Without a doubt, you have to be near a university.
Here's a few factors that seem relevant to that evaluation.
1. Access to capital
If your company has large upfront capital requirements, then being in a setting with VC's who aren't afraid to take a risk has obvious benefits. However, a lot of web 2.0 startups have relatively low starting costs. You can self-finance the development and launch of a product which attracts a rapidly growing userbase. The main cost isn't even monetary, its opportunity cost. With this done, attracting VC interest is a lot easier, regardless of where you are.
2. Access to talent
Naively, the Bay Area has a lot more talent than other locations and this makes it a better place to do a startup. Problem is, the competition for talent is a lot tougher. If you're a startup in a place with relatively few startups, you have a real shot at attracting the top programmers locally, because you're the only game in town. In the Bay Area you're competing against Google, Facebook and all the rest.
I'm in Waterloo, Canada, and this is evident locally. Waterloo has a terrific undergrad CS program - supposedly, its Microsoft's number one recruiting School - and lots of really talented developers. But there are relatively few Web 2.0 companies in town, which means that startups have (if they're willing to work at it) access to an amazingly talented pool of potential employees, and a real shot at hiring those people.
I don't think one even needs a top CS school locally. My background is as a theoretical physicist, and my observation is that at least in theoretical physics the quality of the top students is pretty much the same everywhere. I'd be surprised if there was much difference in CS. There will be more extraordinary programmers in the MIT CS program, but they will still be there at Podunk State University, and if you're careful and aim high, you'll have a real shot at getting those people onboard.
3. Culture
I don't mean art and a nice orchestra. I mean access to a "can-do" culture, full of sharp people who are plugged in, full of the latest news, insightful (and original!) analysis, and can act as role models, mentors, advisors, and so on. Really sharp criticism and suggestions are worth their weight in gold.
This is something where the Startup Hubs have a major advantage. It also seems to me perhaps the biggest advantage of the YC program - the dinners and other events. In places that are less of a Hub it seems to me that you need to consciously build a really wide network of people who can act in that role for you. This requires work anywhere, but it is a lot harder in somewhere without a startup culture than it is in the Valley.
4. Access to other companies
For some startups it's really important to have access to other companies for partnerships, distribution and so on. For others it's much less important. Obviously, in the former situation being in a Hub has a major benefit, while in the latter situation it is less so.
I don't think this is the case. I went to another Canadian university (Queen's), and in my opinion there were perhaps 2 or 3 first-rate programmers in the entire undergraduate program. I'd expect there to be 10x or more that number in a typical Waterloo class. Depressing, perhaps, but true in my experience. There's a strong clustering effect: the best programmers want to be wherever the other best programmers are.
It's interesting that a similar effect doesn't apply in theoretical physics...
Are the "top programmers locally" likely to be as good as the "top programmers" in SV? (There is some top talent outside SV, but it's not everywhere and SV has a critical mass in almost every domain.)
What does it say about a biz that can only attract/keep top talent when it's competing against the junior varsity? How will that biz fare against a biz that does attract/keep top talent when competing against top tech companies?
Very True. Case study:
Examine the interface of the Blackberry, largely developed by U of Waterloo interns and graduates. Take a look at the iPhone, developed by Silicon Valley engineers. Which will win in the marketplace?
How can you quantify quality of people and potential of an idea?
I'm pretty sure you'll see lots of companies starting outside SV, moving to SV to get funding, and then succeeding.
These numbers would be interesting.
I don't think "ex officio" is really appropriate here (although I'm sure we all knew what you meant), since being Jewish isn't strictly speaking an office which is held. Perhaps ex genesis ("by right of birth") or ex sanguinis ("by right of blood") would be more appropriate?
I may have a UK passport, but I don't think I'd be allowed to pass off any jokes about England as self-deprecating humor (excuse me - humour).
This reminds me of the convert on Seinfeld who starts making Jewish jokes, but then keeps on making Catholic jokes as well.
Preist: "And this offends you as a Jewish person?" Seinfeld: "This offends me as a comedian."
I lived in Fremont for a couple of years, and I can't tell you how much I hated it. Urban sprawl. Nothing to do.
My wife worked for a startup in SF next to a cool bar and a cool coffee shop. When you left work, a couple of your friends/coworkers would often be in that bar or coffeeshop. So you'd stop in, and start chatting. Often, you'd chat about work, and come up with new ideas. They might get excited enough to go back into work to hash it out a bit more - at least they'd have something they were charged up about.
At the time, I was working for Sun Micro in Fremont, a spiritually crushing place. On occasion, we'd all agree to get together for drinks at the W nearby. But it took planning, arranging, getting into your car, driving over there... not at all spontaneous. And so we didn't get to know each other as well, and didn't have any fun.
That said - your post is missing one really important thing: San Francisco and Berkeley have a vibe that is very conducive to creativity, and even parts of (admittedly suburban) Palo Alto aren't so bad. This is why I drove a horrendous hour and fifteen minutes to work every day. It's also why I finally got so fed up with the commute that I faced a choice: quit sun, or move to Fremont. I quit.
But hey, would you rather live in SF and be an hour from the valley, or in Munich and be a trans atlantic flight away? One poster called SF a "second rate new york" in a previous thread (obviously not getting it). San Francisco is not a big city like New York, so don't go looking for Manhattan. Look for a small (surprisingly small to some, considering how many comparisons to NY I hear) but very entertaining city with a terrific vibe and a ton of technical and creative people to hang with.
I remember trying to make the more than 1 hour drive from there to SF, and then back again... just to spend a few hours in a the nice city. Yes, I'd rather live in Munich.
This is a huge topic and it affects the entire USA. Our whole country is stupid automobile sprawl. "The greatest mis-allocation of resources in the history of mankind."
You're kidding, right? Silicon Valley has the best year round cycling anywhere, and some of the best cycling, period. Maybe Switzerland in the summer is better, but that's about it (and it frequently rains in the summer in Switzerland). I lived in Silicon Valley without a car for 7 years. It's flat, and by drawing a 16 mile radius around my apartment in Sunnyvale, I can hit nearly every important tech startup of any consequence.
The quality of life in Silicon Valley sucks if your idea of fun is visiting bars, going to rock concerts, or top quality museums. For people for whom outdoor life is important, Silicon Valley is great. I regularly run into famous outdoorsy types (Brian Robinson, Jacquie Phelan, Jobst Brandt, Tom Ritchey) just by riding around in the area. On my cycling trips around here, I've met the former VP of IT at Adaptec, the VP of Engineering at Portal Player, etc.
And much as you might want it to be true, Fremont isn't Silicon Valley. Neither is Redwood City.
Case in point -- my cousin wants to make movies. So he decided to move to LA and get a job as a bartender. He went to bartending school and then got a job at a bar that is frequented by producers and other movie industry folk. One day he served a drink to a producer, mentioned to the guy that he wanted to make movies, and is now working on a couple of movie deals. That could have never happened even if he continued to live in his native Orange County, only 40 miles away.
1) It creates software for users to use. 2) It creates a company that owns the rights to certain software and accompanying intellectual property 3) It creates a community of users 4) It creates a team that has proven that it can create and ship a software product.
#1 is not geographically limited. You don't have to be in Silicon Valley to write software. Anyone in Duluth, MN can create software and load it on a server for users all over the world to use or purchase.
The market for numbers 2, 3 and 4 are geographically limited, however:
#2 and #4) The highest concentration of software companies in the world is in Silicon Valley. This in generally your market for #2 and #4. Your chances of interaction with someone interested in buying your IP are much higher in SV than in Duluth. Your chances of finding someone interested in paying top dollar to acquire a proven group of developers increases exponentially in SV.
#3) Many companies are interested in purchasing large communities of users. These tend to be located in large urban areas, however. If I'm Chief Acquisitions Officer (CAO) for BigMediaCo, and I'm interested in acquiring a startup that has a big community of users, it's not going to hurt if that company is based in Silicon Valley. It adds to the CAO's prestige if he has to travel to silicon valley to acquire a startup.
But, ask yourself this question: How would that CAO feel about traveling to Duluth to talk about the acquisition?
Also, the value of a network increases exponentially with the number of users in the network. In SV, it's hard to avoid networking with entrepreneurs and people in the software industry. It's really not that large, and after you've been here for any length of time, there are no more than 2-4 degrees of separation between you and everybody else in the Valley, including people who want to fund you or acquire you.
Case in point: I've been here for 1 year, and I know for a fact that there are 3 degrees of separation between myself, Guy Kawasaki and Woz, and 2 degrees of separation between 3 different VC's and me. That would probably never happen in Duluth.
On that topic, now that I have left my job (for the move), I would really like to get involved at a start-up out here. I loved working my tail off while I was at college and hated (barely) working at work for the past year. I really want to get back into nose to the grindstone working to build something cool. Anybody have a good idea how to get the ball rolling. I am teaching myself a few extra programming languages, but I feel like I need to get with the right people to get things off the ground.
Anyway, great essay Paul. Sometimes I wonder if the start-up companies will revolutionize "work" in a way that factories and unions changed the landscape of America during the 19th and 20th centuries. Are we that far away from a start-up being the norm? I suppose not everyone could work at a start-up, how could a start-up expand to a larger corporation if everyone is working at a start-up? But, I could see the mentality switch such that students work for/start a start-up for 2-3 years after college, if it succeeds, great, if not, they go work for a larger company or go to grad school. Either way, it sure would be nice to live in a society where everyone "takes their shot" before settling in to a nice, steady, safe career.
Interesting observation. Being in a non-hub, that has also crossed by mind.
OTOH, when you do a start-up, if the negative energy doesn't come from one place, it will surely come from another. So, instead of trying to minimize it, I have had to learn how to better respond to it.
I'm kinda old fashioned, so I believe that the code has to come before the funding. And as a hacker, I don't need a lot of contacts to do that either. So, for now, I don't care what others think or what the atmosphere is where I live. I will hack on.
This is a necessary, but not necessarily sufficient, condition.
Well, what if it isn't the raw number that makes a city a startup hub, but having a certain minimum amount of startups? That argument would then account for small towns not being as startup-friendly as London, but London (or Boston or New York) being an equal to Silicon Valley. Maybe the startup friendliness of a town looks more like a logarithmic graph than a linear one.
New York may be underrated as a startup hub, for the reason you cite. According to Wikipedia, "though it is not often thought of as a 'College Town', there are about 594,000 university students in New York City, the highest number of any city in the United States." Similarly, there's a lot of startup activity in New York, but it's not considered a startup hub because there's so much else going on in the city. Silicon Valley doesn't have anything else going on, so startups and the tech industry dominate its image.
Also, though SV has the most investors, Boston probably has the highest volume of hackers flowing out of its universities.
Robert is a professor at MIT and is not moving in the immediate future.
But I would want to have one foot in Cambridge even if it weren't for Robert. Cambridge is smarter than SV. The smart world and the startup world are adjacent, but not identical. We'd rather be half in the smart world and half in the startup world than just in the startup world all the time.
Likewise, perhaps it makes sense to use Cambridge for early stage hacking, and SV for finding investors and building a business.
Nobody likes moving, so this is an issue that people are going to grumble about no matter how sound the advice is, or how often it is repeated.
Yes, but not everyone's homepage is http://news.ycombinator.com/threads?id=pg
All "intangible" means in this case is "Oops, we missed it!"
But this is an almost exclusively US club if you currently have a start up. It takes years to get a visa and go that route unless you already have, I believe over $1.5 million funding, which somewhat defeats the purpose of the move which would be to raise money primarily.
So if you have a start up in London and are not a US citizen and do not already have millions in funding you simply cannot move to Silicon Valley.
So if you are not a US citizen get a job there for the visa (not at all easy, remember all of this years allotment of visas disappeared on the first day) and work on your start up on the side or get the funding and go.
Also consider the following, the std. angel investment is $12k from ycombinator. That gives you 3 months, which is also about the minimum amount of time you can arrive on tourist visa.
Can you take that to get up and running and then move to silicon valley? If your idea is promising then you seem to be ok.. It doesn't seem that reality gets in the way here, either by immigration policy or the details of a ycombinator investment.
What if you have definite funding from someone who wants you to move?
PG used a similar argument style in Hackers & Painters to show that some languages are better and Lisp is the best. Reduce it, then refine it. "Rural areas are clearly very bad"=="basic is clearly very bad", then "SF is the best"=="Lisp is the best".
It's funny because we're in Boston using Python, the roughly #2 spots in cities and languages.
If the situation were reversed and PG came from the UK to give that talk in SV, I dont think many would have been offended on terms of national pride. I suspect many startup entrepreneurs from SV would not hesitate moving to a different city in another country if it greatly increased their prospects of success. I for one do not have a problem moving somewhere else, and I consider myself to be at least somewhat of a patriotic American.
Again, not meaning any offense to European citizens in general, just sharing my observation.
I have folks over here in Portland that I visit, usually I'm in LA or SV sometimes. It's a dramatic shock the types of friends you make, even if you try.
For example, if you're in Portland and try coder or Linux groups, the forums are dead a lot, the Meetup groups are the same way. Ask around successful people about who they know. Your network will be limited.
It all adds up in differences.....
The advantage is that you can get the feel of people who aren't bent on startup -> domination, which is probably the majority of your customers.
Think of it like the art of personal maturing by living for a few years in a different country. Gives you major perspective and altitude.
"Back East, engineers, no matter how gifted, ranked below doctors, lawyers, Army colonels, Navy captains, business executives, and professors of English, history, biology, chemistry, and physics. This piece of European snobbery never reached Grinnell, however, nor did it turn up in many of the thousands of small towns in the Midwest and the Far West. An extremely bright student, the one possessing the quality known as genius, was infinitely more likely to go into engineering in Iowa, Illinois, Michigan, or Wisconsin than anywhere Back East."
That's from this: http://members.forbes.com/asap/1997/0825/102.html . It's great.
I am surprised that the locational freedom that internet offers (I have hired people in India and elsewhere whom I may never meet) has not been embraced by investor community as much as I would have imagined. Hopefully that will change in future.
The two claims that "I'm British by birth. And just as Jews are ex officio allowed to tell Jewish jokes, I don't feel like I have to bother being diplomatic with a British audience." are so offensive that I initially thought that you must be joking, but on re-reading, I don't think that you were.
The Jewish claim is just pure racism; the British claim is slightly more subtle, in that it contains a hidden suggestion that IT in the UK is a de-facto joke.
I am not usually terribly sensitive about such things; I'm not Jewish, I am British, and whilst I could write an essay about what is wrong with the UK IT industry today (and not much about what it excels at), I do not concur that the state of the UK is one which (in most circumstances, though not yours, of course, Brother Paul) would necessitate diplomatic skills to discuss.
I am interested to read of your experiences. Ones prejudices are best kept to oneself.
Now imagine if your name is Mohammed (not that mine is)
But I know that this is not taking the easiest path nor is it doing everything I can do to reach success, since I would raise my success probability by simply moving to Bay Area.
Also, leverage.
A $20 mil fund in Boston acts differently than a $20 in the Valley. But take the Valley mentality, double the fund size to $40 mil, and while the approach will still very, the dollar size of investment all of the sudden becomes very similar. Funds in the Valley are bigger, they have more cash to invest, and have a much higher risk tolerance than their counterparts on the East Coast
http://www.j-lp.com/blog/2007/10/move-to-silicon-valley.html
I have translated this essay to Traditional Chinese version at here: http://mclee.foolme.net/2007/11/blog-post_21.html
In case if you feel that is inappropriate, please let me know. :)
He lists:
Venice 1380 -- 1500 Antwerp 1500 -- 1555 Genoa 1555 -- 1621 Amsterdam 1621 -- 1780 London 1780 -- 1929 New York 1929 -- present
(For the future see http://www.theatlantic.com/doc/200507/fallows).
Maarten van Emden.
From what I can tell, VCs in Seattle are approximately as conservative as those in Boston. In this part of the country, it almost seems like your "fundability" is tied to your reputation as an ex-Microsoft employee....
Coming from Cornwall (a rural part of the UK) I can't tell you how much we spend sending sales people to the cities for face-to-face meetings.
I liked the bit about VCs from Silicon Valley Vs Boston. I see London VCs, Parisian VCs, German VCs don't even get a sniff. Most amusing, and so very true. I think that may be more evidence for the argument.
monk.e.boy
Justin.tv is the youtube of the future.. Name one VC outside of Silicon Valley that would have invested in that? When I first heard about it I thought.. man that'll never work... I was so wrong! It's a webcam, on his head, that simple.
Imagine being a VC and getting this biz plan:
1) put webcam on head and broadbast to world. 2) ??? 3) profit!
I guarantee you that nobody probably knew (even the VC) how the hell they would make money at it..
This does not mean others will not be successful. But you are fighting the odds, really.
Great essay as always :)
"Seeming like they will fund you one day is the way investors say No."
We learned this the hard way - by expending our energy and enthusiasm on an investor who really was saying no. Hope the new startups remember this.
Praki
http://blog.sina.com.cn/FrankieCHN I hope I can make kind friends in this hub,haha^^
http://blog.sina.com.cn/FrankieCHN I hope I can make kind friends in this hub,haha^^
Silicon Valley > Boston
a triumph of Berkeley-Stanford over MIT-Harvard?
http://www.amazon.com/gp/product/0674753402/ref=cm_cr_pr_pro...
The book was written in 1994, one year before the Netscape IPO, but even 13 years ago, the author concluded that Silicon Valley offered enormous advantages over Massachusetts for entrepreneurship. Two points in particular are worth noting:
1. Professor Saxenian paid particular attention to the (back then) highly successful minicomputer companies: Digital Equipment, Data General, Prime Computer, Wang. All of them were vertically integrated companies that attempted to do everything themselves -- R&D, product design, manufacturing, sales, and after-market service. The SV companies were more likely to focus on their core competencies and then network with other companies to provide the missing pieces.
2. Employment laws make a significant difference. Under California law, a non-compete contained in an employment agreement is void as a matter of public policy. In the employment content, California courts simply do not enforce them, and thus companies do not even bother to ask for a non-compete in California. Under Massachusetts law, a court of equity will consider enforcing a non-compete agreement if it is reasonable in terms of scope, duration and geography. I say "consider enforcing" because to a large extent, it depends on which judge decides the case; some judges are more sympathetic to the employer seeking to enforce such an agreement while others are more sympathetic to the employee who needs to earn a salary.
The upshot of this is that in California, labor is extremely mobile. People quit their jobs on Monday and start a new company or work for a new company on Tuesday, and there is nothing the former employer can do in terms of enforcing a non-compete clause. (I am ignoring intellectual property issues that may protect the former company.) Because the new employer know that California courts will not enforce non-compete agreements, it is willing to hire employees that would not be hired in Massachusetts, and investors are willing to fund start-ups that would not be funded in Massachusetts.
In Massachusetts, due to the legal uncertainty and the possibility that a non-compete will be enforced, lots of employees are not hired, lots of start-ups are not started, and lots of start-ups are not funded, that would be in California.
Simply put, Massachusetts could increase its competitive advantage (or more accurately, decrease its competitive advantage) by changing its law concerning non-competes.
One issue that Saxenian and Paul do not address is the quality of the business laws and its court system. Ceteris paribus, a state where business laws make sense and where the courts enforce contracts and handle business disputes quickly and fairly will have an advantage over other states.
The "gold standard" is Delaware. The Delaware Corporations code, for example, is clear, well written and is in almost cases unambiguous. The Delaware Chancery Court (a court of equity that hears all business disputes) is respect through the world for its smart judges who show no favorites, enforce reasonable agreements, and decide cases quickly. Their supreme court (Delaware is small enough so that all appeals go directly to the state supreme court) is equally well regarded. To some extent, companies outside Delaware can opt-in to the Delaware legal system by incorporating in Delaware, giving Delaware jurisdiction to corporate governance issues, for example.
Neither Massachusetts nor California can compare to Delaware. In comparing Massachusetts and California, I believe Massachusetts has the advantage. At the Superior Court level, at least in Middlesex and Suffolk counties (the only two counties with which I am familiar), the judges are very well regarded. Massachusetts has a ton of law schools who produce an excess number of lawyers who do not want to practice law. So when a judgeship opens up, a lot of very good, well educated lawyers apply, and the committee has its pick of the litter. At the appellate level, the judges are also well regarded.
A recent development in Suffolk county has been the establishment of a court -- called the Business Litigation Session ("BLS") -- whose sole mandate is to adjudicate business disputes. Like federal court, the BLS handles the entire case from the time it is filed to trial. Allan Van Gestel is the judge appointed to the BLS. He is highly experienced in business disputes and is very well respected by lawyers who litigate business disputes. So far, none of the other counties have create a BLS, even though everyone agrees the BLS has been quite successful.
In California, the court system is less well regarded. The caliber of the trial judges is very uneven. Appeals in California are often unpredictable -- California is such a large state that different appellate divisions in the state simply disagree with each other, and thus there is not the predictability there is in Massachusetts. And the California Supreme Court does not step in enough to decide the disagreements among the appellate divisions, again because California is such a large state that there are simply too many appeals to the California Supreme Court, a small fraction of which are accepted for review.
James Mitchell jmitchell@kensingtonllc.com
