At first glance, the advantages of headquartering a B2B company in a major metropolitan area are almost too numerous to list. From workforce size and media attention, to civic and business infrastructure, to diversity of client base, and even culture and entertainment options, cities, it would seem, are where any B2B exec would first want to consider setting up shop.
Talent alone is a compelling reason to headquarter a B2B company in a major metro area. University of Toronto urban studies professor Richard Florida, author of The Rise of the Creative Class, notes that the engineering and design specialists essential to a technology company’s success are “overwhelmingly concentrated in big cities.”
Many B2B companies rely less on breakthrough innovations “and more on the application of technology to massive new markets in retailing, advertising, media, financial services, education, publishing, communications, fashion and music,” Florida wrote in the Wall Street Journal. “Big cities like New York and London are where those industries—and the talent that powers them—are most concentrated.”
Aware of the comparative advantages offered by cities, some B2B companies born in small towns relocate to major metropolitan areas as they grow. IntegriChain, which provides cloud-based channel management for major healthcare corporations, was, until January, based in Princeton, NJ, population 28,000. But the lure of the big city proved irresistible, and the company has relocated to downtown Philadelphia.
“As a leading-edge software company serving the top players in the healthcare industry, our relocation allows our team to be a part of the thriving Philadelphia tech community and be proximate to many of our customers,” CEO Kevin Leininger explained in a statement. “Additionally, Philadelphia offers a pool of high-caliber technology talent as we continue to grow.”
Big isn’t always bettter
On the other hand, some B2B companies have found that doing business can sometimes be easier in smaller cities, even small towns and rural areas. Such settings can actually foster a stronger sense of community, as social gatherings and team-building activities may be more plentiful and there may be greater opportunity to interact with employees at all levels in informal settings. There is also a greater chance that employers will know or have connections to potential hires, decreasing risk and further bolstering a sense of community and closeness.
Look at Microsoft setting up shop in Redmon, WA. And Englewood, Colo. is home to both Arrow Electronics, which provides electronic components as well as computing products and services, and Fortune 500 companies Liberty Global and Liberty Media.
The Internet revolution has allowed enterprise to flourish anywhere and everywhere, but it also represents a double-edged sword. While rural and smaller-city B2B companies can access new markets through the effective utilization of ecommerce, this also exposes them to global competition from market-leading giants. Innovation and well-planned e-marketing strategies are essential to survival.
Brush Art Corporation, a full-service advertising agency focusing on businesses serving the construction, general consumer and agricultural industries, is based in Downs, Kansas—population 900. But working out of a town with fewer residents than many big-city apartment towers hasn’t stopped this innovative firm from doing seismic things. Brush Art was an early ecommerce adapter, and this willingness to embrace new technology has allowed it to transcend its ultra-obscure location.
That’s not to say there haven’t been significant challenges. The experienced graphic artists, marketing experts and IT specialists necessary to the company’s operations are not easily found in, or lured to, rural Kansas. Potential clients are also skeptical that a firm based in Downs, Kansas has the skilled employees they’re looking for to deliver the best results. The company has attempted to overcome these obstacles by purchasing its own plane and buying and renovating a local hotel so clients can be comfortable, and by stressing the relative importance of ecommerce and the family nature of the business.
“Our parents graduated in the same class in 1960 at Downs High School, so they really wanted to move back home,” said Vice President and CFO Heidi Doane in an interview with NexTech. “My dad’s dream was always to open a little shop on Main Street but no one really understood what he did, but he really wanted to be back in his home town.”
“We have customers in all 50 states and in the provinces of Canada,” CEO Tim Brush told NexTech, “and we service all of those customers just from our location here.
“As technology has evolved, our employment numbers haven’t had to grow at the rate they would have had to when so much of the process was mechanical,” added Brush. “With so much [of our business] online…we’ve been able to maintain nice employment size… and grow sales each year consecutively through the continued utilization of the latest… technology and utilizing as many of the online resources that we can.”
Sometimes operating from uncommon, even unknown, locations can be a great opportunity to discover local opportunities and talent. Tony Mondia, founder of Taliflo, a Smithers, British Columbia-based B2B platform that enables companies to give and receive goods and services using community capital, said told author Paul Orlando that his small-town location offers significant advantages.
“The benefit of working out of a beautiful place like Smithers is that there are less distractions here,” Mondia explained. “It’s easier to focus, [and] there are opportunities for advising and partnerships that wouldn’t exist elsewhere. We have an incredibly high concentration of multinational company founders here who give me the time of day because we both go to the same farmer’s market. It’s more about community because no one is anonymous in a small town.”
But such examples seem to be the rule to the exception, and more often than not, when a B2B company packs up and moves, it is from one major metropolitan area to another. Such relocations occur overwhelmingly for financial reasons, as is the case with Trafinity, a curated research platform that tracks information flow based on keywords across a wide range of content channels. This week, Trafinity completed a move from Seattle to Dallas after being accepted into the latest class of Tech Wildcatters, a nationally-ranked B2B accelerator.
“Trying to raise money for a finance technology product in Seattle is like pulling teeth,” co-founder Dave Babich told GeekWire. “We just couldn’t get the message across that we wanted to and Tech Wildcatters was a good opportunity for us to build more of a pipeline of investors.”
This sort of lateral move from one city to another also takes place across national borders. Canadian Michael Litt, founder and CEO of B2B video marketing platform Vidyard, heeded advice he received in Silicon Valley and went into business in Kitchener, Ontario after a year in California that included a stint at the famed Y Combinator accelerator.
“We raised some capital there and a famous investor told us that if we were going to create a B2B company, we should go somewhere else because the Valley was mostly B2C,” Litt told the Financial Post. “There, a B2B company has to be very cool to attract talent. Also, talent there is very expensive and mobile.”
Finding a comparative advantage for any particular B2B companies means finding a base location that suits each firm’s individual needs, objectives and resources. There is no one-size-fits-all solution, and while one company may decide that a small-town or rural headquarters is its best option, another might not be able to thrive anywhere but in the big city. While cities are overwhelmingly favored, there are numerous examples of B2B companies which have found their niche—and their success—in places most people have never been, or even heard of.