Silicon Valley Losing its Luster?

http://www.pehub.com/wordpress/?p=2721

by procyon • 18 years ago

13 15 18 years ago

pg3• 18 years ago

If you decide where the entrepreneurial hot spots are by polling your site visitors, what you get is a lot of data about where people wish they were.

The fact is, practically all startups need investors. Entrepreneurship means more than web/software startups, of course, but for web/software startups, the limiting reagent is investors with expertise and connections in that area. And they are highly concentrated in Silicon Valley.

It doesn't matter how vibrant a place seems if it is missing the specific type of expertise you need. So while Brazil, for example, may be a fine place for some forms of entrepreneurship, it will have the same drawback as a home for new tech startups that Silicon Valley would for, say, new fashion labels.

dshah• 18 years ago

Why is it that practically all startups need investors? Particularly web/software startups?

Seems that more and more startups could be started with personal funding these days and not really require outside funding.

webwright• 18 years ago

Dharmesh, I think you overestimate folks' personal funding. Most people don't have cash to both live and pay (even small) startup expenses for 6months - 2 years in might take to hit profitability or early liquidity.

That aside, there seems a strong correlation between liquidity and VC investment (even nowadays). The connections, maybe?

Of course, there are plenty of examples where you can involve VC at the END, like StumbleUpon did-- Garrett Camp chugged along with it in Calgary for 3 years before heading down to SV and getting it sold (if memory serves)-- once he got investors.

pg3• 18 years ago

Why is it that practically all startups need investors? Particularly web/software startups?

To cover the founders' living expenses while they build a product and get the company to profitability. That's going to take a minimum of 6 months. More often a year.

The other alternative would be to keep their jobs and do the startup on the side. But taking that route means that (a) the startup happens much slower, which can be dangerous if, as usual, there is someone else working on the same idea, and (b) it's easy to let the startup slide, since it's only a side project, and not the work that's paying your bills.

You can also look at the empirical evidence. Make a list of the 100 startups you admire most. What percentage of them did it without investors?

The scary thing about that exercise is that startups done as side projects are probably more numerous than those where the founders quit to work full-time on the company. If this much larger pool produces such a tiny fraction of the successes, the attrition rate must be appalling.

procyon• 18 years ago

I totally agree that as far as investors are concerned Silicon Valley has more expertise concentration. On the other hand, Silion Valley also has more number of startups seeking funding!

In a web startup where geographic locations are not a huge factor for the product development itself, it is harder to justify high cost of living with other benefits hotspots in US like Seattle and Silicon Valley provide.

My current startup is in Seattle and we are bootstrapping right now. We are strongly considering about moving to another country. Startups are about people, as we all know. Seattle definitely had better resources to get support, advice, and seek funding. However, we had to let it all go over the vast cost of living difference between India and US.

jhancock• 18 years ago

sorry, fact is few things are cheaper to create and replicate than software. Having investment before product, customers, and revenue provides advantage for some types of business models. It enables "failing-fast"; the "go big or go home" approach. Its useful/necessary for an arms race when many are going after the same model at the same time.

Silicon Valley is an advantage if your startup user/customer base includes and is led by U.S. users/customers. If not, Silicon Valley may be a disadvantage for understanding opportunities for innovation. I am an American having lived in Shanghai for 8 years. Most profitable web models in China are ones evolved in China by Chinese. Sure some of it is copied, but that is part of evolution. So if the U.S. economy is going to take a backseat in growth relative to others, China and Brazil being good examples, then go where the growth is. In these faster growing markets, you can for the moment leverage your American earning potential to save enough quickly to pay people in China or Brazil to bootstrap your startup. VC money is harder to come by in these places, but you can fund it yourself easier than in the U.S.

Another point to keep in mind is targeting opportunities that are not going to be an overnight boom. Try thinking several years ahead of the curve a bit and finding a model that grows slow and steady in a country like China or Brazil. If your vision is only 6 months out, then many others will have the same vision and stamina to go for it. I think the real heroes are those that think longer term with what is initially niche markets. These guys can build slow and steady without VC. I'll call this the "traditional" approach. In economies like China, this traditional approach still works ;).

pg3• 18 years ago

Sure, if you're making something for a specific country or region, it would probably be good idea to be there. This is just another instance of the principle that you want to be where the expertise you need is.

projectileboy• 18 years ago

Do unsupported statements seem more plausible when phrased as questions?

Will Minneapolis become the next hot spot for all-night heroin parties?

Film at 11.

mynameishere2• 18 years ago

If I had to make one choice, Brazil.

California is about one generation away from being Brazil. At any rate, anyone with an interest in South America knows that the best bet is Uruguay. Check out the flag for starters:

http://www.newspapercountry.com/Uruguay.png

rms• 18 years ago

I had always leaned towards Argentina, but Uruguay sounds pretty good... beyond the kick-ass flag and general liberalness, what makes Uruguay so great?

mynameishere2• 18 years ago

It's basically like Argentina or Chile without the revolutionary rumblings.

wallflower• 18 years ago

If you are considering Argentina, you can infer a lot about the Buenos Aires tech scene from this:

http://osdir.com/ml/culture.people.kragen.journal/2007-09/ms...

helveticaman• 18 years ago

Argentina? BA is nice, I agree, but the economy goes down the drain every twelve years. I'm not talking about US-style depressions with lost jobs and protests; I'm talking starving children, a different president every week, and politicians escaping in helicopters. Of course, if you arrive right after a flush, everything's cheap. But do you really want to deal with an economy as chaotic as your startup's?

I know of businesses that are really reluctant to do business in Argentina because of government corruption, particularly mining companies.

Brazil sounds better, but it isn't SV.

If I had to be in Latin America, I'd be (OK, I am) in Santiago. The country is run by engineer entrepreneurs, taxes are really low, the economy is very well managed (moreso than that of US, for instance) and labor is relatively cheap. But, having tried to do a startup here, I can see why SV is the place to be. You just don't hit other uranium atoms often enough.

tectonic• 18 years ago

http://startupwarrior.com

PaulGrahamBell• 18 years ago

http://startuphubs.com

Silicon Valley Losing its Luster?

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