to visit etcetera. You see expats what have you and they look at at what you're getting in the life that you're living there and they're like, oh my God, I can't believe how cheap everything is.

Ryan Rutan: Right, right? Like you got a little twisted there, right? It's not that it's that cheap here, it's that you've just gotten used to this hyper inflated cost of living from one of these three cities that you seem to think we're the entire world, right? And again, nothing against those cities, nothing against the people that live there. But to your point, they are a massive liability there, a huge drag on on the people and the businesses that operate there, simply due to the economic factors. Yeah, they have other benefits and and hopefully people are really enjoying the hell out of those because they're certainly paying for them.

Wil Schroter: Right. Right. Right. Well, and so let's let's start with this, let's start with housing because I think that's the one we can't overlook. So here's what happens again immediately. All my friends right now, in all the major cities are per Covid are hopping on Zillow and they're saying, oh my God, I can't believe what I can afford elsewhere now. Two things strike me as this with this, right? The first thing that strikes me is, um, you can't believe what houses cost in indiana or Austin or Miami. And it's like, dude, you came from Idaho. I know not know what housing should cost,

Ryan Rutan: right? You're not, you're not exactly born inbred san Franciscan, right? There's like

Wil Schroter: six of you that they were actually born there, right? Everyone else just moved there five minutes ago, right? And act like they built the city right? Like, oh, you're from, Ohio, I'm like, where are you from? Michigan? Did you move here like three months ago? How quickly we forget. Right? And so, um, I don't know where the amnesia comes from, but I'll tell you this when my wife and I were shopping for a home in Los Angeles the first time we moved out, um, This, this was not lost on us for a second. We're trying to move to Santa Monica and this is 2007. So long before Santa Monica was even nearly as expensive and it wasn't cheap back then either. We're laughing. We're like, wait a minute, we're gonna pay this much for an apartment and it costs twice as much as our full home in columbus, right? It's a pretty nice home, right, This is nuts And that was as cheap as it was ever going to get and like all of a sudden, uh you you get amnesia right? Start shopping around a little bit right? Like well if it's, you know if it's, it's $6000 a month here while this other places only 7000 for only an extra 1000. And then all of a sudden you're in like $11,000 a month and you're looking around going, I'm still in an apartment. Yeah.

Ryan Rutan: What do I have to do not to share a wall with someone? Yeah.

Wil Schroter: And in heaven forbid I'm able to find a house at any price. I have like a tiny postage stamp of yard and this here nor there. Right? That is what it costs to be there. That used to be your price of admission. It's just not anymore. By the way, the prices are still what they are, you just no

Ryan Rutan: longer have to

Wil Schroter: pay. All I get is an apartment. Guess what? You don't have to live there anymore. You don't have to pay that price of admission.

Ryan Rutan: Yeah. I think that you know you made a good point which is that these things used to buy you something. They used to be necessary, right? There were there were powers that be that deemed at such that you had to be in these places. Um and it, and it trickled down, right? It went from the, the VCS and the angels telling people you got to be here. Um two then the employer is saying, well if you want to work in these, these high paying jobs, the most competitive, the biggest, fastest growing startups and companies in the world, you got to be in this city to do this. And it just, it just fed into this machine that then became unnecessary at some point. I look at that kind of like, you don't put cattle guards on your cars anymore, right? We don't dig moats around our houses. Those became irrelevant, right? And to me, having to live in one of these cities saying that we have to live in one of these cities to be successful as a startup or a founder, um, has the same, you know, ludacris appeal to me that those do, right. We just don't need those things anymore. It's not necessary. Nobody's dictating this. Uh, other than some outmoded mentalities that I think are by and large only being held by the founders at this point, right? I don't know that there's a whole lot of VCS going, nope, gotta be, you know, you got to be within a rock's throw sand hill road. If you want us to invest in you. It's just not true

Wil Schroter: anymore. And it used to be true just to be clear. It used to be true. Yeah, 100

Ryan Rutan: Percent right. And I used to, but I used to, we also mean, we also mean like 18 months ago, right back in the

Wil Schroter: days of the war in the olden days. Look, I don't want to like pretend like like cities don't have value, right? In other words, I'm just purely from a business standpoint, right? Um there are more talented people there, there are more probability that you're gonna run into somebody that that that you know, you can network with. Most of my network comes from living in major cities, right? Yes, I get it. Right. However. However, when when I say, hey, the company's going to headquarter in a major city. What I'm also saying is in, so is everyone else, right? And again, this is where it gets a little bit gnarly. When I was in in L. A. Or in san Francisco and I was looking around at what it would cost for my family and I to to own a home, you know, long term etcetera. It wasn't what it would cost us. Although that was certainly top of mind, All I could think to myself is, man, I've been working for almost 30 years. Like I put some money away, right? The rest of my staff hasn't and there's no way when they hit a point in their life where they're going to want to buy a home, send kids to school etcetera, there's no way they're gonna be able to afford any of what's around us and that's what I'm talking about because it's not just how it affects us, it's making a decision that's going to then be incoming and how it affects everybody else in the organization to and I think that gets overlooked a whole bunch, you know what I mean?

Ryan Rutan: It does it. And so there's two things I wanna, I wanna ping on. Their one is, you know, the the impact that has in the organization as a whole, at the individual level, Right? So when we when we look down, so that, yes, this is going to impact everybody across the board, everybody is going to deal with these things. You may have a few outliers where they've, you know, they've maybe they were employed for another startup and they've made some money because you will encounter those folks in these places where you would have in the past, but the vast majority are going to be people who are coming from elsewhere, have just arrived from elsewhere or whatever, and they're now going to get this, you know, great job with a brand new startup, you know, well funded out of necessity, and that's the other half of this, right? So, if we go back in time, there were companies that got funded, and that's, you know, funding started to concentrate in these, in these few areas. And so, you know, people are getting funded so that other people flocked there, what ends up happening in the long term is that your costs rise to meet the funding such that it just becomes a necessity to have the funding simply because of the system you exist in, Right? It doesn't sound very smart and that's exactly what happened. You now had to go and raise these funds just so you can play within these geographic constraints. Right? So it doesn't make any sense whatsoever. But you end up trapped in this. So the system just feeds itself, right? It supports itself. You have to go get funding now. Um, I asked the same question when people say things like you said about, you know, I have most of my network here. Well, what were you trying to utilize that network for a huge portion of what people end up trying to use the network for is funding and or buying down costs of other things. Right. Which is to say like I want to be able to make sure that I'm doing. You know, the most I can with my marketing budget. I want to make sure that the, you know, the next couple of hires on the engineering front are top quality and we don't have to, you know, bring those people up to speed and whatever you're doing all of that because of this the financial hellhole that you find yourself in called a major city. So you end up having to play to that level simply because of the underlying economics. And you know, it wasn't like that when it started funding. If you look at funding as a function of what a company's costs were 15 or 20 years ago compared to what that represents from a percentage of cost. Now. It's entirely different, right? The things are damn near at parody. Used to be funding gave you a bunch of runway right now. Funding just keeps you alive. And it was the first time you heard bridge around. Well, it's, it's not something we heard about 20 years ago, right? You got funded once and you're like, okay, off I go now. It's just this constantly evolving process of funding. And that's hugely due to the fact that you have these ever escalating costs based on geography. So I'm glad we can erase some of that. We've got on a big tangent here. Well, I think we're trying to talk about housing prices.

Wil Schroter: Well, but hold on a second. What I thought was interesting again, uh, back in the day 2007 we end up moving to uh, Los Angeles because we're getting funded for the company was running out of time. And uh, I, I did this weird thing. Not weird to me. Weird everybody else. Um, I hired all my staff from columbus Ohio right. And no one could understand what was happening. Right? My friends like, wait, how much does an engineer cost? I'm like, so you're

Ryan Rutan: offshoring like, no, you can't call it that we haven't crossed a short

Wil Schroter: yet. What was amazing was I'd sit down and show like, you know our our income statement everything to like our investors and stuff. And they were like, wait, how much are you paying a developer? And I'm like I'm paying him $70,000. And he's like where I'm like anywhere but here anywhere but here in the entire country, right? Um

Ryan Rutan: And by the way that engineer was living better on that 70,000 then on the 220 they were paying their

Wil Schroter: or was the magnitude. Yes.

Ryan Rutan: It's that's the thing that can't be forgotten here. This isn't cost arbitrage, this is life value expansion, right? It works for the startup, it works for the founder, it works for the staff. Everybody benefits when costs are in line with your pay scale.

Wil Schroter: Right? Well think about it like this. So we end up raising some money for the company's afforded at the time. And uh and all of a sudden we have some cash in the bank. Now I've got two options. I can hire local engineers in L. A. At the time who at the time made about $150,000 and that was 13 years ago. But the same engineer, same quality um cost half that pretty much anywhere else in the country. Right? So I look at that and I say, okay, wouldn't it make sense that I'd rather hire someone elsewhere because I don't know I can get two of them for the same price. But here's what's more important, here's here's here's the real kicker. I was like if I hire an engineer in columbus. Ohio you name your own city. Doesn't matter what city it is right from columbus Ohio because I have a big network there, I've worked with tons of engineers, you know etcetera. A few things are gonna happen that all work in my favor. Number one, they're going to live really really well right. Super important because they're gonna be able to buy a house, they're gonna be able to buy a BMW or whatever is that they want right? They're not going to be sitting there thinking I have nine roommates in an 800 square foot apartment, how do I get out of here? Mom and dad sent me money right? Like that's that's not the way it's working because of that, this was the other side of it. They stay long, right? They're not job hopping every 6-12 months. They don't

Ryan Rutan: have to level up

Wil Schroter: that everyone's like poaching them from each other because they don't have to move as much because they're living really well. Right? Conversely when I hire an engineer in L. A. Or san Francisco or whatever, a couple of things are working totally against me. Number one their costs are so damn high just to live That 150K. doesn't get them very far. All that money is gone at the end of the year depending on how you live. Not not easy to do or not hard to do to lose all that money right Second now they're thinking dude, if I want to buy a house, a house out here, even a crap house is $2-$3 million right? Well it's not what I'm making for this company. This company is perfectly fine. Nothing wrong with this company, But now I have to go keep job hopping to go find that opportunity or I have to find a lottery ticket, right? Because the salary that I'm going to make as a developer and developer is the highest paid people, right? Isn't gonna be enough, no matter how long, you know, I work at it in order to find a house or be able to buy a house

Ryan Rutan: and that just feeds into that job hopping, right? So then it's like I'm just looking around trying to figure out which ones, yeah, which one is most likely to pay back on that, right, which one is likely to exit? I'm gonna move around, I'm gonna keep hopping until I land on that one, right? Which just leads to this, you know, kind of transient nature of employment in some of those cities. And it's and it's rough, right? So we see that driving some of that behavior, we see, I mean talk about like an impossibility, you're not allowed to change life circumstances, right? You're not allowed to go from single to married in these in these economies are not allowed to go from, you know, you know, having, you know, just being a couple or you know, having kids, right? You can't do that, right? Because all of a sudden you look at that and you go what we're gonna have to go from a one bedroom to a two bedroom, which is going to escalate our costs well beyond our means. We just can't do that. Right? So you start to dictate all sorts of life circumstance that you have absolutely nothing to do with with, you know, your your finances right? And of course you do have to be financially stable to these things. But there's a difference between being financially stable at at $70,000 and saying, well, you know, there's two of us in this household and we're both making 2 50

Wil Schroter: uh so we can't really afford to have

Ryan Rutan: kids. Like what?

Wil Schroter: I know I saw it over and over. Yes. Now here's what happens though, the moment we take our cash, you know, whether we've raised money or let's say, you know, our sales the moment we take that and we hire people in a in a reasonably priced city, right? We've just two x. That capital, we've to ext every sale, it acts as a multiplier. So $5 million dollars In the bay area was really $10 million able, to see an opportunity. you know, by the way, I just want to mention if what we're talking about today sounds like the kind of discussion you wish you were having more often, you actually can, you know, we're online all day everyday working through exactly these types of topics with founders, just like you. So, any question you would have or maybe some problem you just want to work through. We're here and we love this stuff and we're easy to find, you know, head over to groups dot startups dot com and let's just start talking, Yeah, now it's

Ryan Rutan: it's it's an amazing bit of leverage right? To be able to say that, you know, we're going to cut our costs in half is essentially equal to doubling anything else that was happening. Right? So, you know, whether, like you said, whether it's funding raised was five million, it's now 10, right? If we're doing, you know, 15,000 mrr, we're really doing 30 mrr now, right, Because all of that stuff just ends up having this, this, you know, leverage factor against it and that can make the difference between a startup company that's struggling and when that's not incidentally it can it can make the difference in a company that needs funding or doesn't, or needs follow on funding and further dilution or doesn't right. And so don't let the system that you're in define your outcomes, right? Pick a system that works for the business that you're building, get to a point where you have the economic advantages that you need rather than having to live up to these economic expectations based on this antiquated system of funding and therefore geographic concentration. This doesn't make any sense.

Wil Schroter: Right? And now because so many people are going remote, we actually have the opportunity. Right? So you can get, if you, if you're so hung up on being able to get a SAn Francisco, uh, you know, developer find one that was in san Francisco, you know, it's funny the last probably a dozen people we've hired in the past year. Ryan, I don't even know where they live. I have no idea. I don't care. It

Ryan Rutan: doesn't matter does it doesn't, I don't know where they are. Well, I'm gonna move to SAN Francisco, I mean by which I mean I'm gonna change my linkedin location and they're just like that. I'm in SAN Francisco

Wil Schroter: now. And so the way I look at it though is we've always, you know, we've been a pretty remote company as it were for 10 years. Uh, but the way I've always looked at it, uh, with, with different folks in the organization was maybe where we want to be, isn't where they want to be, forget price for a second, right? Let's just, let's just zoom out for a second. Let's forget all about prices. And let's look at it from the standpoint of when, when Covid hit and all of a sudden our staff could really, really go anywhere. They did, they went all kinds of places. And that was awesome. And it turns out that have given the opportunity, Most people don't necessarily only want to live in an expensive city, right? Like I said, they want to live near a beach or they want to live in a mountain. They want, you know, there's so many other places, they want to, they want to go back to their hometown because they loved it there, right? You name it. Um, and, and maybe they love it for, for their career, but let's say they have a spouse down, their spouse doesn't feel the same way the spouses, like, I want to go back to where I was from, right? For the first time kind of in history, our jobs don't have to be a parochial thing, right? And as founders, we need to think about that. We need to think about, man, it's really expensive for me to be able to force everybody to say, you have to be here, you have to either be in the office or be in this location, etcetera. And if I force that decision, by the way, I just don't have to anymore. But if I force that decision that just felt me right, it's also about everybody else. And I think, I think that's a real challenge.

Ryan Rutan: Yeah. You know, I think there's still, it's going to take time to let go of some of this. I know I get a mixed bag in terms of response to this when I'm talking to founders who either already running companies are working on building, um, you get, you get kind of mixed results, some of them are really happy that they can now have this geographic diaspora and have people wherever they want to be and that they're no longer limited. Those tend to be the people who are outside the big cities. Um, I've heard some complaints recently from people who are in the big cities where, you know, the labor forces fleeing the other companies are moving out, they're able to be more competitive. And it's like, well, of course they are, right? So why, why are you fighting this versus embracing it? And they have their reasons, you know, some people just, you know, don't like the remote environment. They'd rather have people in a room with them. I get that, that's fine. But I think at this point you're gonna have to accept that as a potential competitive disadvantage on a lot of levels, right? Being able to attract the best talent now, right? You're seeing it everywhere if if a job is remote possible, that's listed very clearly now. And it used to be something that would get put down, kind of in the, in the byline as as a maybe because companies didn't prefer it, they might be willing to do it under the right circumstances. But now it's kind of table stakes. Alright? So if you're not offering remote and people like, well, I'd have to move to Austin for that, and or I can only target people who are already in Austin. You're you're immediately limiting the size of the pool that you can hire from, right? You're you're also fixing your costs in a lot of ways, right? Because you're going to have to go with the market there, right? Uh, and if you're not only selling to people in Austin, right? If you've got a, you've got a business that spans the US or the globe or whatever, um, your economics

Wil Schroter: externally

Ryan Rutan: are different than your internal economics and this can lead to huge issues, like we just can't seem to get above our costs. Well, have you thought about changing your costs? They resist it, resist it. But to your point, it's now possible, and it's not even just possible, it's the, it's the probability, right that you will be hiring remotely and and that you can and should be doing that for all the reasons you've just discussed, right? Putting that power back into people's hands is so, so important, um, to let people live, the way they want to live, right? We became founders because we wanted to build companies the way we wanted to build them. Uh, so it's a bit ironic or uh, you know, hypocritical that we say, yeah, I'm gonna build this the way I want to build it. Um, but everybody else who's along for the ride is gonna have to kind of live within my frame for what life should look

Wil Schroter: like. You know? It's interesting though. We had kind of a hack to this, a best of both worlds if you will. And I think it's important that we talk about this. Um, when I had moved out to uh, to santa Monica in Los Angeles. Um, the teammates that we're still here in columbus. Um Elliot was one of them. Um, and they're like, okay, you know, when are we coming out? And at first I was like, oh, it's gonna be great, you're gonna come on a few months and you know, and we'll start it out. And all the other team members were trying to figure out, you know where they might live in L. A. A funny thing happened, go back, go back after like a few months. I was like, guys, I gotta be honest, like you're good. Like you

Ryan Rutan: signaled the retreat. Yeah, you're like, we don't need to move everybody here,

Wil Schroter: I don't need to be here. You don't. And so we learned this thing that so long as the founder or somebody from the founding team or whatever, it looks like had the presence and could do the meetings and do whatever it needs to be done. No one actually cared where anybody else was. Right. And so I'd go into meetings, I'd be pitching BC like, hey, where are you based? We're based in santa Monica. End of discussion. Right. No one cared whether or not 10% of the team was in Santa Monica, 90%. They didn't want to know you're in Santa Monica. They just wanted to know that if they needed to get ahold of you, they can find you, right. And investors do not get on planes. Generally speaking, they'll say they do, but they, they're, they're very comfortable with people coming to them. And so a lot of that have to do is do I have to get on a plane to come find you and if you're in B F E somewhere, not the top of my list of things to do, that's usually where the question came from. But what we found was when we were growing startups dot com, you know, so a few companies later, uh, we really wanted to be, uh, in a couple of major cities because we wanted access to founders. We want, we're looking to do acquisitions were, we weren't raising capitals that wasn't on the table. There was a lot of things we wanted to do. And at the time this is like 5, 10 years ago, uh, the way to do it is you have to be there. So we came up with a plan, I'll go, you guys stay right where you are

Ryan Rutan: just send the advance guard

Wil Schroter: and the advanced right? Exactly. And so you know my family and I, we moved to SAn Francisco for a few years, right? And we did all the ship we needed to do in san Francisco, but here's what was cool about that still had our house in columbus at any time. We needed to to bail. We could and we came back on a regular basis. But as far as people in saN Francisco were concerned, I was running around being, you know, we're a SAn Francisco company at that time. We also wanted to have a presence in Los Angeles. So guess what, packed up our stuff again and moved to Los Angeles right? The point was that I've tested this for over a decade. If you feel like you need to be in a major city doing major city things cool. You can, in fact, if your whole team as we've demonstrated is anywhere, but their number one, no one cares. Number two, you don't have to drag them with you, you can keep them right where they are, you go move there, you pay those bills, don't drag everyone else along with you. And that worked out amazing.

Ryan Rutan: Yeah. I mean, I think you have to consider, right, if you're going to move that entire team there, you're going to have to adjust for cost of living and it just won't be tenable. There's no version of taking our entire columbus team and moving them with columbus salaries to L. A. Or san Francisco unless we were, you know, I don't have planning on renting a barge and just housing everybody on top of it. Uh, you just can't write without some sort of cost of living adjustments. So you're talking about, you know, really, really dialing up costs and again, to what, to what benefit. And I think that's the part that's really starting to fade now. Um, if you're not stuck in this catch 22 of what we built this in an expensive city to their, therefore we need funding. Um, you can kind of take that one off the table. And if you didn't start there, the benefits in going to one of these places, as you've said, can be largely attained by simply going to that place as an individual, right? They don't, It's not like you walk into VC meetings with the entire team like, uh, we're just calling ahead to make sure you guys have 64 chairs because we're bringing 60 for people like you don't do that, right? So you don't need, you know, the entire Army presence. These aren't that kind of battle.

Wil Schroter: Yeah. And in case you're not sure. I mean, look why Combinator, which was one of the most parochial accelerators of all time. You know, they were initially in, in boston. They moved out to um, to Palo alto and uh, they were all about, you know, you have to come here, you have to be part of the program etcetera. Guess what? You don't anymore, right. I don't care where you are. There's a reason for that sh it's changed, right? And as, as the founder, I think it's incumbent on us to make a few really important decisions. Right? So decision one would be simply, where do I need to be? Right? Forget everyone else for a second, right? Where do I need to be? Decision to, where does everyone else need to be? Right. Sure. If I'm, if I'm in san Francisco uh it would be great if the whole team was right there with me. But do they need to be there? Right. If they're not, if they're somewhere else where they enjoy life probably a little bit more or life is far more um you know, cost effective. Are they worse off? Because I didn't, I didn't hear anybody back in columbus while I was in all these different cities going, you know, will talk to my spouse about this and I would really like to do is sell our beautiful home, move into an apartment. So coming to work every day that conversation came up. Never, you know what I mean? No,

Ryan Rutan: not even once. Yeah, I think that's the thing. Right. Again, a lot has changed in the last couple of years, not that it couldn't have changed before that, but it took this cataclysmic event to force people into doing it, to see some of the benefits, right. We've been doing this for quite a while. We were ahead of the curve through some purpose in some accident, um, and just decided that, you know, we'd be more flexible and we were kind of on the leading edge of that. But now that everybody is following along behind, it's becoming more and more apparent how valuable that was. Even the growth of our company, I look back at it and I can say like how different we would have been, how different would be right now. You know, if if we, we wouldn't be doing this podcast right. I think we've talked about this once before. If we'd taken on investment dollars, which that would have forced us to do, we wouldn't be doing this podcast because they'd be asking us, why are you doing that? Is it a major acquisition engine for you? Um, are you getting, you know, tons and tons of following or you know, we're just doing good for our community and we like that. Um, that would have been shut down real quick. They'll be like, okay, so get back to work. Um, and so, you know, it would have inextricably changed the course of the company would have had to make very different decisions had we gone to a major metro to build this thing and I'm really glad that we didn't

Wil Schroter: and if you're, you know, if you're in a city, but, but by this point if you're in any major city, you've already done all the math and what it would take to leave, What we're telling you is I lived in in two different versions, I lived in California and in Ohio for 10 years uh, at the same time, which means every three weeks my family and I would get on a plane and we live in our house in Columbus in Ohio or we live in our house in San Francisco or Santa Monica or Beverly Hills where we lived at the time. And as far as folks were concerned, they knew that we traveled back and forth, but our kids had friends in both cities. Um our kids went to school in one city and then the other, my point is we were very like immersed in both cities and I can tell you the move to one versus the other, all that changed was price. Like at some point, especially in the last couple of years, it just hasn't changed any of the value points right? Like all the people that I talk to on a regular basis or meat, I mean on twitter now or I mean on linkedin like to put it this way, it got to a point that when I was landing in a major city right? In our house in um, in san Francisco a place in Beverly Hills. The first thing I do is I list all my friends and all the people I needed to talk to, right? And then I realized that I didn't have much to connect with him on whether you're doing dinners, lunches or whatever meetings you do Because I already talked to him all day on like Twitter or Facebook or whatever and they're just, it wasn't like, it used to be when I first moved there in 2007. Social media was relatively new man, I had to do meetings with everybody in the first year that Sarah and I were living in uh, in santa Monica. We had over 1000 people to our house to give you a sense for like how extroverted we are. Um, and we met everybody, but that's how you had to do it. It was a giant pain in the asset that had to be a lot

Ryan Rutan: Of individual meetings because like that house couldn't have been big enough to support more than like five or 6

Wil Schroter: More. Yeah, it was six nights a week. We had this huge rooftop situation going. But uh, yeah, it was great. But the point is I had to, it was fun, right? But I had to now same circumstance, same timing. If I had to do it again, I just wouldn't have to, in fact, I actually don't need to leave the city anymore, Right, barely need to

Ryan Rutan: leave your house. Right?

Wil Schroter: I don't want to. I'm saying because I just don't need to, times have changed. Times have changed.

Ryan Rutan: They have, they have big time, you know, circling back on a point you made earlier about being able to kind of like parachute into a city and get most of the value need out of it. I was on a, on a zoom call with the founder that I've been talking to for a couple of years and we get together, you know, once, once a quarter or something. Um, and I, I looked up and I realized like, I'm looking at a coast. This guy's normally in London and, and I asked him was like, are you on vacation? He's like, no, I actually moved out here about a year and a half ago. Um right, right at Covid time decided to flee the city and, and now has no plans of going back and was like, oh, I didn't know that. And he's like, well that's intentional. We haven't really told anybody that we're not in the city anymore. It's like I go into the city once a month on, on Wednesday. I stay overnight Wednesday to thursday and then I take the train back out and lives like 3.5 hours by train. I mean does this once a month and he just schedules all of his meetings for these two days and nobody that's in London has any idea that he only schedules meetings for those two days. It's just the only days he does, it doesn't, they don't know his calendar. Right? And so he's still very much appears like he's in London while enjoying the, you know, the coast and, and enjoying not paying for a London flat and all that comes with that. Right? So again, all of this is so achievable now and you can still appear to be anywhere you want to be, your need to be, you can still show up in those places if that's required, right to your point. That was necessary. When you went to L. A. Uh, you needed to do that, You needed to be able to develop that network and you had to do it fast. And so that required a whole bunch of activity. We can argue now that that level of activity wouldn't be required because you can reach people in other ways. Um, but you can still do that very much the same way like fly in, fly out. You don't have to be there to get the benefits of the city to do that networking to gain those connections and to leverage those in whatever ways you want to.

Wil Schroter: You know, what's interesting about that is a lot of my friends, founders who've gone on to sell their companies fled their respective states for tax reasons. Right? So fled California or massachusetts or new york or wherever they were living at the time. And so this was a monetary catalyst, Right? So they went to las Vegas or they went to somewhere in texas or they went to florida, etcetera because of the state income taxes are different. So they were trying to, you know, cut their exposure on taxes, but none of them moved back. They got to Vegas, so they got to Austin or they got to Miami and they're like, and now they had way more money than they ever had before, but I've yet to see anybody move back.

Ryan Rutan: That's funny. Yeah, that tells you a bit about what the value that city actually was to them. Um, and I think that's really, really telling the people who still live there don't yet have the perspective or know what they'd be giving up or not by leaving. I think that's, that's a really important point. Will

Wil Schroter: The cities all have value. There's still networking value that they're still, you know, there are amazing vibrant cities and for people who love to live in a city and it's a great one to live in there. There's also a lot of other good cities now, right? You know, so, uh, but we're just talking about the business case, right? Uh, for moving to those cities or staying in those cities. And so here's what I, here's what I would say at this point. This is a magical time at this point in life as a startup founder, you don't have to live in a major city, you just don't, you can, if you do have to live in one, you can go live in one, right? But there is just no longer a strong case, a repeatable case to be made, that you need to drag your entire company, your cost structure and all your poor employees to that city in an overpriced way in a way they will never be able to get ahead for what will now be a fraction of the benefit that it ever had before.

Ryan Rutan: Exactly,

Wil Schroter: Alright, so that was fun. But let's actually keep this conversation going. You've heard what we think about this, but you know, Ryan and I would really like to hear what you think and we're online, like all day long, pretty much talking about every startup topic you could think of from fundraising, the customer acquisition to just really had to get all of this crazy startup stuff out of your head. And there's tons of other founders, just like you, they're weighing in on these topics, so you'll get a chance to just hang out and meet some really smart founders were also super, super easy to find you head over to groups dot startups dot com and let Ryan and I hear what's on your mind, let's get to know each other a little bit and let's just start having more of these conversations

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