

New start-up hubs challenging Silicon Valley - study - thinkisgood
http://www.reuters.com/article/idUSL5E8MJK6220121120

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w1ntermute
Ironically, the existing people/companies that are already there aside,
Silicon Valley (and California in general) is a horrible place to found a tech
startup. The cost of living is high and the taxes are high, with the former
being an obstacle for bootstrapping a startup, and the latter being an
obstacle when your company grows in size. The Democrats got a supermajority in
the state House and Senate in the recent elections, so now they can
unilaterally raise taxes, with the Republicans basically left powerless. No
doubt many people will start to feel the squeeze in coming months as tax rates
shoot up.

One of the big advantages of California is the year-round nice weather, but
when you're sitting inside in front a computer, that doesn't really matter all
that much. Moreover, a tech company, more so than many other types of
businesses, can effectively work with people in remote locations.

Unfortunately, this is a problem that can't be solved easily over short time
scales. The only hope is that people start realizing you can be "ramen
profitable" a lot quicker if you choose to base your startup in, say, Kansas
City (and there's always the nice added bonus of super-fast Google Fiber).

~~~
joonix
The Democrats do not have a majority in the House, the Republicans do. And the
Democrats do not control enough of the Senate to be immune to the threat of
filibuster.

You are contradicting yourself, regardless. You are arguing that higher taxes
will kill those seeking to bootstrap companies -- but if people are
bootstrapping and have no income, they pay no taxes, and they most certainly
aren't being hit by the only tax increases that are now being discussed: those
on high earners making over $200k. It doesn't affect them.

Cost of living really doesn't matter that much to tech startups. If it did,
everyone would be rushing to rural Nebraska to bootstrap their startup. In
reality, you can find cheap rent anywhere, even SV, you just have to
compromise on space and housing/location quality.

~~~
w1ntermute
> The Democrats do not have a majority in the House, the Republicans do. And
> the Democrats do not control enough of the Senate to be immune to the threat
> of filibuster.

Trying reading my post again:

> The Democrats got a supermajority in the _state_ House and Senate

And this:

> You are arguing that higher taxes will kill those seeking to bootstrap
> companies

You really need to work on your reading comprehension. Read this again:

> The cost of living is high and the taxes are high, with the former being an
> obstacle for bootstrapping a startup, and the latter being an obstacle when
> your company grows in size.

It's the high cost of living that will kill bootstrapping companies, not the
high taxes.

> Cost of living really doesn't matter that much to tech startups. If it did,
> everyone would be rushing to rural Nebraska to bootstrap their startup.

You've made a common logical fallacy. People aren't "rushing to rural Nebraska
to bootstrap their startup" because the high cost of living is a pill worth
swallowing considering the networking benefits in SV. That is, there's a net
benefit to being in SV vs. being in rural Nebraska. However, like I said in my
first post, this is not something inherent to SV - it's just a matter of where
the people and companies happen to be at the moment.

Moreover, you've resorted to _reductio ad absurdum_ here. I clearly stated in
my first post that a good option in the Midwest for founding a startup would
be a medium-sized city like Kansas City, not "rural Nebraska".

> In reality, you can find cheap rent anywhere, even SV, you just have to
> compromise on space and housing/location quality.

Which means that if you "compromise on space and housing/location quality" in
a place with a lower cost of living, you'd get _even cheaper_ housing. Another
common logical fallacy.

------
yesimahuman
I'm proud to be a part of a small but growing one in Madison, Wisconsin.

At the end of the day, the nerdy dream I always had was to transcend physical
location, so I'm always surprised how passionate others can be about where
they physically live.

------
shawnee_
Although this is probably won't be a popular viewpoint, Silicon Valley is
likely reaching the end of its glory days. For the past 30 years or so, it has
been able to exist as a largely insulated bubble -- mostly because it has been
able to flex and grow as the rate of increasing demand started its exponential
slope upward. But the reality of today is that demand for technical workers
has outpaced SV's ability to grow. Because it _is_ a peninsula, with limited
space for growth and housing, the bubble is not infinite. Prosperity generally
demands space, and there's just not enough of it here on this bleeding edge.

So, it's inevitable that other places will eventually benefit from the
spillover. The questions are: where and how and when? Whatever cities can
employ the most forward-thinking civil engineers and planners to literally
build the city of tomorrow will be able to create an environment where cost of
living coupled with a good cultural and environmental climate make it totally
worth it to build a company elsewhere.

~~~
mikeyouse
The success of Silicon Valley isn't limited to the tech workers though, the
entire infrastructure of the area is designed for startup success. All the
financiers, lawyers, professors, etc. are 'lazy' in the sense that they prefer
their companies and investments to be close to where they live.

There is ample supply of tech workers / infrastructure in NYC, Boston, LA, but
the list of cities is a short one. There will absolutely be more companies
formed outside of the SV area, but there is still plenty of room for growth
here as well. There are a half dozen cheap communities in the East Bay which
still have low housing costs, plenty of commercial vacancy, access to public
transit and are actually a closer commute compared to driving to San Francisco
(with Palo Alto as a center-point).

I have personal experience with two similar companies, one in 'Silicon Valley'
proper and one in the East Bay. The company in SV had more employees by a
factor of 2x, but was paying 15x more in rent for their commercial space! Both
were backed by Sand Hill VCs and had professors from Stanford / Berkeley
involved in the efforts. This could just be another data point in the "SV is
too expensive camp", but it also points to the affordability of nearby areas
which haven't seen the same level of expansion yet. Look up commercial /
industrial real estate in Newark / Fremont / Hayward / Milpitas, you'll be
shocked at how affordable it still is.

You don't need to build cities from the ground-up to have a climate hospitable
for investment and venture success, it's much easier to be proximal to where
such a place already exists.

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saryant
Until recently I lived in San Antonio, TX and over the last year the startup
community there has really begun taking off.

Rackspace is aggressively working to build a community there through efforts
like Geekdom[1] and 3 Day Startup[2]. Two of the universities (TU and UTSA)
are working with Geekdom to build entrepreneurship programs and companies are
starting to come out of these efforts.

SA already has a tech community (Rackspace, Denim Group, the massive
development groups at USAA, HEB and cyberdefense firms that are doing really
cool but unseen stuff) and Geekdom has become the catalyst to draw them all
together.

I was there this weekend for 3DS and I'm about to move back to work on some
ideas with people I met over the last 72 hours.

1\. <http://geekdom.com/>

2\. <http://sanantonio.3daystartup.org/>

------
guimarin
The world economy ( the west + china ) is collapsing. Investors are seeking
yield frantically. It's not surprising that high-tech is flourishing in this
climate. It's also not surprising that high-tech is now being applied to new
industries ( bio-informatics ), and that those industries are based in
different geographic areas. SV isn't going away, though. Their are socio-
cultural issues at play that took generations to build in the Valley, and
replication in other places is not happening overnight. There are a lot of
places this article could have gone, but didn't and that was sort of
disappointing.

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micro_cam
I often wonder why more small companies don't locate in smaller "lifestyle"
cities to facilitate recruiting. I suppose that places like Seattle, Boulder
and Salt Lake fall into this category but as someone who just moved from
Seattle to rural Montana near Missoula I am constantly surprised at the number
of really talented individuals willing to take paycuts to live and work near
the mountains.

------
michaelochurch
The advantage of the existing hubs is the difference between a continuous vs.
discrete labor market.

If you want a Scala + NoSQL + NLP full-stack expert with 10 years production
experience with the JVM and 2 years as a product manager, and you want such a
person to start in 3 weeks, you can find that in California-- for some price.
In Madison, there are still a lot of great people, but not the massive number
of technical people that makes it likely that you'll find an ideal match.

If you can't afford any hiring latency and have strict requirements, you need
to be in a hub. All that said, I think these grow-fast-or-die efforts are
pretty stupid. If something adds genuine value and isn't just trying to first-
post some obvious idea, does it really need to grow at 20% per month?

Also, a lot of these work that startups are doing isn't that complicated and
doesn't require the level of people they think they need. I hate that social-
climbing useless selectivity of needing awesome people to do mediocre work,
largely because these startups lie about their intentions and I'm one of those
"awesome" (?) people they're looking to court (and then underemploy on their
mediocre idea).

The continuous-market effect goes both ways: if your startup goes belly-up in
California, you'll have 4 interviews in a week. If you hauled ass out to the
Midwest and that happens, you'll probably have to move _again_ for your next
opportunity. Also, some cynical realism: it's harder to start a bidding war
(which is how most people get their best jobs) in Minnesota.

The rest of the country has quality people and companies, but not the critical
mass of them that creates a continuous market. Investors generally aren't
comfortable launching a business in a place with a discrete labor market.

I'd love to see a better distribution of opportunity. It'll (a) generate more
eligible places to live, and (b) lower the rents for those of us who stay.
However, I think that's a really hard problem to solve, because technology has
become so specialized that very few regions are big enough to support a
continuous labor market.

Honestly, I'm a major fan of the Midwest: a lot of really great people are out
there, and they have no idea what they're worth and what they could do in
technology. That said, I tend to think the advantage of the hubs is vast. I'd
probably move to California myself (as opposed to #2 New York) if it weren't
for strong family reasons to stay here.

~~~
daniel-cussen
Since when is New York #2?

I thought that, for tech startups, it was, #1. Silicon Valley, #2 Tel Aviv, #3
Boston/Route 128, and then came some sorting of New York, London, Singapore,
that triangle in Virginia, whatever city is in the lead in India, etc.

~~~
SatvikBeri
Here is an interesting report on different startup hubs. The top few hubs are
Silicon Valley, Tel Aviv, Los Angeles, Seattle, NYC, Boston. NYC is #3 in
terms of # of startups, but falls behind on metrics such as talent
availability, startup support, and "mindset" (how good the founders are.)
Worth a read even if you don't agree with the exact methodology.

[http://cdn2.blog.digital.telefonica.com.s3.amazonaws.com/wp-...](http://cdn2.blog.digital.telefonica.com.s3.amazonaws.com/wp-
content/uploads/2012/11/Startup-Ecosystem-Report2012.pdf)

