Since I’m beginning to work on my own startup, I figure part of the job is to throw my voice into the conversation going on around startups. Since I’m not very far along (basically, I have an idea, a preliminary design, no name, a little research, no code, and no website), the best I can offer is a synthesis of my observations. I’m in Chicago (suburbs actually), which is not a startup hub by any means. Sure there is some activity, including some very influential voices, but no one would confuse it with the Bay Area, or even Seattle or Austin. I’m definitely going to write about Chicago soon, but right now that’s too big of a bite for me to take.
The Bay Area, on the other hand, has been sliced and diced and analyzed by so many people that one more voice won’t hurt. The usual answers are:
- More Programmers
- More VCs
- More Big Companies
1) More Programmers – Sure. I guess. But does this really matter? Do you need 100,000 programmers? How many employees would you need for 100 startups? 250? 500? Are you saying that your huge metro area has fewer than 500 people talented enough to start and run a software/web company? If there were 100 publicized startups, would that qualify as a startup hub?
I promised myself I wouldn’t talk about Chicago this post, but it’s the city I know best and so I have to use it for my examples. Are you telling me that between the University of Chicago, Northwestern, UIC, Loyola, and DePaul, there aren’t enough CS students for this to happen, given the right encouragement? Are you telling me that the trading, insurance, real estate, finance, and consulting companies that drive the economy are getting by without any engineers at all? The talent is here (or wherever you would like here to be). Out of the largest 25 US metro areas, there are only 8 that I have any doubt could field this number. (I’m not telling which – I don’t want to hurt anyone’s feelings). The big numbers in Silicon Valley are necessary to run an Apple, a Google, eBay, etc, but you don’t need them to start with.
2 ) More VCs – This one is more obvious of a rout in favor of the Valley. SV gets nearly half of all venture capital money in the entire country, and more than double that of Boston, the runner-up. However, if you believe what everyone is saying about the low cost of starting a startup, this shouldn’t be that big of an issue. Yes, it will come into play when companies get larger and need more cash, but let’s think about the 100 startups mentioned in #1. Seed money of $25,000 (more than YCombinator, less than anyone else) would be $2.5 million. Angel funding of $500,000 for the 10 most successful would be another $5 million. Beyond that point, VCs would be needed, but even if you had NO VCs at all in your town, $7.5 million well invested would give enough incentives to start 100 startups. Chicago just raised many times that amount to fund the Olympics bid. Are you telling me there’s no uber-wealthy investor who would want the prestige of changing the face of industry in his town? (Note to any uber-wealthies reading this – please view this page). The point is, another Paul Graham (not just rich but influential) could do the same thing anywhere else.
3) More Big Companies – This is the biggest difference. The culture of the Valley is technology and software. Not only that, but the big technology companies there are home grown. This sends the message that it’s okay to work in technology. If you’re in New York, you need to be in finance, acting, or performance. If you’re in LA, you’d better be an actor or a designer. In Portland, you’d better be an organic farmer or hand craft bicycles. But in Silicon Valley, where programmer is a normal profession, then extra step of working at a software startup is easier to make. In other places, software startup is two steps removed from mainstream, which is too extreme for most people to take.
That to me is the big difference. When small companies in the Bay Area got big, they stayed there. That was easy to do because technology used to be more geographically spread out. When the Valley was being formed, there was no Valley to compete against – Texas, Arizona, New Jersey, and Boston were just as likely to grow into the nation’s technology hub. It took decades and several technology cycles for Silicon Valley to grow into the powerhouse it is today, so it’s naive for any other city to think it could reproduce that effect quickly (it might be naive to thing they could do it at all, but that’s another story). If Chicago, or New York, or Boulder, or wherever wants to be the next Silicon Valley, they can’t be disappointed if it hasn’t happened by 2008. They need to be aiming for 2028 or beyond. Just follow these three steps:
- Fund Startups
- Retain Startups
- Grow Startups Into Big Companies
More on each of those to come.
I’d make a few points.
First off, when you need a ___, you can probably find one without too much problem.
Second, I suspect the cultural issues are even bigger, where would we be if Bill Shockley had not been such an ass?
Oh, and Fry’s. You need something, they have it. Not critical, but very handy, everything from breadboarding and other low level sodering gun required type stuff through complete systems, in the good old days it was like 10x a radio shack plus a 7/11.