Tech Startups Don’t Need the Valley Unless They Need VC

http://gigaom.com/2009/03/15/tech-startups-dont-need-the-valley-unless-they-need-vc/

by jasonlbaptiste • 17 years ago

64 50 17 years ago

It's one reason to go to the valley, but not the only one. When I moved to the valley last year, everyone asked me why? I said "People". Those people could be new friends at other startups, future talent for my company, future informal advisors, potential investors, or an awesome bartender at the Olde Pro in Palo Alto. The Valley exposed me to people that I couldn't have met anywhere else.

If you love technology and startups, you should probably give it a shot out there. Just because you move doesn't mean you'll have magic VC genies grant you three rounds of funding. You will definitely meet some awesome people along the way.

jwilliams• 17 years ago

Agreed.

I live over in Australia -- My cofounder and I are in Bay Area (visiting) and the access to having access to the people/minds here is astounding... And as you allude to - it's not just hackers, it's a whole ecosystem of people that can contribute to your idea.

zhyder2• 17 years ago

Agree about the other benefits in addition to access to VCs, but it's still arguable if they're worth the higher cost of living. If you're a bootstrapped startup, you'll hit ramen profitability much sooner elsewhere. When you have an infinite runway, you'll have infinite time to find people as well :).

garply2• 17 years ago

To me the valley seems like a good place to grow if you're already profitable and can't find enough talent in whatever location you started. For a business with a few guys doing product development in an apartment and counting every penny, I just don't see the justification for the cost of living.

hedgehog• 17 years ago

OTOH being out here is great for meeting other startup minded technical & business people. You're out here too, what's your experience been?

pg2• 17 years ago

Living in the Valley is not especially expensive for founders. Buying a house in the Valley is notoriously expensive, because there is so much speculation built into prices (even now). But renting a two-bedroom apartment in Mountain View is no more expensive for equivalent quality of life than in Boston.

We gave groups the same amount of money in Boston cycles as in Bay Area cycles, and we never noticed any difference in how long it lasted.

ghshephard• 17 years ago

Definitely about the people. Unless you are the founder of a company, you are never working for the _current_ company, but instead are working for the next company (in which you will be a founder, or an early stage employee that gets a good chunk of equity) - you need to demonstrate that you are someone they want to hire.

With the possible exception of craigslist, where they manage to accomplish heroic feats with very little in the way of staff, any company that is eyeballing $1B+ market-cap will grow to hundreds, and possibly thousands of employees.

Where else on earth can you find such a concentration of DBAs, Sysadmins, Designers, Tech-Friendly-Lawyers, Developers, Product Manager who have all three of the following characteristics: o Very, Very good at their job. o Real world experience in several major companies. o And, most importantly, willing to go to work for a "lets throw caution to the wind" startup.

Change is the only constant in the valley. People here, for whatever reason, are just comfortable changing jobs, sharing information, and building new things.

The weather is astoundingly good. Never too hot or too cold - 350 / 365 days in the year. And the other 15 usually mean having to actually turn on your heater or open a window on a warm summer night.

The peninsula, for the most part, does suck in terms of lifestyle. There are exceptions (Murphy Street in Sunnyvale, Good portions of San Francisco, downtown San Jose on a Saturday night) - but, in general, it's mile upon mile of suburbia and strip malls. This is not Manhattan or downtown Vancouver. (On the flip side, with few distractions there is more time to get work done)

The major downside is that unless you are filthy rich or already a home owner, the only sane strategy (unless you don't mind commuting for 90-120 minutes each morning) is to rent.

With all that said, if what you are looking to do is grow a company organically, and have your eyes set on something more sane like a $10mm-$100mm market cap over 5-10 years, there are probably a lot of ways to succeed without being in the middle of it all.

mattj• 17 years ago

Is it surprising in any way that a bunch of people not from the valley say that being in the valley isn't important?

patio112• 17 years ago

The rebuttal writes itself, doesn't it.

paulgb• 17 years ago

No more surprising than the fact that so many people in the valley say being in the valley is important.

I notice that in the bay area, or at least SF, "startup" is assumed to mean a web site or web app of some sort. So when I hear claims that the bay area is the best place for a startup, I don't necessarily disagree, but I parse "startup" as "web app startup".

sachinag2• 17 years ago

Your probability of success is higher in the Valley. Doesn't mean you can't be successful elsewhere. I don't understand why people can't reconcile these two statements.

If you like your lifestyle where you are, by all means, stay. If you can find investors, lawyers, and accountants (assuming you want them) that you trust, stay where you are.

But if you're just a couple of crazy kids with a work ethic and an idea to change the world, and if you are willing to do everything possible to give your startup the highest probability of success, go to the Valley.

patio112• 17 years ago

Your probability of success is higher in the Valley

Your probability of flipping heads is higher than your probability of rolling 1 on a six-sided die: X = .5, Y =~ .167. I have yet to even hear of a good setup for measuring X or Y, to say nothing of actual numbers for them, for measuring "probability of success in a startup". Heck, I have never even heard a defensible universalizable definition of success for a startup.

Incidentally, and this has always bothered me about statements like "give your X the highest probability of Y": do people routinely get the opportunity to run a simple random sample of startups, marry a simple random sample of women, raise a simple random sample of children, etc? No? Then why do we bastardize statistics in this manner.

sachinag2• 17 years ago

Look, you get one bite at the apple per idea/situation. A random sample isn't an appropriate counter-factual. Your job as an entrepreneur is to maximize your chances for success given the situation at hand.

I suppose "chances for success" wouldn't have set you off, and I acknowledge that. But we're at the point where we mock people for using "beg the question" incorrectly and ignore the substance of the argument, which isn't really productive for others reading this thread.

aneesh• 17 years ago

You're being very frequentist (http://www.statisticalengineering.com/frequentists_and_bayes...).

You don't have to have a random sample to estimate a probability. In the Bayesian interpretation, you can have a reasonable prior that you update as you collect more data. For example, a meteorologist can look at the clouds and "guesstimate" that there's a 50% chance of rain tomorrow. A frequentist would object and say that you can't take lots of random samples of tomorrow to estimate that probability. The Bayesian is willing to take the meteorologist's guess as a prior, and update it as & when more data becomes available. In this case, I think Sachin's statement is reasonable in the absence of any real data.

paulbaumgart2• 17 years ago

You've got a point, in the sense that a lot of the "probabilities" are just best guesses based on anecdotal evidence. But pragmatically, I don't see much of a choice; it would be paralyzing to try and gather all that data before making a decision. And, in my mind, it's usually better to make that decision on imperfect information- like the aphorism that "Your probability of success is higher in the Valley"- than no information at all.

garply2• 17 years ago

The guy in the video makes a point about external funding: a lot of well-known, large tech companies accepted money only after they were already profitable and did so in order to expand. That seems really sane to me - capital seems like a magnifier for a process that either produces money or consumes money. I suspect a lot of companies that succeed with external money would have succeeded without it and that a lot of companies that fail without external money would have failed with it.

blackguardx• 17 years ago

Some people like Silicon Valley, some people don't. To each his own.

Silicon Valley has a huge population of smart tech workers. There are certainly advantages to running a tech startup there. Other aspects of the area detract from the quality of life, however.

I live in the bay area, but can't stand Silicon Valley's feeling of endless suburbia. I don't think strip malls and sprawling apartment complexes make a good living environment for me. Some people prefer it, however. Silicon Valley is for them. It is not for me.

menloparkbum2• 17 years ago

There is not much substance to this article. It doesn't really even build on the title. It's just a bunch of quotes about VC funding and startup culture by a couple bloggers who live in Wisconsin and China. And, a video of a random investor from Texas.

I feel like they're riffing about an imagined startup culture that died out in 2001.

dejb2• 17 years ago

Maybe it isn't what you meant but to me you post comes off as... "What would they know. They aren't from the valley"

menloparkbum2• 17 years ago

I really just meant what I posted - there isn't much to the article.

On the other hand, there is some truth to your comment. Aside from the guy who lives in China, there wasn't anything that suggested the authors had even been to California.

There are real disadvantages to living in Silicon Valley, and they didn't mention any of them. Instead, they brought up things like work culture and being showered with VC dollars, which actually aren't the big problems.

riferguson• 17 years ago

Dude, Google is your friend.

Mike was being coy when he described himself as a "former Microsoft employee", but dismissing him as a "random investor from Texas" is silly.

http://people.forbes.com/profile/michael-j-maples/49137 http://query.nytimes.com/gst/fullpage.html?res=990CE2D81038F... http://www.alibre.com/corporate/management.asp

vaksel2• 17 years ago

I disagree. Have you taken a look at the culture in the valley? They are all about helping each other.

i.e. I think this story was told at LeWeb.

Seesmic founder lets Friendfeed guys know that their products would work really well together. The Friendfeed guys call back and tell him to drop by to discuss it. Loic hops into his car, drives 10 minutes to the Friendfeed offices, and after an hour or so of meetings, Friendfeed adds Seesmic to their site.

Outside of the valley, something like this isn't possible. The spirit of startups lets companies be a lot more relaxed and open to new possibilities.

nostrademons• 17 years ago

...outside the Valley, most people have heard of neither FriendFeed nor Seesmic. ;-)

The big advantage of living outside the valley is that you're closer to real customers - people who don't live and breathe technology 24/7. That can help you or hurt you, depending on your target market. Could something like MySpace, AOL or PlentyOfFish have started inside the Valley, considering that they succeeded by catering to idiots?

pg2• 17 years ago

There are plenty of nontechnical people in SV too. There are dentists and cooks and policemen here just like everywhere else.

AOL, incidentally, did not cater to idiots initially. Before the web it was something a lot of hackers used.

asdflkj• 17 years ago

The problem with catering to idiots is that unless you're an idiot yourself--the particular kind of idiot comprising your target market--you have no idea what your customers want. Also, this approach would probably be too demoralizing to sustain for anyone without the record-label-executive state of mind, which is the opposite of the hacker state of mind.

axod2• 17 years ago

>> Outside of the valley, something like this isn't possible.

We do have email, IRC, etc etc these days.

dejb2• 17 years ago

And the phone.

vaksel2• 17 years ago

I was talking more about the fact that it took a few hours from seeing an opportunity, to finalizing the deal. Outside of SV, it would take a few weeks just to arrange a meeting. And chances are the company would end up passing on the partnership because they don't want to trust a fresh startup.

neilk• 17 years ago

Agreed, but it's way slower at building trust. Especially compared to the opportunities people have in the valley to socialize outside of some deal-making session.

macco• 17 years ago

Of course tech startup don't NEED the Valley, but to me(German resident) it seams that the Valley is a good place to be for a tech startup.

jdrock• 17 years ago

"..and forces entrepreneurs to build a startup that can make it as a business from day one."

I think the conclusion borders on comedic. Only a miniscule # of companies should not be thinking of this way.

racy_rick2• 17 years ago

This inspired me:

Looking for a great city to start you startup? http://news.ycombinator.com/item?id=518379

rjurney3• 17 years ago

Silicon valley is unacceptable because Norcal has great white sharks, which scare the pants off me and I can't live by the ocean and not surf :(

Tech Startups Don’t Need the Valley Unless They Need VC

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