There was a time when Silicon Valley and startups went together like cake and ice cream. Of course, New York was the original place where if you made it there, you could make it anywhere, and there are still throngs of hopeful professionals heading to the Big Apple, too. But the times, they are a’changing. Now that telecommuting and cloud technology has made it feasible to work and run a business from just about anywhere, roots have become digital. Is Silicon Valley and Manhattan no longer “worth it?”
There will always be a case for staring a company in a place like Silicon Valley — especially if it’s a brick and mortar establishment. While there are plenty of upsides, you can’t ignore the downside: Expensive commercial rent, a lot of competition and realizing that it’s going to take nearly a miracle to become a top dog in this saturated market.
The latest wave of entrepreneurs are getting frugal and savvy—and heading out of startup central. Here are a few of the regions slated to take down Silicon Valley and why.
1. San Francisco
Yes, the rent is high and space is limited, but there’s something about the creative spark of San Francisco that’s appealing to startups. In fact, it’s boasting nearly as many new businesses as Silicon Valley recently, and founders have discovered a way around the costly rental space: Calling San Francisco home but offering a virtual office environment for many employees (if not all).
Here’s something you might not know about Washington: There’s no state tax. That means you can operate a startup from the Seattle metro area, take advantage of all the talent of that city and cut your tax bill by a huge amount. While California boasts one of the highest state taxes in the country, just a few hundred miles away you can enjoy zero state taxes.
3. Portland, Ore.
Just 200 miles south of Seattle, Portland has been considered an underdog in startup territory with plenty of creativity, foodie delights and a very liberal vibe. Even better, there’s no sales tax in Oregon so you can pick up those office supplies on the cheap. It’s a favorite spot for new restaurants and non-profits.
4. Costa Rica
Who says you need to stay in the U.S. to start your company? You can choose a “home base” in any state (just get a mailing address there) and then operate your business from anywhere in the world. Costa Rica is a favorite because there’s a tax agreement with the U.S. which allows foreign income tax exemption — you’ll be paying a fraction of the businesses taxes compared to anywhere else in the U.S. Plus, in certain (non-touristy) areas of Costa Rica, you can snag a three-bedroom house rental for about $500 right on the beach.
5. Oxford, Miss.
There are some regions in the south where it’s still incredibly affordable to find commercial rental space and yet the environment is thriving and ripe for new business. A famously literary community, Oxford is the perfect place to set up shop, enjoy southern hospitality and take advantage of a moderate tax rate.
6. Rosarito, Mexico
A few miles away from Tijuana and nestled on the Mexican beach, Rosarito is one of the many beach-side communities right across the border that’s welcoming to Americans. It’s relatively safe, insanely affordable and you can qualify for foreign income exemption. However, you’re just 40 minutes away from downtown San Diego, so you get the best of both worlds.
Don’t arbitrarily choose where to start your business. Do your research, look at tax pros and cons, and make an informed decision.