I agree with PG and MA and many others that a startup, especially a good one, has a much better shot in a startup hub.
Both the SV infrastructure and mentality value those that build great technology. While it is true that there exist other pockets of this (NYC, Boston, Austin, etc).
SV is not a pocket, it's the entirety of the community and that has massive value.
I agree with your general argument about NYC. SV isn't only where you get "people doing startups for the sake of startups" (although it has that). It is more technology focused and less "all business" like NYC.
This is a great article. When I read it in WSJ last week I realized that it helps explain why startup hubs such as Silicon Valley are so important for startups. These locations simply offer more intangible wealth to founders. Just by being in a place like Silicon Valley you have more immediate access to investors, a society which understands and encourages startups, and like-minded peers. These are intangible items that may not immediately seem obvious but are contributors to success none the less.
When this reasoning is applied it makes sense why founding a company in a place like SV is so important. When you are not in a startup hub, you are instantly at a disadvantage because you do not posses as much intangible wealth as a competitor who is.
I dont subscribe to the philosophy that one must be in SV to take their idea to the next level or succeed in general. SV is not a shrine for success and coming here isn't a magical formula for success.
Yes, I am in SV, but I feel like other areas also have a thriving startup community just as great as SV.
Unfortunately, there's a confounding variable: people know SV is a good place to start a startup (even if they aren't as sure as pg), so more startup starters will start up there, anyway.
No. Only the second part of my statement "best startups will be formed" can be labeled as an assertion of my opinion.
The first part is fact. SV has produced more great startups than any other area in the world. Arguing with that fact is futile.
It's not just VC that SV has as an advantage. Its a high density of angel investors and young people wiling to take a risk and launch startups.
As for the assumption of taking venture capital not holding any longer, venture capital in the narrow sense i.e. VC firms - possibly but in the general sense of needing to raise investment at some point, name me a successful startup that hasn't.
I'm conflicted. Personally, I think SV is a magical place and that's why I live here. OTOH, it's also a very fad-driven place and some people get distracted by the noise. Plus, there are clearly many other startup hubs where founders can thrive these days.
So, as a citizen of the USA: come here, help make us great
As a citizen of the world: transform your city into a startup hub
I guess what I'm saying is there is some truth to the saying that "Silicon Valley is a state of mind" and also some truth to the saying "that sounds great but a lot of the money is on Sand Hill Road."
You either have tons of funding or tons of talent: SV has both which is why it's the center of the IT universe.
NYC has more funding than engineers, and all other hubs are either a mix of both or have a serious deficit in one side (or even both) meaning making a startup there is very difficult, and if it takes off odds are they are going to move to a bigger hub, like SV.
While I agree that starting a company is vastly different then starting a disruptive startup, other than the valley having a heavier density of VCs what you've stated about supportive startup ecosystems practically not existing anywhere else but in Silicon Valley is utterly false.
Just look at New York, while it's honestly pretty much on par with SV in terms of cost of living, it's got a fantastic startup ecosystem in which many startups burn cash equally as fast.
Step outside the SV bubble, I'd venture to say that two thirds of the states within the continental US have fantastic and thriving startup communities with plenty of talent and venture funding to boot. You just have to know where to look.
As fellow nerds you should realize that with the power of the internet as well as the sheer amount of interconnectivity we now experience, there are virtually no location barriers.
It's not often that I think Paul is flat out wrong, but this is a case. I agree with sachinag that it is culture. When the "contest" between SV and Route 128 started, it appeared that Boston had the edge. Slightly better in the university ranking and a vibrant electronics industry. The big difference was the corporate culture/climate. Boston was closed and secretative. Think DEC and Ken Olsen. SV was open and cooperative, even among competitors. Think Hewlett and Packard. Maybe even more important was Frederick Terman of Stanford who pushed industry/academic cooperation. The SV culture grew from that. An engineer could talk to his buddies at other companies. If you left HP to form a company, they were probably your first customer. My first customer in my first startup was a former employer. In SV the money came because of the successes.
Now SV has this huge infrastructure of talent and money. High tech angel investors invest in SV not in their own communities, because of the decision support here. One of the real difficulties in investing in Kansas City, for example, is winnowing out the 99 crappy ideas/teams to get the one that will succeed, and investors having confidence that they can do so.
The best approach for another area is to pick an industry with local advantages: new energy sources, manufacturing for wind or solar, biotech, robotics.
I think public funding of startups will fail, because problems with mindset. What a community can do is streamline the business permit process, build out the infrastructure like fiber, assemble a volunteer group of professional advisors, and promote the startup culture. A 10K grant to an entrepreneurs' club that promotes mixers and speakers for entrepreneurs, angels, and support types will probably help the climate more than $500K to some random startup.
OP here. Ok, yes that statement was a little bit extreme on my part, but I think it is still 95% true. Startup location is another one of those holy-war topics, but if you want to learn by immersion, SV is the place to do it. There are certainly valid reasons for locating a company outside of SV, but for first-timers like myself trying to build my network of peers, professionals, mentors, friends, VCs, etc, it feels like this is the center of the universe (for better or for worse).
Duuuude, NO! Or at least, that's what I want to scream at you after reading this. But it is hard for me to refute your logic around investors. Of course, SV has a larger and older network. Can't deny that. But, of course, in SV there are also waaaay more entrepreneurs vying for VC dolla bills. Having spent time in both locations, I wouldn't say it's any easier to raise funds in SV, although they do have more smart money for sure.
But now with FRC, Flybridge, and Founder's Collective (among many others) stepping up in NYC, I think we're just seeing the beginning of an awesome growth curve.
Plus, haven't you been reading Dave McClure's blog? It's not about the tech, it's about the design and marketing. Which NYC has in SPADES.
Yes, I believe that statement. There are two things that being located in SV gets you:
1. Ability to hire elite programmers that are a few percent better than those in NYC. You'll pay for that quality though. Plus the cannon fodder programmers that you'll hire if you get big cost more in SV for the same quality as NYC.
2. VC money that is a bit easier to get for tech startups compared to NYC.
Your business is not robust if it would be successful if you hired a 99th percentile programmer and had $5mm in investment in SV, but it would fail with a 95th percentile programmer and had $3mm in investment in NYC. People that don't think they could make their idea work in NYC aren't confident in their idea and just playing entrepreneur.
Well SV is one of the only places where they have these wheelbarrows full of millions of dollars to throw at tech companies, so I would think that location is pretty important if you're interested in VC funding.
I feel like this is one of those SV bubble things, that a place has to have a "scene" in order to have startups (and only SV has a "scene"). There are thousands of successful businesses everywhere, even ones that would be considered "startups". The only difference between SV and any other city is people are willing to throw money at ideas with no chance of ever turning a profit which isn't really a sign of a healthy ecosystem.
I wonder how many people who say "you need to be in Silicon Valley to run a successful startup" use MailChimp (Atlanta) or RunKeeper (Boston), or Venmo or Squarespace (NYC) or Duo Security (Ann Arbor, MI) or Dwolla (Des Moines, Iowa).
Whenever I hear "startup scene", I think of Juicero and wonder if that kind of company could ever actually ship a product if they were based anywhere but Silicon Valley. And I wonder how much that actually says about the "startup scene".
SV isn't the best fit for a lot of startups. It really shouldn't be the default location for all startups especially since there are different options that offer different things (NYC, Denver/Boulder, Austin etc).
The Bay Area has 3 things that set it apart from anywhere else and startups that really need this have no other real choice:
Investors who are willing to invest super early
Lots of top tier engineers
An extremely optimistic culture
Investors- Our startup did fundraising on both east/west coast. Valuations, investor quality and potential help was relatively the same, but those in the the Bay Area were completely fine in investing in a pre-rev idea. That was, and still is inconceivable outside. A NYC fund flatly told us they will do no investments until we reach 50k MRR. That wasn't a requirement at SV and we got the initial seed funding as a result.
We do something very tech heavy and quite at the forefront in our field. We need really good engineers and most these types of specialists currently are employed at a Google or Facebook etc. In theory they should be super expensive and impossible to dislodge from these tech giants but what I find is that these super smart people get bored after a few years. They know their worth and that there will always be high paying jobs for them, but they can be persuaded to join a startup on a lot lower salary because they get a lot of freedom and ability to make a difference. A lot of the people that complain about expensive demanding engineers in SV are basically a bunch of PMs or salespeople who want a CTO to build a front end app. If you actually have interesting tech, finding engineers at a discount is quite feasible.
The last thing is about culture. It's like the YC interview day. We spent the entire day before and after the interview (and snuck in again the next) because the other teams you meet- the optimism and energy is infectious. It's the same feeling the morning of a marathon where you're worried it's too cold and wet, but the instant you see the crowd, everything feels right.
If you're doing something that counter-intuitive, and changes existing thinking, then culture is essential. Most startups, even in the accelerators, are ops businesses. They utilize tech, but business not tech is their key driver. There's nothing wrong with being that kind of startup, but if that is the case, then the Bay Area isn't a good a fit which is what this article says. Your customers aren't there, it's expensive, and there are other options. But if you do have a early crazy idea that is based around a key piece of tech, the Bay Area is still the best choice by far.
I like SV and do wish it would spread around more. But it does seem like companies aren't considered a startup anymore unless you are paying some of the highest rents in the country in SF. Something doesn't compute, high rent is not the best decision for early stage companies except in SV, unless there is some other angle like maybe you own the building/real estate. Maybe in the end lots of VC is real-estate plays parallel to product development.
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