I wonder if an app that would let you list the one thing you need right now to move your project along would help... it would make the chance meeting phenomenon an internet occurrence, which seems like it would greatly facilitate finding that one person.
I'm curious at Hacker News' thoughts on what it takes to start a startup hub.
For instance, here in Blacksburg, VA (Virginia Tech) a few local entrepreneurs and Angels are trying to get the startup community here off the ground. We've gone from little activity, to having a populated co-working space and regular meetups. The community is small and close; which is great for all those involved.
However, most companies that start here still aspire to move out to the Valley. The opportunities there still dwarf the opportunities here, and we're constantly in danger of losing what few founders we have.
Granted, Blacksburg isn't exactly a geographically optimal spot for techies to flock to. But is it possible that the larger hubs such as the Valley have too much pull for smaller communities to really take off?
Just having a Hacker News meetup has helped London a lot i'd say, it's helped me find like minded people as I found there were a lot of 'old business' and finance folks going to the events that weren't designed for what they wanted to do in business.
London Hacker News is now the biggest (or top few) monthly startup meetup here.
I grew up in NC, lived in upstate NY and NYC, then Hawaii, and now the Bay Area. From my initial observations there are two things that set Silicon Valley apart:
1) Huge risk tolerance, and of a different sort than Wall St. The risk model of the startup ecosystem is different than for the banking system., in fact it's the inverse. Wall St. tends to chase returns (especially in trading, which has become a huge part of their revenues), and quarterly performance evaluations are even structured around that. But chasing ever larger returns based on leverage and debt entails ever more risk, exposing you to the possibility of catastrophic, systemic loss. The higher the return, the more exposure to company-ending loss.
In the startup world, many small bets are spread across many companies, 90% fail, 9% succeed somewhat, and perhaps 1% hit it big. But the ROI from that 1% more than makes up for all the small losses of the 90%.
Graphing the startup ecosystem ROI on chart would look like a line with a negative slope, punctuated by positive spikes. Whereas graphing the banking system's revenue would be inverse - a positive slope, punctuated by negative loss spikes.
Silicon Valley seems more comfortable with and tolerant of the periods of negative ROI than any other culture I've observed, supremely confident that the positive spikes do happen, and that you don't even have to guess exactly where they'll come from as long as you play the odds and spread your bets. It's just an article of faith here.
2) Innovation pervades everything, from academia, tech, and business, to social, even spiritual. By way of example, one of the first people I met here was a guy studying to be a Shamman. Anywhere else in the US, especially the east coast, such a thing might raise eyebrows, but here it's just par for the course - unbounded experimentation with anything and everything. For another example, is there anywhere else in the US that something like Burning Man could have become what it has? Doubt it. Innovation is universal here, not applied in some domains (tech) but stymied in others (social, spiritual), it's applied everywhere.
Those two also seem to reinforce each other. Risk tolerance begets innovation begets success begets risk tolerance begets innovation begets ...
Plenty of places have some degree of innovation, but I'm not sure there's anywhere it pervades culture to the extent it does here. That's one more big thing other startup hubs are up against.
Looking at the same thing in East Lansing. My personal opinion is that Boulder is a much better model for a second tier city than Silicon Valley. They've come from nowhere in the past fifteen years to become a leading hub.
We've got strong networks of enthusiastic people (http://www.hackersandhustlers.org) started but no clear roadmap how to go to the next level.
Michigan in general imho has two problems to overcome:
1. Lack of angel investors
2. Experienced people willing to take the risk of working for a startup. The economy has been so brutal here for the past eleven years that it can take a long time to land a new position if the startup fails.
Paul (or anyone else), in note 3 you say "Starting a company is common, but starting a startup is rare. I've talked about the distinction between the two elsewhere..."
I'd appreciate any links to the places you've mentioned this.
There are millions of small businesses in America, but only a few thousand are startups. To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn't scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.
I'm not sure it's the best way to distinguish, but it is how the term is often used, especially in the context of startup funding, where "startup" is used as a synonym for basically "the kind of thing a VC would want to fund".
For example, you start a site for college students and you decide to move to the Valley for the summer to work on it. And then on a random suburban street in Palo Alto you happen to run into Sean Parker
I thought that was the fake movie story, and in real life Sean Parker went after Facebook, flying to Harvard to meet Zuckerberg and eventually convincing him to come to Silicon Valley.
I think the flying out to meet Zuck part is true, but it's also true that he later bumped into him that summer in Palo Alto (not sure if they'd stayed in touch).
I read something more along those lines in an article about Sean Parker talking about how he was more involved with things than the movie presented. I can't find that article anymore. Here is an article that actually has a quote from Zuckerberg, stating he let Sean Parker crash at his place (although Zuckerberg himself does not say he bumped in to Parker): http://www.fastcompany.com/magazine/115/open_features-hacker...
I didn't mean to suggest that no one realized it was helpful to be surrounded by a lot of people working on the same things. I've written about it a couple times myself. The surprises for me were in the details. E.g. that with startups, people are more willing to help out their peers than in more zero sum fields, and that you need that extra margin of help because startups fail by default.
"that with startups, people are more willing to help out their peers"
I'm going to guess that this happens in the entertainment industry as well. The similarity being that the person you are rooming with or working with who has a bit part on some show with you might be the next big star. So I would imagine people tend to be nice and helpful to people in any field where there is a big prize and it's not easy to tell (like with sports) who the next star or Spielberg might be. Because in addition to skill (which many have, as has been said with acting for example) there is luck and landing that key opportunity that launches your career. And if you happen to have known or have been friends with that successful person it could only help your career.
pg's description of his day in Palo Alto is telling. I don't think he learned anything from these interactions, or if it ever led to any concrete action. But it helps sustain the idea that what you are doing matters, or could matter. That is the single biggest psychological stumbling block for the people I know who are in startups. There's this nagging sense that maybe they are just throwing all this time and effort away for nothing.
It's possible that the reason why other cities are "startup killers" is that this optimism is, to some extent, a shared delusion. If there were a town in the USA where all the lottery winners moved to, the people who also happened to be there would have completely different ideas about risk.
But the Bay Area is that town for internet startups. Although there are real benefits to moving here, I bet there's a strong delusion-enhancing component too. Which is good for VCs, but perhaps actually maladaptive for the individual startup founder or employee.
I was actually having a conversation about this recently. A few of us were talking about how startups are almost "normal" here (Waterloo), so it doesn't seem odd to work 9am-10pm. But when you go home, people think you're crazy.
It's that subconscious influence that makes it so hard elsewhere. If enough people tell you that you're crazy, it takes a really special person to be able to shrug it off. I think the interesting thing here is that having a great co-founder has a very similar effect. I would even go as far as to say startup hubs and co-founders play a very similar role in keeping you going.
For the last paragraph in that post, the Valley is different (from NYC,Boston etc) in that it is NOT the hub of anything else...other cities are metropolitan areas of various things going in in them...unlike valley, where there is only a very narrow band of activities that thrive...
Speaking as a nanoengineer now doing a web startup (in SF for 2 weeks now), this is just the way the world works.
Startups and nanoparticles can spontaneously form anywhere under the right environmental conditions, but they can just as easily break up in isolation. But if the local concentration is high enough, something magical happens. Even when a person or a molecule jumps ship, another one fills its place almost instantly. Suddenly, these things are "stable" but not only that, they can grow, sucking up bits from the surrounding environment and merging with others.
Critical mass, in SV it's the right kind of people, in nanoengineering it's the right kind of molecule, either way, once it gets going, you just hang on for the ride.
As the low hanging fruit disappear, the type of veteran knowledge each entrepreneur requires will change.
Right now issues like effective user interface are being solved and are general enough across disciplines/markets that the results can be shared by everyone for everyone. But as internet startups specialize in finer and finer ways, focusing their products and services on smaller and smaller niches, the struggling entrepreneur will require an equally specialized knowledge. Startup towns have been ideal for sharing the knowledge of how to run an internet startup, but when that knowledge becomes more common and less geographically constrained, I'd wager we'll see Sector Specific regions ascending.
Funny - I mention a chance encounter helping us a lot (meeting FB's head of data at a party), and then the vibe being optimistic and ambitious (and we were working out of the then Twitter office in South Park). We did also bump into Ron Conway one morning on the way back from kickboxing.
The Internet is the biggest startup hub of them all. IRC, topic specific mailing lists, places like HN, etc.
99% of all good ideas in computer security were discussed on the cypherpunks list in the 1990s. I'm sure there are or were other subculture groups online equally useful.
I think the world has changed drastically in the past few years...
I can provide perspective from working for a startup in SF in 06-07 and a startup in Chicago now... In Chicago noone thinks you're unemployed if you say you work for a startup. That was the case a couple of years ago, but with Groupon and a TON of other companies that just isn't the case. The difference is just that more people are doing startups in SF vs. consultants/bankers/fortune 500 workers... Go to a bar here and girls think it's so damn cool that you are running a startup (apparently girls are obsessed with all things geek - http://www.chicagobusiness.com/article/20110924/ISSUE03/3092...).
Re: the coffeshop thing- just by chance (ie we didn't know this going in and it is NOT the startup hub area within Chicago), within 3 blocks of FeeFighters office are: 37signals, SproutSocial, Threadless, Crowdspring, and several other startups. I don't see how it helps us significantly to bump into them (though we have helped our neighbors when they've had merchant account issues). Many people think it is a wasteland anywhere not the valley but I have seen that not to be the case here, in New York, and even in Pittsburgh.
So what is the difference between here and there? The largest differentiator I've noticed between the valley and elsewhere is funding. We raised most of our money in Chicago from VC's we really like, but could have raised easier on the west coast. A lot of top VC's prefer to have you close and told us flat out they would fund us if we moved there. We had term sheets dependent on us being in Austin, SF, and LA. I don't think it has had an effect one way or another on our business thus far.
Startups need money, and often flock to where it is. Things are changing all over the place though (Rich people in Chicago all of a sudden want to fund startups, will be interesting to see if that continues post-Groupon IPO)
It also depends on your type of business. If you sell mainly to startups, you should probably be in the valley.
West coast VCs are aggressively investing three thousand miles away from the valley in NYC. I'm sure being geographically closer to VCs makes it easier to raise money, but I really hope startups don't pick their location based on where VCs are. There are better parameters to optimize for.
I encourage startups to base their businesses where they'll have the best chance at recruiting the best talent. The next search engine would be well-served starting in the valley, especially if it's an ex-Google team. Similarly, storage companies continue to thrive in and around Boston, as they can draw talent from EMC. New media startups with a heavy emphasis on design-as-differentiator do really well recruiting in NYC.
By this reasoning, it might even make sense to base your web startup in Florida, if your network high-quality development talent is in Florida. I've seen this approach work well in unusual startup geographies, especially when it's a leader of an ex-team that is getting his or her band back together for second (or third) time.
Pick a geography that will play to your recruiting strengths.
Aggressively investing? That wording suggests to me that VCs are actively cold-calling or spamming companies with indications of interest. I assume you don't actually mean this.
[W]ithin 3 blocks of FeeFighters office are: 37signals, SproutSocial, Threadless, Crowdspring, and several other startups. I don't see how it helps us significantly to bump into them ...
That's because the marginal utility FeeFighters will get on average out of any given serendipitous moment is a lot less than, say, an unfunded startup no one's ever heard of.
If you graphed that marginal utility over time, you'd probably find that it's multi-region: linear in some parts, exponential in others.
"willingness to help people out" would seem to suggest NYC, LA, and DC will be forever handicapped. NYC seems to be overcoming this through bei great in other ways, but LA/entertainment culture seems the antithesis of startup culture, although both constantly create new things from ideas.
This all makes thhe demise of Boston even more stark and sad. It had every advantage except weather!
I'm curious why you think there has been a "demise of Boston". Is it really no longer a first-class "startup hub"? NYC gets more hype these days but it seems like both are great places to do a startup.
Outside biotech, it has gone from number 1 to a solid number 2 to mid-list. Seattle, Austin, Portland, NYC, and Boulder are all above it for many types of startups -- Boston has some legacy VCs, great but declining universities, and big city air travel and other infrastructure, but it is getting weaker by the day as a place to base a startup.
I don't really have time to put together statistical backing for my argument, but based on talking to a bunch of new startups in security tech, it is definitely an anti Boston trend.
Outside biotech, it has gone from number 1 to a solid number 2 to mid-list. Seattle, Austin, Portland, NYC, and Boulder are all above it for many types of startups -- Boston has some legacy VCs, great but declining universities, and big city air travel and other infrastructure, but it is getting weaker by the day as a place to base a startup.
That is a good point. My only experience with NYC is with VCs there, and non startup companies there. The moved from NYC startups I have talked to were all very helpful on e they were in sf, so maybe that happened there, vs. here.
Which is also a stereotype. While I believe there are very many nice and helpful people in NYC, there is a still very much a "me-first" attitude. At the end of the day humans ultimately strive only to better themselves. Take that statement with a grain of salt, because enabling oneself can be manifested through social means. Hence why over time humans have evolved to understand that they can better themselves by social means. Either method is still a medium to which we can attain personal fulfillment.[1]
I think what pg is getting at is that the culture in SV leans much more towards this - that we can better ourselves by the help of others. Financial industries work better when individuals strive independently. I'm not narrowed minded enough to think that these are absolutes but more of leaning towards one medium over another.
but LA/entertainment culture seems the antithesis of startup culture
That's an interesting comment. I'm curious as to what you mean. In my limited experience, LA/entertainment culture seems to be the closest thing to startup culture.
An interesting question is why 'physical' hubs work and why all those elements can't be captured yet online?
One key element to debate is randomness - pg does a good job I think in describing the value of randomness in terms of random meetings, shower thoughts - etc - There are many other examples of this process at work - e.g., in management/strategy: http://www.management.wharton.upenn.edu/siggelkow/pdfs/SOart...
It bears the question - what is this valued randomness in terms of social interactions? And how can we get it in online? Definitely not chatrulette :)
But not "hackernews" type of places either - because in here we are interacting in a very structured manner - on specific topics one chooses, etc - so it's not random - we are directing our thoughts, so we are not randomly exploring things.
How can we find that great balance that physical hubs have? Going to pick up dry cleaning you find a random guy and you say hi - because you have nothing better to do you end up chatting with the guy and discovering he's Sean Parker. But that won't happen online. You just switch to another browser window that is more interesting - no need for randomness.
Is the internet killing randomness? - Or better yet: how can we come up with something that gives that value to people in a way that is not chatrullette?? It should be random but within your comfort zone, in a way that is casual and not sought after (which is uncool and weird).
This seems a very important question. It's hard to simulate the randomness of the physical world, but it would be extremely useful to be able to do it.
One of the problems is that computer screens are just so small. If displays (or whatever replaces them) were bigger, what they were displaying could be more ambient. There wouldn't have to be as much purpose.
On the other hand, maybe the difficulty of physically getting to a place is an important filter.
Even physical micro-hubs like coworking spaces where I live in Phoenix do not capture the serendipity of interaction that Silicon Valley provides.
Here you have to consciously decide to go where other startups are at. In Silicon Valley I just get a cup of coffee and there's a conversation at the table next to me about startups.
Although, I have to say Twitter enabled more fluid communication in the startup scene here. Enough to where I have been able to spot a couple people not at the typical hotspots.
It might be that humans naturally possess superstitious minds that react strongly to elements of serendipity. Even the most scientific minds will have a hard time not having an emotional response to randomly getting into a conversation that shows potential of positively affecting their lives.
I'm not so sure randomness is the key. Randomness can be also be thought of as "absence of pattern". For me the key question to ask is to ask what role chance plays in formation of startups? Is it really chance or something process we can't yet fathom?
The last paper written by Alan Turing, "The Chemical Basis of Morphogenesis," [0] ~ http://www.dna.caltech.edu/courses/cs191/paperscs191/turing.... attempted to answer the theoretical explanation of the biological process that defines the shape of an embryonic organism from creation. This process is called "Morphogenesis" [1] This is an important problem because complex organisms appear to be created by some "random" process that organises what appear to be self similar cells.
A lot of recent work has been done to experiment Turings ideas on "reaction-diffusion" processes describing morphogenesis in biology and other natural systems to see if a) they can be reproduced in the lab and b) mathematically model them. [2] This begs the question, "what is the Morphogenesis of startups?" and can the same maths Turing used to describe the process be applied to startup formation?
There is a pretty good broad outline of Turing and Morphogenesis in a BBC documentary, "The Secret Life of Chaos" [3] by Professor Jim Al-Khalili on Youtube. [4]
[1] Morphogenesis, "the Greek morphe shape and genesis creation, literally, "beginning of the shape", is the biological process that causes an organism to develop its shape.",
http://en.wikipedia.org/wiki/Morphogenesis
Thanks to your comment, I just had a lightbulb moment.
The missing piece of the puzzle is real-time online location!
The reason we don't have chance meetings online is that we are not aware of who else is using or reading the same site or app as us in real-time. PG suggests that it maybe because of screen size, but I don't think that's the main problem. The real issue is that unless it's explicitly built into an app, like a chat site, we simply don't know who we are sharing that online space with at any specific point of time.
Imagine if you could say, "Oh I was reading this random blog on Tumblr and was surprised to see Fred Wilson reading it too. Didn't know he was into ASCII art, but had a good chat with him."
I can see Facebook doing this at some point. They are already doing it with music on their site. And they already know which of their users are on a particular site at any given time. It's just a matter of letting the users see that too and interact with each other. Turntable.fm is an outstanding example.
It's bound to freak people out, but it should actually make things more open and real-life like.
The problem of course is establishing true identity, and given that we can't literally see people to know it's really them, we will have to rely on a central identity system like Facebook. A decentralized method of identification would be great but is unlikely to happen.
> The missing piece of the puzzle is online location!
This is something that I think has, oddly enough, gone backwards as technology has improved. BBSs had a very strong sense of location, while the internet is much flatter and amorphous, because everyone can connect to everything.
I think you misunderstood me. I mean real-time online location, as in I'm on news.ycombinator.com right now. My friend is on facebook.com right now. I'm not talking about geophysical location.
Oh I agree; I didn't mean that BBSs were tied to geographical location (though there was some of that), but that they provided a strong sense of online location. You were on a particular BBS at a particular time, not on another one; and you couldn't have 30 tabs open to 30 different BBSs. If it was a multi-line board, you could see who was online at the same time as you. That sort of thing made it feel more like a virtual location.
I think that the hacker news structure has its own merits in terms of randomness which makes it as close to an online hub that currently does exist. By posting something on HN you open the idea to the community, with no idea where discussion can go. As someone who isn't from a Startup hub (Ohio), this type of directed random interaction and analysis has been crucial for me in helping me to understand the startup mentality, as well as providing me with the opportunity to rapidly immerse myself with information and anlaysis of the startup movement coming directly from the horses mouth (those within the movement). The members of the physical start up hubs of the world, contribute to the online hubs, allowing those outside of these physical hubs to be a part of our first start up hub.
Another reason and a big reason seems to be past success, you need people with capital to invest. Once an area gets a couple large companies to cash out not only do those people tend to invest or start companies in similar industries but people around them see their success and want in on the action. If Groupon has a successful IPO and enough employees cash out Chicago could very well become the next large hub. This is the reason why you need a physical hub, but I think AngelList might be removing that hurdle.
On the same note, the investors, lawyers, and employees in startup hubs have 'standard terms' where as in other parts of the country the terms get extremely complicated with things such as tranches. They understand what it takes to succeed since they've usually done it before and are there to guide the company.
> In most places, if you start a startup, people treat you as if you're unemployed.
This is why I think for places like NYC, London, etc (i.e. any financial capital) it will become increasingly difficult to create a startup culture. Being unemployed in those cities is NOT cool.
That's what Taleb explained for his living in NYC: it buys him the option of a Postitive Black Swan to meet great people ("antidotes"?): This makes living in big cities [hubs] invaluable because you increase the odds of serendipitous exposure _ you gain exposure to the envelop of serendipity. p209, The Black Swan, 2007. /Taking maximum exposure to the positive Black Swan p207, Seize any opportunity, or anything that looks like an opportunity. They are rare, or much rarer than you think. Remember that Positive Black Swans have a necessary 1st step: you need to be exposed to them p208
Does anyone have any statistics on the success rate of startups in Silicon Valley versus elsewhere? It would be interesting to see some data that supports pg's claim.
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[ 4.0 ms ] story [ 166 ms ] threadFor instance, here in Blacksburg, VA (Virginia Tech) a few local entrepreneurs and Angels are trying to get the startup community here off the ground. We've gone from little activity, to having a populated co-working space and regular meetups. The community is small and close; which is great for all those involved.
However, most companies that start here still aspire to move out to the Valley. The opportunities there still dwarf the opportunities here, and we're constantly in danger of losing what few founders we have.
Granted, Blacksburg isn't exactly a geographically optimal spot for techies to flock to. But is it possible that the larger hubs such as the Valley have too much pull for smaller communities to really take off?
London Hacker News is now the biggest (or top few) monthly startup meetup here.
1) Huge risk tolerance, and of a different sort than Wall St. The risk model of the startup ecosystem is different than for the banking system., in fact it's the inverse. Wall St. tends to chase returns (especially in trading, which has become a huge part of their revenues), and quarterly performance evaluations are even structured around that. But chasing ever larger returns based on leverage and debt entails ever more risk, exposing you to the possibility of catastrophic, systemic loss. The higher the return, the more exposure to company-ending loss.
In the startup world, many small bets are spread across many companies, 90% fail, 9% succeed somewhat, and perhaps 1% hit it big. But the ROI from that 1% more than makes up for all the small losses of the 90%.
Graphing the startup ecosystem ROI on chart would look like a line with a negative slope, punctuated by positive spikes. Whereas graphing the banking system's revenue would be inverse - a positive slope, punctuated by negative loss spikes.
Silicon Valley seems more comfortable with and tolerant of the periods of negative ROI than any other culture I've observed, supremely confident that the positive spikes do happen, and that you don't even have to guess exactly where they'll come from as long as you play the odds and spread your bets. It's just an article of faith here.
2) Innovation pervades everything, from academia, tech, and business, to social, even spiritual. By way of example, one of the first people I met here was a guy studying to be a Shamman. Anywhere else in the US, especially the east coast, such a thing might raise eyebrows, but here it's just par for the course - unbounded experimentation with anything and everything. For another example, is there anywhere else in the US that something like Burning Man could have become what it has? Doubt it. Innovation is universal here, not applied in some domains (tech) but stymied in others (social, spiritual), it's applied everywhere.
Those two also seem to reinforce each other. Risk tolerance begets innovation begets success begets risk tolerance begets innovation begets ...
Plenty of places have some degree of innovation, but I'm not sure there's anywhere it pervades culture to the extent it does here. That's one more big thing other startup hubs are up against.
We've got strong networks of enthusiastic people (http://www.hackersandhustlers.org) started but no clear roadmap how to go to the next level.
Michigan in general imho has two problems to overcome:
1. Lack of angel investors
2. Experienced people willing to take the risk of working for a startup. The economy has been so brutal here for the past eleven years that it can take a long time to land a new position if the startup fails.
I'd appreciate any links to the places you've mentioned this.
In particular,
There are millions of small businesses in America, but only a few thousand are startups. To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn't scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.
I'm not sure it's the best way to distinguish, but it is how the term is often used, especially in the context of startup funding, where "startup" is used as a synonym for basically "the kind of thing a VC would want to fund".
"...a startup is an organization formed to search for a repeatable and scalable business model."
This is "economies of agglomeration", and it's basic urban economics. http://en.wikipedia.org/wiki/Economies_of_agglomeration
I'm going to guess that this happens in the entertainment industry as well. The similarity being that the person you are rooming with or working with who has a bit part on some show with you might be the next big star. So I would imagine people tend to be nice and helpful to people in any field where there is a big prize and it's not easy to tell (like with sports) who the next star or Spielberg might be. Because in addition to skill (which many have, as has been said with acting for example) there is luck and landing that key opportunity that launches your career. And if you happen to have known or have been friends with that successful person it could only help your career.
pg's description of his day in Palo Alto is telling. I don't think he learned anything from these interactions, or if it ever led to any concrete action. But it helps sustain the idea that what you are doing matters, or could matter. That is the single biggest psychological stumbling block for the people I know who are in startups. There's this nagging sense that maybe they are just throwing all this time and effort away for nothing.
It's possible that the reason why other cities are "startup killers" is that this optimism is, to some extent, a shared delusion. If there were a town in the USA where all the lottery winners moved to, the people who also happened to be there would have completely different ideas about risk.
But the Bay Area is that town for internet startups. Although there are real benefits to moving here, I bet there's a strong delusion-enhancing component too. Which is good for VCs, but perhaps actually maladaptive for the individual startup founder or employee.
http://www.google.com/url?sa=t&rct=j&q=%22clusters%2...
It's that subconscious influence that makes it so hard elsewhere. If enough people tell you that you're crazy, it takes a really special person to be able to shrug it off. I think the interesting thing here is that having a great co-founder has a very similar effect. I would even go as far as to say startup hubs and co-founders play a very similar role in keeping you going.
Startups and nanoparticles can spontaneously form anywhere under the right environmental conditions, but they can just as easily break up in isolation. But if the local concentration is high enough, something magical happens. Even when a person or a molecule jumps ship, another one fills its place almost instantly. Suddenly, these things are "stable" but not only that, they can grow, sucking up bits from the surrounding environment and merging with others.
Critical mass, in SV it's the right kind of people, in nanoengineering it's the right kind of molecule, either way, once it gets going, you just hang on for the ride.
*http://en.wikipedia.org/wiki/Critical_micelle_concentration is one nanoengineering example but there are others.
Right now issues like effective user interface are being solved and are general enough across disciplines/markets that the results can be shared by everyone for everyone. But as internet startups specialize in finer and finer ways, focusing their products and services on smaller and smaller niches, the struggling entrepreneur will require an equally specialized knowledge. Startup towns have been ideal for sharing the knowledge of how to run an internet startup, but when that knowledge becomes more common and less geographically constrained, I'd wager we'll see Sector Specific regions ascending.
http://news.bbc.co.uk/2/hi/business/6355289.stm
Funny - I mention a chance encounter helping us a lot (meeting FB's head of data at a party), and then the vibe being optimistic and ambitious (and we were working out of the then Twitter office in South Park). We did also bump into Ron Conway one morning on the way back from kickboxing.
99% of all good ideas in computer security were discussed on the cypherpunks list in the 1990s. I'm sure there are or were other subculture groups online equally useful.
I can provide perspective from working for a startup in SF in 06-07 and a startup in Chicago now... In Chicago noone thinks you're unemployed if you say you work for a startup. That was the case a couple of years ago, but with Groupon and a TON of other companies that just isn't the case. The difference is just that more people are doing startups in SF vs. consultants/bankers/fortune 500 workers... Go to a bar here and girls think it's so damn cool that you are running a startup (apparently girls are obsessed with all things geek - http://www.chicagobusiness.com/article/20110924/ISSUE03/3092...).
Re: the coffeshop thing- just by chance (ie we didn't know this going in and it is NOT the startup hub area within Chicago), within 3 blocks of FeeFighters office are: 37signals, SproutSocial, Threadless, Crowdspring, and several other startups. I don't see how it helps us significantly to bump into them (though we have helped our neighbors when they've had merchant account issues). Many people think it is a wasteland anywhere not the valley but I have seen that not to be the case here, in New York, and even in Pittsburgh.
So what is the difference between here and there? The largest differentiator I've noticed between the valley and elsewhere is funding. We raised most of our money in Chicago from VC's we really like, but could have raised easier on the west coast. A lot of top VC's prefer to have you close and told us flat out they would fund us if we moved there. We had term sheets dependent on us being in Austin, SF, and LA. I don't think it has had an effect one way or another on our business thus far.
Startups need money, and often flock to where it is. Things are changing all over the place though (Rich people in Chicago all of a sudden want to fund startups, will be interesting to see if that continues post-Groupon IPO)
It also depends on your type of business. If you sell mainly to startups, you should probably be in the valley.
I encourage startups to base their businesses where they'll have the best chance at recruiting the best talent. The next search engine would be well-served starting in the valley, especially if it's an ex-Google team. Similarly, storage companies continue to thrive in and around Boston, as they can draw talent from EMC. New media startups with a heavy emphasis on design-as-differentiator do really well recruiting in NYC.
By this reasoning, it might even make sense to base your web startup in Florida, if your network high-quality development talent is in Florida. I've seen this approach work well in unusual startup geographies, especially when it's a leader of an ex-team that is getting his or her band back together for second (or third) time.
Pick a geography that will play to your recruiting strengths.
That's because the marginal utility FeeFighters will get on average out of any given serendipitous moment is a lot less than, say, an unfunded startup no one's ever heard of.
If you graphed that marginal utility over time, you'd probably find that it's multi-region: linear in some parts, exponential in others.
This all makes thhe demise of Boston even more stark and sad. It had every advantage except weather!
I don't really have time to put together statistical backing for my argument, but based on talking to a bunch of new startups in security tech, it is definitely an anti Boston trend.
Everyone here is very helpful.
Which is also a stereotype. While I believe there are very many nice and helpful people in NYC, there is a still very much a "me-first" attitude. At the end of the day humans ultimately strive only to better themselves. Take that statement with a grain of salt, because enabling oneself can be manifested through social means. Hence why over time humans have evolved to understand that they can better themselves by social means. Either method is still a medium to which we can attain personal fulfillment.[1]
I think what pg is getting at is that the culture in SV leans much more towards this - that we can better ourselves by the help of others. Financial industries work better when individuals strive independently. I'm not narrowed minded enough to think that these are absolutes but more of leaning towards one medium over another.
[1] - paraphrased from Driven - http://www.amazon.com/Driven-Nature-Shapes-Choices-Warren/dp...
That's an interesting comment. I'm curious as to what you mean. In my limited experience, LA/entertainment culture seems to be the closest thing to startup culture.
One key element to debate is randomness - pg does a good job I think in describing the value of randomness in terms of random meetings, shower thoughts - etc - There are many other examples of this process at work - e.g., in management/strategy: http://www.management.wharton.upenn.edu/siggelkow/pdfs/SOart...
It bears the question - what is this valued randomness in terms of social interactions? And how can we get it in online? Definitely not chatrulette :)
But not "hackernews" type of places either - because in here we are interacting in a very structured manner - on specific topics one chooses, etc - so it's not random - we are directing our thoughts, so we are not randomly exploring things.
How can we find that great balance that physical hubs have? Going to pick up dry cleaning you find a random guy and you say hi - because you have nothing better to do you end up chatting with the guy and discovering he's Sean Parker. But that won't happen online. You just switch to another browser window that is more interesting - no need for randomness.
Is the internet killing randomness? - Or better yet: how can we come up with something that gives that value to people in a way that is not chatrullette?? It should be random but within your comfort zone, in a way that is casual and not sought after (which is uncool and weird).
I wonder what you guys think.
One of the problems is that computer screens are just so small. If displays (or whatever replaces them) were bigger, what they were displaying could be more ambient. There wouldn't have to be as much purpose.
On the other hand, maybe the difficulty of physically getting to a place is an important filter.
Here you have to consciously decide to go where other startups are at. In Silicon Valley I just get a cup of coffee and there's a conversation at the table next to me about startups.
Although, I have to say Twitter enabled more fluid communication in the startup scene here. Enough to where I have been able to spot a couple people not at the typical hotspots.
I'm not so sure randomness is the key. Randomness can be also be thought of as "absence of pattern". For me the key question to ask is to ask what role chance plays in formation of startups? Is it really chance or something process we can't yet fathom?
The last paper written by Alan Turing, "The Chemical Basis of Morphogenesis," [0] ~ http://www.dna.caltech.edu/courses/cs191/paperscs191/turing.... attempted to answer the theoretical explanation of the biological process that defines the shape of an embryonic organism from creation. This process is called "Morphogenesis" [1] This is an important problem because complex organisms appear to be created by some "random" process that organises what appear to be self similar cells.
A lot of recent work has been done to experiment Turings ideas on "reaction-diffusion" processes describing morphogenesis in biology and other natural systems to see if a) they can be reproduced in the lab and b) mathematically model them. [2] This begs the question, "what is the Morphogenesis of startups?" and can the same maths Turing used to describe the process be applied to startup formation?
There is a pretty good broad outline of Turing and Morphogenesis in a BBC documentary, "The Secret Life of Chaos" [3] by Professor Jim Al-Khalili on Youtube. [4]
[0] Alan Turing, "THE CHEMICAL BASIS OF MORPHOGENESIS", http://www.dna.caltech.edu/courses/cs191/paperscs191
[1] Morphogenesis, "the Greek morphe shape and genesis creation, literally, "beginning of the shape", is the biological process that causes an organism to develop its shape.", http://en.wikipedia.org/wiki/Morphogenesis
[2] Brandon Keim, Wired, "Alan Turing’s Patterns in Nature, and Beyond" http://www.wired.com/wiredscience/2011/02/turing-patterns/?p...
[3] Jim Al-Khalili, BBC, "The Secret Life of Chaos" http://www.bbc.co.uk/programmes/b00pv1c3
[4] Jim Al-Khalili, et,al, Yahoo, http://www.youtube.com/watch?v=uF7gdlTrCQY
The missing piece of the puzzle is real-time online location!
The reason we don't have chance meetings online is that we are not aware of who else is using or reading the same site or app as us in real-time. PG suggests that it maybe because of screen size, but I don't think that's the main problem. The real issue is that unless it's explicitly built into an app, like a chat site, we simply don't know who we are sharing that online space with at any specific point of time.
Imagine if you could say, "Oh I was reading this random blog on Tumblr and was surprised to see Fred Wilson reading it too. Didn't know he was into ASCII art, but had a good chat with him."
I can see Facebook doing this at some point. They are already doing it with music on their site. And they already know which of their users are on a particular site at any given time. It's just a matter of letting the users see that too and interact with each other. Turntable.fm is an outstanding example.
It's bound to freak people out, but it should actually make things more open and real-life like.
The problem of course is establishing true identity, and given that we can't literally see people to know it's really them, we will have to rely on a central identity system like Facebook. A decentralized method of identification would be great but is unlikely to happen.
This is something that I think has, oddly enough, gone backwards as technology has improved. BBSs had a very strong sense of location, while the internet is much flatter and amorphous, because everyone can connect to everything.
On the same note, the investors, lawyers, and employees in startup hubs have 'standard terms' where as in other parts of the country the terms get extremely complicated with things such as tranches. They understand what it takes to succeed since they've usually done it before and are there to guide the company.
This is why I think for places like NYC, London, etc (i.e. any financial capital) it will become increasingly difficult to create a startup culture. Being unemployed in those cities is NOT cool.
Is there much difference between living in San Francisco and Palo Alto in terms of how much living/working there helps your startup?
And in these terms, is there any difference between Mountain View and Palo Alto?
Mountain View is cheaper than Palo Alto. Otherwise they're similar.