When startups are deciding where to locate, many consider setting up shop in “tech clusters” that have developed labor markets for the specialized staff that startups need to grow. Yet these areas are dense with talent for a reason: It’s often due to the presence of large firms with whom these fledgling companies must compete. In a new study, researchers found that when large firms increase their hiring, startups in the same location are forced to offer 10% higher salaries, while reducing their expected growth by 36%. While talent-rich communities may be alluring, they can stifle startups ability to scale — a finding which should be incorporated into startups’ landscape analyses.
