There are a couple of stories in the Heartland Tech newsletter this week that touch on startups looking to expand outside the Bay Area. First, there’s my story on Opendoor adding an engineering office in Atlanta, its first outside of San Francisco. Second, there’s a nice analysis from Crunchbase News on where unicorn companies are opening offices outside of New York, San Francisco, and Boston. I thought I’d take this time to reiterate what I’ve found in speaking with scaling startups about what they are looking for when choosing a location for a second office.

Companies frequently say they want to go somewhere that has a reputation for offering a high quality of life. Crunchbase News reports that Nashville, for example, is a popular destination for unicorn companies looking to expand. Meanwhile I’ve found that Denver — which has a reputation for attracting young, active folks who like to be outdoors —  is another city that’s top of mind for startup founders.

And many companies like opening offices in places that are easy to get to from the Bay Area. That could be a city like Phoenix, which is just a two-hour flight from San Francisco, or a place like New York City, which is further away but has a ton of direct flights to San Francisco.

Finally, while low cost of living is one of the advantages most frequently touted by economic development officials in second- and third-tier startup markets, it’s actually not one of the biggest factors I hear cited by founders. Pretty much every other U.S. city will have a lower cost of doing business than the Bay Area, so by opening an office outside of San Francisco, they are already saving money.

Not all founders I’ve met would agree with the points I just listed — but I think the discussion of what startups are looking for when opening another office is one that constantly bears repeating. Do you agree or disagree with my observations?  Please share your thoughts via email.  You can also sign up here for VentureBeat’s Heartland Tech newsletter to get this column in your inbox weekly.

Thanks for reading,

Anna Hensel
Heartland Tech Reporter

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