5 Reasons Early-Stage Startups Should Relocate to Asia Why be 'ramen-profitable' in San Francisco when you can be 'pad thai-profitable' in Chiang Mai?
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Here's the one question plaguing many entrepreneurs based in Silicon Valley: How can a founder find time to work on a startup while also covering living expenses and saving money?
Related: 3 Tips to Set Up Operations in Asia
One creative solution is to temporarily relocate the startup team abroad to a country with a low cost of living. This will dramatically decrease monthly expenses and allow for more time to focus on building a great product. Once product-market fit has been achieved and the product has gained some initial traction, it will be possible to reach out to investors and relocate back to the Bay Area.
Thus, instead of struggling to be "ramen profitable" -- as some investors comically put it -- in San Francisco, founders can thrive by being "pad thai profitable" in Asia.
Here are five reasons why Asia has become a great place to bootstrap a startup.
1. A low cost of living
The cost of living in Silicon Valley has become unbearably high for many startup founders. It's become common to have to pay $2,300-plus for a studio apartment in the Tenderloin -- and be grateful for the opportunity to do so.
Compare that to a destination like Chiang Mai, Thailand, where founders can easily cover all of their living expenses for $1,000 per month. Johnny FD, prominent digital nomad and blogger at JohnnyFD.com, supports this point: "I've lived in Thailand for the past eight years and Chiang Mai offers the best setup for bootstrapping tech entrepreneurs," Johnny told me.
"You can live comfortably on $1,000 per month while having access to reliable internet, incredible food and sunshine. Even better, the digital nomad community has grown rapidly in Chiang Mai and is the world's hot spot for meeting other traveling startup founders."
In addition to cheap rent, founders relocating to Asia can expect meals to be highly affordable there, ranging from $2 to $5 (U.S. dollars) at food courts in shopping centers. Major cities, like Bangkok, Chiang Mai and Ho Chi Minh City (Vietnam), also have modern amenities, like gyms, bars and luxurious cinemas.
It's entirely possible to live an "American" lifestyle, in fact, at a fraction of the cost. The thousands of dollars saved on rent, food and entertainment will go a long way toward lowering monthly burn rates and helping early-stage startups survive.
2. The ability to become cash-flow-positive
Founders who live in San Francisco while bootstrapping their startups often, by default, run out of money unless they raise venture capital. This can put pressure on startup teams to accept investment terms that may not be in their best interests.
However, what if the default situation were one where teams are not inevitably running out of cash? What if founders set up a life that allowed them to save money every month?
By combining the low cost of living in Asia with a part-time job, it's possible to save money while working on a startup. The best way for a non-technical cofounder to make a living while bootstrapping a startup in Asia is to teach English. A TEFL certification will be needed before arriving so that a wider range of opportunities can be available. (For technical cofounders who don't want to teach English, remote engineering jobs can be found at RemoteOk and WeWorkRemotely.)
Demand for English teachers, however, is consistently strong in Asia, so founders should be able to negotiate packages that allow them to balance their part-time jobs with their responsibilities as entrepreneurs. By creating a situation in which the team effortlessly saves money every month, startups gain control over their destiny.
3. Expansion for your runway for reaching product-market fit
Many founders based in Silicon Valley have to work full-time jobs to pay their bills and hustle on their startups on nights and weekends. This results in a situation in which startup teams can quickly get burned out trying to get their product to market.
By working part-time in Asia, while dramatically lowering expenses, founders will have more time and energy to focus on their ventures. This setup has the dual benefit of allowing founders to spend more hours per week on their startup as well as improve the quality of work done to reach product-market fit.
The challenge at this stage is knowing exactly what constitutes product-market fit and traction for a startup. Product-market fit is a perpetually moving target that constantly evolves as a startup grows. Marcin Treder, CEO and Founder of UXPin, the product design workflow platform, elaborated to me on this point.
"Product-market fit is not binary," he said. "You should think of the journey toward product-market fit as trying to land within a range of acceptable results that allow you to launch and monetize your product. It's important for founders to accept the idea that their product will never be perfect, but to always strive toward perfection, anyway."
4. Leverage in fund-raising negotiations.
In any negotiation, the party that is willing to walk away from the table has leverage. If a startup team is about to run out of cash and begging for an investment, it's unlikely that it will get the terms it seeks. However, if a startup team is able to bootstrap indefinitely, it's improbable that members will be coerced into taking on unfavorable investment terms.
By bootstrapping abroad, startup teams can create a situation in which they won't run out of cash, and therefore have leverage in negotiations with investors.
Startup teams that can bootstrap indefinitely should seriously consider doing so. Toby Zhang, a partner at CRCM Venture Capital, expanded on this point: "Raising venture capital is like entering a marriage, so founders should be absolutely certain that they are making the right decision," he pointed out to me. "If you decide to raise capital, turn your startup pitch into a story that is concise, simple and compelling, to capture the attention and interest of potential investors."
5. Unique insights and international experience.
In addition to saving time and money, founders who bootstrap abroad can gain unique experiences and insights about the world that they could not get by living in the United States. Navigating a new culture, language and environment forces entrepreneurs into interesting situations and requires them to flex their creative problem-solving muscles.
Jonathan Palley, CEO and founder of Spire, is an example; he used his time abroad to gain a competitive edge: "I lived in China as an entrepreneur for eight years, which enabled me to navigate Chinese business culture and manufacturing," Palley told me.
"I'd often literally stroll into factories in Guangdong to learn about how products were created from scratch. By combining these globalized experiences with my technical background, I was able to gain an unfair advantage for my hardware startup."
The downsides to an Asian relocation
Having more money and time is great, but there are still some downsides to this plan. The opportunity cost of bootstrapping in Asia is that founders won't be building a network in Silicon Valley. Joshua Scott, cofounder of Shyp, said he supported this point: "San Francisco's cost of living is daunting for anyone considering launching a startup in the Bay Area," he acknowledged to me.
"However, what you're paying for is the ability to source talent, mentors and investment in a tech ecosystem unmatched anywhere in the world. By bootstrapping in Silicon Valley, I was able to find my cofounder and line up introductions to top-tier investors."
Founders, then, should be wary of complacency if they follow this plan. While a startup will not inevitably die due to a high burn rate, the pressure will be significantly lowered to meet deadlines. This is a double-edged sword, in that startups need to make rapid progress on a consistent basis to survive in the long run. Startup teams should make sure they remain sharp and hit all of their milestones, to keep their momentum strong.
Bootstrapping abroad can save startups teams considerable time, money and energy. Moreover, it increases the runway that founders have to reach product-market fit; and it strengthens the leverage that they will have in investor negotiations.
Justin Lin, the CEO and founder of family concierge service Envoy, described to me how he'd bootstrapped his venture for two years. "Every entrepreneur faces tough obstacles, such as lacking a technical cofounder and seed capital," he said. "However, the further you go in validating your product idea while working on your own, the easier it will be to convince a cofounder and an investor to come on board. Don't make excuses, don't give up and you'll eventually break through the wall."