Big Fish, Small Pond – 4 Reasons Why Small Cities are Better for Startups

In theory, you can be an entrepreneur from anywhere. All you need is a reliable internet connection and sustainable access to caffeine. In reality, however, location is a key success factor. Think of startups as seeds. No matter how much potential an idea has, where you plant it matters.

The list of factors to consider when choosing a location to launch your business includes access to talent, capital, customers, industry expertise, proximity to other startups, cost of living, and a quality of life that helps balance the grind of turning opportunity into revenue.

Many founders assume there is a need to relocate to established startup hubs like Silicon Valley or New York to find all of these things. However, the need to “go big” when choosing your startup’s address isn’t always the right move.

1. Big fish, small pond

In a large city, you may be one of hundreds of startups. In smaller cities, startups standout due to the innovative aspect of their businesses. Innovation often creates curiosity in a smaller community, resulting in interest from local stakeholders, which then results in open doors and easier access to capital.

Small cities have sought for several years to develop vibrant entrepreneurial ecosystems that can help them compete with larger cities for talent and companies, resulting in dense networks of active local support organizations eager to help startups succeed.

2. Costs are lower when you’re in a small pond

Higher taxes and strict regulations in metropolitan areas traditionally associated with startups often hinder growth. Smaller cities have a lot to offer young entrepreneurs who launch their startups outside of major hubs. A supportive environment is key, and big cities tend to take entrepreneurship for granted.

Business insider ranks1 the Midwest more favorably than coastal metropolitan areas as favorable locations to launch a startup. In fact, Missouri has the fifth-highest density of startups in the United States, with Cape Girardeau ranking in the top 502 of best small cities to start a business.

Additionally, getting away from metropolitan areas dramatically lowers the cost of living. The median sale price for a home in Silicon Valley3 is $1.2 million. To compare, the median sale price for a home in Cape Girardeau, Missouri4 is nearly 90% lower at $150,000.

With a lower cost of living, startup founders are able to bootstrap and give themselves a better run between funding rounds.

3. Hiring is simpler when you’re in a small pond

When you’re seeking tech talent in a metropolitan area, most competitive candidates focus on established, billion-dollar companies. Startups can’t compete. Even when your company’s industry and culture are a natural fit, candidates simply can’t find you through all the noise.

Small cities offer a completely different hiring landscape for startups in terms of visibility. Your accomplishments are big news around town, big enough to put your startup on everyone’s radar. Simple efforts such as sponsoring local events ensures top-of-mind awareness. When candidates are looking for jobs, they will find you.

In small cities, perception is fully cultivated due to the lower degree of separation from others. Employees tend to take their jobs very seriously, not only because there is less mobility, but also because reputation is king. Yesterday’s boss is tomorrow’s reference – and references in small cities are paramount.

4. Focusing is easier when you're in a small pond

It’s no mystery startups are hard. Endless work and long hours make removing all the shiny objects necessary. Small cities allow startup founders to focus on the business, filter out the noise that crashes through major hubs, and do the critical work of reaching goals and increasing traction.

In the end, the location that your company calls home isn’t just a place. It’s the foundation for your company’s future. Every entrepreneurial ecosystem, big or small, needs strong entrepreneur support programs. While small cities need the bolstering benefits that startups bring, founders may find that startups get just as much back from the community.