Why Being Outside Silicon Valley is Good for Startups

http://venturelaw.blogspot.com/2007/11/why-being-outside-silicon-valley-is.html

by terpua • 19 years ago

20 27 19 years ago

venturelaw.blogspot.com

dean3• 19 years ago

"IBM is said to love buying Canadian companies like Cognos because of their tremendous employee stickiness. Next time one of my American clients ridicules Canada's pro-employee ways, I'll remind them of this."

I didn't know Canada had "pro-employee ways" (whatever that is), let alone that they were being ridiculed for it by Americans. Last time I checked, Canadian companies were just as interested in down-sizing as American companies are. The "employee stickiness" IBM is talking about probably has more to do with the mindset of employees in Canada rather than anything employers or the government might be doing. Maybe Canadians are more reluctant to move cities for a different job than Americans are, but the people I know in IT in Canada, at least, have no qualms about leaving their jobs if they can find something better. Even people at Cognos.

amichail2• 19 years ago

"employee stickiness" is a bad sign for employees. It means that finding and keeping a rewarding job is hard.

electric3• 19 years ago

Or that an employee has "stuck" around for long enough to be unemployable elsewhere.

hello_moto2• 19 years ago

Not quite a bad sign. Maybe they're just happy at the place they're working and the employees are loyal people.

electric3• 19 years ago

"Maybe Canadians are more reluctant to move cities for a different job than Americans are"

Canadians love living in Canada and in general move to the US very reluctantly. As a result Canadians have fewer career options relative to their US counterparts. This results in low turnover. You're right, it has nothing to do with a company's "pro-employee" which I assume means "employee-friendly" ways.

neilk• 19 years ago

I don't think it's true that Canadians move to the States "very reluctantly". For most of my lifetime, it's been a given that the top Canadian talent in any field would eventually move to the States, or spend significant time there.

I would bet that most Canadians, even those working in the USA, feel that the USA is a bit messed up on some issues and has an arguably lower quality of life. But it's got an economy that's an order of magnitude bigger and opportunities to match.

nickb• 19 years ago

Couldn't agree more. FInding right employees at right prices is extremely hard to do in the Valley. You're competing with the likes of Google, Facebook etc and it can take forever to fill a position at an inflated price. While you're small and your startup consists of a few founders, there's no better place on Earth to be at but as soon as you get that check from a VC, things are gonna get tough.

suziedw3• 19 years ago

A few clarifications: Canada is generally a country where the concept of "employment at will" does not exist. You want to fire someone? You need to pay severance. We also have human rights legislation that can add to what you must pay if you fire someone who is older, pregnant or has one of a wide range of conditions that can be deemed a disability (drug addiction, alcoholism, depression). There are penalties payable for toxic work places or for firing in a particularly harsh manner. These are many reasons why employers based in the US tend to dislike Canadian employment laws - if you hire the wrong person, you have to pay to get rid of them.

Onto the stickiness issue - you're generally right - there is great R&D talent in Ottawa, for example, but very few superstar tech companies at the moment. If you are like most R&D talent and attracted by the quality of work, you're pretty sticky.

A related point - thanks to the limited number ofwork Visas to the US, we've become a naturally sticky country for near-shoring talent from India, etc that cannot get a permit to work in the valley. Sticky by geography works for us, too.

joshwa• 19 years ago

Boy, that sure sounds nice! Wish I could have applied some of those laws to my last employer...

davidw• 19 years ago

It's really a double edged sword with some unintended consequences. Italy has similar (probably stronger) laws. One of the results is that most employers are very, very wary of hiring women of childbearing age.

herdrick• 19 years ago

When an employment relationship is a bigger commitment, employers are much more hesitant to hire.

dean3• 19 years ago

My impression is that what you say about firing someone is true for employees of the government or very large companies. But not really for medium or small companies. And certainly not for startups. And I suspect the U.S. government has similar policies and legislation in place for federal government workers.

suziedw3• 19 years ago

Provincial employment standards legislation, human rights codes and case law make what I am saying actual law, not just impressions, True for all employers, including startups.

neilc• 19 years ago

> For these reasons many SV VCs, he says, will not fund startups unless at least 50% of their development work is done outside of California.

I don't buy that, at least for generous definitions of "many SV VCs". I don't think any intelligent VC would follow a blanket prohibition like that. And at least in my experience, most SV startups do the vast majority of their key engineering work in the Valley.

johnrob• 19 years ago

Remember the blub vs better languages debates? Chalk one up for better languages, where you get more done with LESS people. Have fun trying to hire java engineers in the valley right now :)

BitGeek• 19 years ago

The main reason to build outside of silicon valley-- less people poaching your employees, yes, but more importantly: You don't have the bad advice constantly being forced on you.

in SV, its like being in a bar full of hot chicks who are constantly coming on to you, and telling you that they will sleep with you, if only you'll get a vasectamy, shave your ballsack, take female hormones, grow your hair out, start dressing in womens clothes, etc-- where each time you do something to please one of them they have another suggestion and two more show up with completely different suggestions. You can never make them happy and none of them will sleep with you, until you have proven yourself to be completely desperate, and wrapped around your finger. So you ultimately end up with an ugly one after being teased by hot chicks to the point of total desperation. Then when they do sleep with you, you find out they have herpes, and a few days later, they start sleeping with your best friend instead and tell you that you have to stop going to bars, or they will make sure you never get laid again.

In the end you're screwed, diseased and have wasted several years trying to get laid when you should have been trying to build your business.

Only, when I talk about women here I'm talking about VCs and when I talk about changing you I'm talking about really bad business advice. You're left with the choice of running your company into the ground based on their bad advice, or being pushed out of your own company because you wouldn't destroy it for them. No VC realizes that they are incompetent at business and giving their clients bad advice-- the best you can hope for is one that is so busy they aren't paying attention to you. People say you just need to find a good VC-- but the reality is, VCs are like politicians: there are no good ones. If they were decent people they wouldn't be in that line of work. (Not that there's anything wrong with venture investing, just the way its practiced in Silicon Valley is death to high tech startups.)

Unless you're a MBA with a marketing focus and cant' write code to save your life, and your only way to make it big is to latch onto some actually talented people and od the high burn rate high profile startup thing-- the Valley is the last place you want to go.

mwerty• 19 years ago

Very unusual analogy. I assume its first or second hand. How do you distinguish the good VCs from the bad?

pg2• 19 years ago

Pressure from investors to do stupid things is a real problem, but it's actually less of a problem in SV than anywhere else.

You need roughly as much money to do a given startup outside the valley as in it. That means you're roughly as beholden to investors no matter where you are. And stupid as many SV investors are, they are on average smarter than those outside it.

nkohari• 19 years ago

I live in Northeast Ohio. My major concern is that if I try to shop around my business plan in my area, investors won't understand half of what I'm talking about. I'm not speaking from experience, mind you, but the area is not exactly a powerhouse for Internet companies. The VC firms around here are attenuated towards other industries, like biotechnology and polymers. I'm pretty sure it would be tough to convince them to invest in a 25 year old's web startup when they're used to investing in companies that have patent-protected manufacturing processes and $10 million in sales.

pg2• 19 years ago

The employee retention argument is a misleading one. It only matters if you make it past earlier and much higher hurdles, like creating something novel that users like, and getting funded.

Someone who wants to start a startup and avoids SV because it will be harder to retain employees is like someone who wants to become a movie star and avoids LA because the higher crime rate means he'll have to worry about people breaking into his mansion after he succeeds.

Why Being Outside Silicon Valley is Good for Startups

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