
Why Startup Hubs Work - anateus
http://paulgraham.com/hubs.html
======
PabloOsinaga
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...](http://www.management.wharton.upenn.edu/siggelkow/pdfs/SOarticle.pdf)

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.

~~~
revorad
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.

~~~
_delirium
> 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.

~~~
revorad
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.

~~~
_delirium
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.

~~~
revorad
I see. So I misunderstood you because I discovered the internet too late :-)

------
tptacek
I don't want to argue too much about this, because I think Graham is probably
right, but this footnote struck me:

 _[4] As I was writing this, I had a demonstration of the density of startup
people in the Valley. Jessica and I bicycled to University Ave in Palo Alto to
have lunch at the fabulous Oren's Hummus. As we walked in, we met Charlie
Cheever sitting near the door. Selina Tobaccowala stopped to say hello on her
way out. Then Josh Wilson came in to pick up a take out order. After lunch we
went to get frozen yogurt. On the way we met Rajat Suri. When we got to the
yogurt place, we found Dave Shen there, and as we walked out we ran into Yuri
Sagalov. We walked with him for a block or so and we ran into Muzzammil
Zaveri, and then a block later we met Aydin Senkut. This is everyday life in
Palo Alto. I wasn't trying to meet people; I was just having lunch. And I'm
sure for every startup founder or investor I saw that I knew, there were 5
more I didn't. If Ron Conway had been with us he would have met 30 people he
knew._

This sounds a little bit to me about what it must sound like to hear Brad Pitt
talk about getting lunch in LA.

I wouldn't make this observation, which I think is superficial, except that
I'm surprised to see that Graham didn't mitigate it ("and it's not just
because I'm Paul Graham; lots of companies we've funded that haven't even
launched have reported the same experience").

~~~
thingsilearned
You would be surprised. Probably because of the density of University Ave and
the consistently great weather (with today as an exception) it's actually just
incredibly common to run into people you know. On top of that people in Palo
Alto are on average doing really amazing things.

~~~
tptacek
Sure, I don't doubt it, I'm just saying it helps a lot to be among the more
powerful people in the valley; the people you know that you run into are apt
to be of a higher caliber.

Can I say again that I think Graham is probably right in this post?

~~~
garret
He did mention that Ron Conway would have know even more people.

------
flipside
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.

*<http://en.wikipedia.org/wiki/Critical_micelle_concentration> is one nanoengineering example but there are others.

------
kevinpfab
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?

~~~
SkyMarshal
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.

------
yahelc
This is a good piece, but, this is well-trodden ground.

This is "economies of agglomeration", and it's basic urban economics.
<http://en.wikipedia.org/wiki/Economies_of_agglomeration>

~~~
pg
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.

~~~
larrys
"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.

------
kul
I remember writing about this for the BBC (to some British backlash) way back
in January 2007, when Harj and I decided to leave London for the Valley.

<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.

------
RavneetG
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...

~~~
pg
Yes, that's true.

------
gregwebs

        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.

~~~
kul
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).

------
gasull
A question for PG (or anybody willing to answer it):

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?

~~~
pg
SF and the peninsula are roughly equal. SF might be better if you want web
designers, and the peninsula if you want database people.

Mountain View is cheaper than Palo Alto. Otherwise they're similar.

~~~
gasull
Thank you, Paul.

------
breck
> The second component of the antidote is chance meetings with people who can
> help you.

This is the key. Stumbling into friendships with just a handful of amazing
people will change your life by orders of magnitudes. There's a simple
probability explanation:

Let's label the group of individuals who are in the top 10% of driven,
creative people "Group X".

If Joe and Bob are both in Group X but never meet, their combined total output
is 2.

If Joe and Bob meet and become friends, they multiply their output by 1.1 so
their new combined output is 2.2:

Joe&Bob = 1.1(Joe + Bob)

2.2 = 1.1(1 + 1)

And exponentially it grows:

Joe&Bob&Sue = 1.1(1.1(Joe + Bob + Sue))

So you can literally calculate the expected value of Joe's output by simply
calculating the probability that he will meet a Bob and a Sue and so on...

Joe's Expected Output = 1(1.1 * Prob(Meets Bob)) * (1.1 * Prob(Meets Sue)) ...

The probability of meeting driven, creative people in the Valley only has to
be a tiny bit higher to see drastically different outcomes. It's a lot higher,
and so we have orders of magnitude discrepancies.

------
harscoat
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

------
mbesto
> _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.

------
protagonist_h
Good explanation of benefits of being in a startup hub. However, are there
advantages to being OUTSIDE a hub? I can think of at least two:

* Living and working outside a startup hub, you are more likely to encounter a problem nobody else has worked on before. In startup hubs, you have large number of startups working on small number of similar problems, while large chunk of profitable opportunities remain untapped. Why? Typical startup people don't encounter these problems. They are not talked about on startup blogs and you won't encounter that problem walking down University Ave in Palo Alto. In many cases, these opportunities are taken by old school, dinosaurs-like software firms who overcharge customers for their crappy software.

* Living outside a startup hub, you are exposed to users who are a good sample of the general population. This is not true for startup hubs, where users a lot more tech-savvy. While it seems at first that being surrounded by tech-savvy users is a good thing, this in fact may be a problem because building your startup based on feedback from these users may steer you in the wrong direction. You end up with couple of thousand "early adopters" who are enthusiastic about your product, but you are not able to expand further because your product just doesn't resonate with a true average user. On the other hand, if you can get a true average user to be your early adopter, the feedback you get from them will help you make a product which is attractive to a large number of users.

Of course, hubs are way overrepresented in the past success stories. However,
more startups are started in the hubs, so it's not clear how actual success
rates compare. I would love to see some stats for that.

~~~
tptacek
A third issue here is that talent is cheaper in (say) MSP than in SJC/SFO.
Like, a lot. It's easier to hire and easier to retain. Because locales are
sticky, the level of talent available to you is likely to be comparable or
better than you'll get in the valley.

Your point about the "general population" is well taken too, especially if
you're a company selling to other businesses. Most of the big companies in
SFBA, and most of the companies you'll talk to period if you HQ out there, are
software companies. Selling software to software companies is hard. Whereas if
you HQ in Atlanta, you've Home Depot, UPS, Coca Cola, big banks, and so on.

There is clearly a kind of startup that benefits from being in SFBA so I don't
want to sound like I'm saying there's nothing to this "startup hub" thing.

~~~
protagonist_h
Actually I disagree about your "cheap talent" remark. When you are building a
scalable startup, looking for cheap labor is not a good idea since it's a part
of "fixed cost" you have. Moreover, you don't need that many developers
nowadays to build a startup. You only need a couple really good developers,
and you want to either pay them really well or have them as your co-founders.
(disclaimer: I'm a programmer myself).

~~~
tptacek
You're not following. Broadly speaking, better talent costs more money. The
more money you have to spend on talent, the better the talent you retain will
be. It's not about looking for "cheap labor"; it's about being able to find,
recruit, and retain better people.

Think of it as a market inefficiency (albeit one that is difficult to "fix"):
the stickiness of people's locales prevents them from maximizing their
opportunities and decreases demand for their services in SFBA and increases
their supply in (say) MSP.

~~~
protagonist_h
In other words, you want to hire in places where there's a large pool of good
developers, but few employers competing for them. Am I following you now?:)

~~~
tptacek
Correct.

------
rdl
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.

------
tgrass
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.

------
revorad
Tiny typo: "from being the business" should probably be "from being in the
business".

~~~
pg
Thanks; Freudian slip...

------
lukes
When I meet people from the Valley they tend to talk how my startup might
succeed and the interesting directions we could take. Conversely when I meet
startup people from London (where I'm based) who haven't been to the Valley
they tend to talk about why my startup might fail, usually focusing on
competitors. Both are useful to talk about, but I think this reflects the
optimism/cynicism divide between the Valley and everywhere else.

We said we'd move to the Valley if we were accepted to YC this winter, but I
think the culture over there might be reason enough to do it regardless.

------
aditiyaa1
Even though this essay has tried to capture how technology startup hubs work
and SF in specifc , but this is how every every other hub works . Let it be
finance(Wall street),cinema(Hollywood),art(Florence).All these have similar
couterparts accross the world. My thesis is, it has more to do with the people
who first come and establish a successful enterprise and develop a culture
that attract more people .Something like how people were attracted to the gold
rush(this had more to do with luck than talent) And also the presence of
supporting infrastructures.Presence of Stanford, Berkeley,etc. Stanford almost
has a symbiotic relationship with the valley.

And it should not be of any surprise in any kind of hub ,that even if
collaboration does not happen abetment will happen. Purely because of the
large presence of like minded people.

One good thought experiment would be to think of former hubs that have lost
their culture. Thinking of that,I realize only hubs formed around matter
(cities that sprang up around mines and oil wells) have been lost while those
that rose on ideas will stay for a long time thriving with life,hope and
innovation.

PS: I am a little surprised that PG notes that he meets so many techie people
in his day to day life.

------
curt
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.

------
jmm
I'm a grad student in City and Regional Planning, and taking a Geographic
Information Systems class. I need to submit a proposal for a final project,
and was thinking of doing some kind of analysis relating to startup hubs. I'd
probably borrow some ideas from this essay -- looking at population and
demographic metrics (numbers/density), the historical presence of startups and
higher ed in an area (environment), walkability and the presence of something
like "cafe culture" (chance). I'd hope that the analysis partly aligns with
existing hubs, and perhaps suggest some

If anyone has any ideas for a data source to look at besides census data,
Crunchbase, and maybe national chain cafe store locators, give a shout. pg???
I'd obviously share the report...

------
ebaysucks
I see two reasons why you should be in the Valley:

1\. You sell to startups 2\. Your business model is cash flow negative, or you
don't have a business model at all

If neither is the case, a "second tier" hub like Austin or Santiago (Startup
Chile) will do fine with lower salary costs.

------
huherto

      "Having people around you care about what you're doing is an extraordinarily
       powerful force. Even the most willful people are susceptible to it."
    

Stupid idea, but may be, AA style support groups are needed. "Anonymous
Entrepreneurs?"

~~~
gasull
That's what the Hackers & Founders meetups are for.

------
Hitchhiker
Paul's written before on the uniqueness of the valley.

A key that America has is her ability to allow for iterative steps ( which
often pose as failure ) before a great idea can execute commercially. Other
countries seemingly have deeper social stigma associated with failing and
philistine impatience. This could be changing though at rates faster than
perceived within the valley.

<http://en.wikipedia.org/wiki/Renaissance> is a great study. In particular,
characteristics asymptotic re innovation.

" They say that coming events cast their shadows before " - Ada, countess of
Lovelace

------
andrewcross
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.

------
amirmc
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.

~~~
pchristensen
One of the best descriptions: [http://steveblank.com/2010/01/25/whats-a-
startup-first-princ...](http://steveblank.com/2010/01/25/whats-a-startup-
first-principles/)

"...a startup is an organization formed to search for a repeatable and
scalable business model."

~~~
hugh3
So was the first McDonald's a startup?

~~~
pchristensen
It was when Ray Kroc took it over and wanted to build a nationwide chain,
instead of run a single restaurant.

------
jayliew
_"Having people around you care about what you're doing is an extraordinarily
powerful force."_

Hit the nail on the head, explains exactly why I'm hungry for a mentor, even
more so than an investor, enough though my savings is running out.

One thing I've realized why pg is so insightful is because he thinks really
hard by digging in deep, about questions that most people don't spend more
than a few minutes thinking about after saying, "hmm. that's interesting."
Most people don't spend more brain-cycles after that obsessing over it.

Lesson learned: really really obsess over your area of interest, your craft :)

------
anactofgod
One could jump start one's thinking on this subject by reading Edward
Glaeser's "Triumph of the City: How Our Greatest Invention Makes Us Richer,
Smarter, Greener, Healthier and Happier" (Reading Jane Jacobs seminal works
can only help, too.)

"Cities, the dense agglomerations that dot the globe, have been the engines of
innovation since Plato and Socrates bickered in an Athenian marketplace."

He also has section in the book assessing the "Rise of Silicon Valley", and
makes the point the "innovation clusters in places like Silicon Valley because
ideas cross corridors and streets more easily than continent and seas." And he
points out an amazing correlation of the geographic proximity of patent
citations. "...even in our information age, ideas are often geographically
localized."

As the NYT book reviewer of Glaeser's work put it... "Greater density is the
goal: more people means more possibility."

Ergo, a greater density of people working in similar modalities means a
greater possibility of achieving within those modalities. It also means that
those working in other modalities can encounter difficulty getting support,
especially when directly competing for resources with the dominant modality.
(I.e., startups v financial services industry for programmers.)

What's different about NYC is that there are so many people in great density,
that it's still possible to have vibrant secondary modalities that may never
supplant the (multiple) dominant ones. It also means that there may be cross
fertilization between modalities not possible in other innovation clusters.

What's different about Silicon Valley is that it's a "city" with a single
dominant modality - tech (currently Internet) innovation & startups. You can
walk entire blocks in NYC without running into someone involved in a tech
startup, or go days without talking tech at a social engagement. That is
almost unpossible in SV. So SV's advantage over NYC's shear density of people
is a density of people operating in the same modality.

Lastly, there are many geographically distributed innovation clusters/startup
hubs that each operate in a different modalities. PG is understandably writing
about the types that occur in Silicon Valley, because that's what he's most
familiar with. And, they produce undeniable, and very public, results!

------
bambax
_chance meetings with people who can help you_

That's why I so much wanted to come to startup school... I was denied, and
apparently there isn't a waiting list..? (or, I was also denied the waiting
list).

But why not organize another sort of event: a "chance meeting machine" where
you would come to some place during a weekend and have many opportunities to
meet interesting people. Many different events, maybe all around town.

A Startup school without the "class" part, and therefore with a much less
strict numerus clausus.

------
SIK
To me, hacker news is my startup hub.

I have chance encounters all the time with people who have interesting
knowledge about startups and startup tools that could help me.

There is a huge social group who don't think starting a startup means being
unemployed. The numbers are certainly on my side at hacker news.

At hacker news, starting a startup is both fashionable and reasonable.

I'm just a lurker, but already I get huge benefit. My guess is that people who
interact a lot get even more benefit.

What does San Francisco have that hacker news doesn't?

------
pwim
_If you look at a list of US cities sorted by population, the number of
successful startups per capita varies by orders of magnitude._

Silicon Valley has a larger concentration of startups per capita, as people
from around the country go there to try a startup. As such, I'm sure it also
has a higher number of failed startups per capita. Instead of looking at
absolute numbers, the chance that a given startup will succeed is the key
metric.

------
rdl
"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!

~~~
svx
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.

~~~
rdl
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.

------
guayosr
What I'd like to explore, is if you can help catalyze the effect PG is talking
about by concentrating whatever startup activity exists in a city to one
central location. In other words can you fake a hub, and thereby encourage its
growth, by 'artificially' concentrating this critical mass of people?

------
ph0rque
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.

------
justinj
I hazard that one of the reasons founders are so helpful to each other is
simple karma. Just like contributors to open source and developers who blog to
share what they've learned.

------
abiekatz
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.

------
pitdesi
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...](http://www.chicagobusiness.com/article/20110924/ISSUE03/309249987?template=printart)).

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.

~~~
andrewparker
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.

~~~
diolpah
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.

------
michaelochurch
Next to drugs, the strongest predictor of imminent mental illness in a healthy
person is a move caused by adverse economic circumstances (such as having to
sell one's house, or move to a new city because there are no jobs). Moving
scares people, especially after 25.

What the Bay Area and New York have in technology is an environment where (at
least for now) people can bounce back from job loss (a likely eventual outcome
of a startup) quickly and without having to move halfway across the country. I
think this is a _big_ motivator. Startups can thrive in the Bay Area because a
person whose startup fails can find a good job shortly afterward, _without_
having to move to another city.

Also, startup generation is a nonlinear function of the desire to launch them,
because of the need to find co-founders and investors.

~~~
tptacek
It's like that now, but when my SF startup failed in 2001 and I had to look
for a job at the end of the bubble, it was extremely stressful --- and I'm
guessing I had an easier time looking for jobs than most of my last-bubble
cohort.

Continuing the same point: it is in fact not all that stressful finding tech
jobs in any major metro area now. I'm in Chicago, we have offices in NYC (our
HQ) and Mountain View, and it's hard to hire in _all three_ places.

I'm sure there's a grain of truth in what you're saying, that SF can
accumulate talent because talent moves there expecting the red-hot market in
the area to mitigate risks. But things can turn quickly.

------
zohebv
Interesting, this reads like an anecdotal description of the New Trade Theory.

<http://en.wikipedia.org/wiki/Paul_Krugman#New_trade_theory>
<http://en.wikipedia.org/wiki/New_Trade_Theory>

------
NY_Entrepreneur
Is Silicon Valley really a hot bed of startups? Let's see:

People do 'startups' border to border in the US, in communities tiny to huge.
Those startups might be a pizza carryout, electrical engineering company,
franchised fast food restaurant, white tablecloth restaurant, law firm, CPA
tax firm, auto body shop, photo studio, boutique dress shop, Web site design
and programming firm, big truck/little truck product supplier, etc. Yes,
Silicon Valley has a high concentration per capita of venture funded
information technology startups, but there are startups all over the US.

Do the venture funded information technology startups really need a very
special environment to keep going?

Let's see: An auto body shop, white table cloth restaurant, or even a lawn
mowing service need more expensive capital equipment than an information
technology startup. E.g., just a lawn mower can cost $13,000, enough to buy
parts enough to plug together 10 good servers. A Web design firm anywhere in
the US, or the world, has nearly all the same software challenges as a venture
funded social Web site in Silicon Valley.

Does Silicon Valley really have a big advantage on the best creative work?

Let's see: Let's look at some of the best creative work in, say, music: How
did Stradivari and Guarnieri build their violins, Vivaldi, Bach, Mozart,
Beethoven, Mendelssohn, and Paganini write for violin, Heifetz get started in
violin all in really small communities where what they were doing was
astoundingly rare and world class on an historic level? I mean, who the heck
was Mozart going to go to for help on how to write interesting, novel harmony?
Where was Bach going to learn about key modulations? Who gave Mozart the
crucial help he needed to write his operas or Bach to write his organ pieces
or his violin 'Chaconne'? No one.

Who helped Newton with optics, calculus, the law of gravity, and the second
law of motion?

Who helped Watt with the steam engine?

The history of the best works in art, science, engineering, and technology is
awash in people doing historic world class work in what in Silicon Valley
would look like near total isolation.

So, (1) startups happen all over the US and (2) much of the best work in all
of history happened in near isolation. So, Silicon Valley is not needed for
either startups or good work.

There's another candidate reason for the high per capita concentration of
venture funded information technology startups in Silicon Valley: On average
and in nearly all cases, the venture partners have at best meager
qualifications in anything technical yet have to justify their risky
investments to their general partners and limited partners.

Their best justification is, may I have the envelope please? Thank you. Here
is it: "Join the herd!" So, get a place on Sand Hill Road or nearby and do
much like everyone else does. So, 'fit in'. Talk to each other a lot like
gossip among middle school girls.

So, net, what Silicon Valley has a high concentration of is not really
startups but just venture funded information technology startups, and the
reason is not that Silicon Valley is an especially good place for the
entrepreneurs to get the work done but just that the venture funding is
concentrated there because the venture partners do not have the qualifications
to evaluate projects on their own and, instead, get along by fitting in and
joining the herd. Net, the concentration is due to the propensity of venture
partners to form herds.

Once again I'm glad for US national security that the Silicon Valley venture
partners are not DARPA, NSF, or NIH problem sponsors.

