

Can You Buy a Silicon Valley?  Maybe. - mqt
http://www.paulgraham.com/maybe.html

======
sachinag
I think even a million dollars per startup may be necessary but not
sufficient. You also need a culture - funding 30 all at once provides some
level of a community. That's well and good, but would the accountants and
lawyers in that city be as good as the ones in the Valley? No. So that money
goes back to the Valley, too. And they have a gravitational pull that would
make it more likely that a company would go back. Not for sure, but more
likely.

So you'd have to make sure you had a rock-solid, streamlined process to make
sure that the legal/accounting talent in the city (hell, white list them) knew
the ins and outs of 83B elections, DE incorporation, how LLCs aren't
appropriate for funded startups, and all that stuff that small business
lawyers/accountants don't need, but are essential to not making it hard to get
that 2nd round of VC funding.

And then you'd have to have the press. TC, VB, CNet, and whoever else can
actually drive "mainstream" pickup are located pretty much in either the
Valley or (to a lesser extent) New York. So your costs of getting press or
going to conferences to network/"run into" partners and VCs is higher too.

Oh, and what about when the million dollars runs out? You need to have a local
angel investor base that can give another million, or at least another half.
People invest in what they know, for better or worse. And two hackers with
laptops are going to be a lot more familiar in the Valley than anywhere else
then you have to find a replacement for that infrastructure, as well - maybe
you have to have the local business community have a co-investment fund or
something.

The point is, I don't think any amount of money can create a culture conducive
to the information-enabled software/internet companies we're talking about
that even begins to approximate the Valley. Sure it can be done from
elsewhere, but it's twice as hard. First thing JamLegend did when it finished
the LaunchBox program was move west - and they had an awesome product with
tons of favorable press. (The only counter I can think of is TipJoy, who moved
east - but only after they presented to 30 angel groups out west who said
no.[1])

As to a specific city I know well, I've been very vocal - there's no better
place on earth to bootstrap an internet/software company than Chicago, but
you'd be hard-pressed to find a city that's _worse_ to try to raise funds in.
(There are many that are as bad, but worse is a small set.) And if there
aren't those support structures, then the founders will take their laptops and
move west. Money alone can't solve that.

[1]
[http://www.masshightech.com/stories/2008/09/08/weekly7-Y-Com...](http://www.masshightech.com/stories/2008/09/08/weekly7-Y-Combinators-
firms-mostly-heed-go-West-advice.html)

~~~
iamelgringo
_As to a specific city I know well, I've been very vocal - there's no better
place on earth to bootstrap an internet/software company than Chicago, but
you'd be hard-pressed to find a city that's worse to try to raise funds in._

I lived in Chicago for 7 years before I moved to the East Coast, and then
finally to California. While Chicago does have it's share of great
restaurants, a decent music scene and pretty good art scene. It suffers from a
chronic second city mentality, which is--It's a pretty good city for being in
the Mid-West, but if you're really good at something go to a first rate city
liky New York, LA or San Fran. In 7 years, every really talented theater
group, actor, artist or musician I knew ended up having to move to either New
York or to California. There just wasn't enough going on to sustain those
people in Chicago.

Chicago also has a _huge_ meathead/jock culture. Just walk within 3 blocks of
the bar district along Rush and Division on a weekend night. I'm 6'7" tall,
300 pounds, and I often worried about some drunk meathead picking a fight with
me. All that to say, that it's not a really nerd friendly town.

If you do move there and you walk around at night, get a black leather jacket
preferably with Chicago PD patches sown on it. (The Alley on Belmont and Clark
sells them). Walk around with your right hand tucked under your left armpit.
You'll look like you're packing heat, and the thugs/meatheads will leave you
alone. At least that worked for me for several years.

Oh, and the winters really suck.

Say what you will, I can think of a half a dozen other cities I'd rather
bootstrap in--Austin, Boston, Providence, New York, Portland, Seattle,
Vancouver, Toronto, Boulder, San Diego.

~~~
sachinag
The point isn't whether or not $1 billion in $1 million increments would work
in Chicago - it's about where it would work _anywhere_ , including the cities
that you name. My argument wouldn't be any different if I said Tampa Bay, New
Orleans, Atlanta, or some other city.

(New personal rule: stop making throwaway comments, especially w/r/t Chicago.
People latch onto them like remoras.)

------
netcan
"Rent Seeking"

Say this works out in a big way & 2-3 cities take up this $30m challenge. The
essay suggests $1m to move a startup, which suggests that having a startup in
your city is worth (more then) a million. Why not offer them a million to stay
(or half a million if they'll take it)?

What if the cities start bidding against each-other for the 'best' startups
(assuming they end up with some mechanism for choosing the best ones). What if
start-ups form specifically to take advantage of this scheme? What if
angels/VCs that happen to rank highly on this list have all their investments
get poached & presenting it as a benefit of taking their 1/4 million?

The perverse incentives, gaming & such might make this impossible to implement
as a large scale government/municipal scheme.

~~~
pg
Picking startups based on the investments of eminent angels would protect
against most gaming. They're not going to change their investment criteria
based on what's happening downstream of them.

~~~
yummyfajitas
The ability to get government funding increases the success probability of
various startups. What happens downstream will affect success rates.

I.e., if flagsfororphans.com goes well, VC's win. If it gets into trouble, the
possibility of future government funding may let the VC's recoup some of their
investment.

This makes VC's prefer flagsfororphans.com to satanictitleinsurance.com, which
obviously does not have the same possibility of government funding.

~~~
pg
Probably not that much in practice. Startups that would have succeeded may
succeed faster, but startups that would have failed will still fail. More
funding never seems to save bad startups. It just makes them die slower.

~~~
netcan
Even if we accept this, to avoid all sorts of distortions you would need all
market players to believe this.

------
jacoblyles
Even if it were possible, I still don't think it a good idea. That money has
to come from somewhere, and it comes from the bank accounts of people that
planned to use it on something other than investing in startups. There's
nothing that startups add to a community that I think is _a priori_ better
than other things that a community of people would have chosen voluntarily to
spend its money on.

Some places fund startups, some don't. That's what comes from having free will
and individual liberty. Other people may make different choices than we would,
but it doesn't follow that we should force them to be like us. I suggest we
should respect other peoples' autonomy.

It has long been the credo of the social planner that the common man is too
stupid and too provincial to pursue his own happiness, and that he should be
cajoled into doing what is good for him. That credo has been the prelude to a
lot of well-intentioned misery. I understand that there are things which are
"public goods" which we may wisely choose to produce with public dollars, but
investing in private businesses doesn't strike me as one of those public
goods.

I don't see the social value in taking a lot of money from private folks to
spread a concentration of startups more evenly over the landscape.

I understand that Paul is pondering what can be done and not what ought to be
done. I just don't think it is a good idea. If I want to live in an area with
lots of startups, I'll move to Silicon Valley where people have voluntarily
chosen to fund them.

Finally, Paul states that this is a good idea because municipalities already
waste a lot of money on projects of dubious value, such as baseball stadiums.
That's true, but it doesn't follow that those municipalities should spend that
money on other projects of dubious value. Another response would be that they
should leave people and their money alone.

~~~
michaelkeenan
Though PG specifically mentioned politics, I took away the message that any
person or group with $30 million could do it, if they wanted. Is it likely
that someone cares enough about a specific place to to altruistically
transform it into Silicon Valley? Probably not (maybe in a seasteading
future?), but nor is this politically feasible. So, it's just fun to think
about.

~~~
pg
That is a very interesting idea. I didn't think of that. You could do the
30-startup experiment with private money. And what pressure it would put on
the city if it succeeded.

Thanks for this idea. I just added a paragraph to the essay mentioning it.

~~~
alabut
Is this the first time you've edited an already-published essay because of
feedback on HN?

~~~
pg
No, I've done that a couple times before.

~~~
alabut
That's a great use of crowdsourcing for your editing. I wonder how that could
work in a more automated and scalable way. I'm thinking something similar to
Etherpad, but with feedback rather than actual edits, like if people could
leave comments and suggestions inline, with some kind of HN-style upvoting and
troll-flagging. Then the originating author could cherrypick the best
suggestions into being actual edits. Something like Wikipedia but more reader-
friendly, without infinite levels of backwards revisions.

Or that could be stupid in practice, maybe a handful of close associates with
honest feedback is way better than taking all comers.

~~~
megamark16
I've actually considered this as a startup idea, except they would be actual
news articles about local events or occurrences. Instead of interviewing
witnesses to a local house fire or bank holdup the witnesses would just log on
and add their witness accounts to articles, and people could attach pictures
and videos as well (hey, everyone has a camera phone these days). Of course
everything (articles, witness accounts, pictures and videos, etc) would all be
user moderated and up or down modded, so if someone posts an account that
seems less then verifiable then it could get downmodded. The user base would
also act as editor, so people can suggest spelling/grammatical changes and
other users can up or down mod specific changes. It would require an
enormously involved user base but imagine getting news reports directly from
the people seeing it happen.

Later Mark

------
shalmanese
I think the way to do it is not to compete with silicon valley directly but
follow the path of Singapore and they caymans in betting big on a niche.
Rather than trying to be the best at everything like SV is, aim to be truly
world class in just a few areas.

I think there's probably a dozen cities in the world that could be world
leaders in cloud computing simply by offering great deals on data centers as
long as research and development work is also being done there.

A city could leap to world class status for mobile/location based services by
offering to buy every citizen a smartphone and then inviting startups to come
experiment.

Really, cities sho:ld take the exact same advice startups take: find a niche
and serve it well rather than trying to crack the mass market with some luke
warm offering.

~~~
pg
The Valley itself started out working on what was initially a fairly small
niche. And whatever displaces it will probably do the same. But to do this
deliberately, the city would have to pick the niche that's going to explode,
and that would be really hard. The Valley didn't pick semiconductors; more
like the other way around.

------
edahan
By all measures, the RTP area of North Carolina should be growing startups and
growing massively large companies with the best of them.

UNC, Duke, NC State + dozens of smaller colleges/universities within a one
hour drive provide a very well educated work force.

An existing network of colleges exist within a several hour drive (Wake
Forest, etc.)

The financial center (hopefully things will return to at least "functioning")
of Charlotte is a day trip in a car. Washington D.C., Atlanta and New York are
airplane day trips and Boston, Chicago and Miami are overnight trips away.
Attracting constant attention from traditional VC funds is not a problem.

There is a strong base of both Tech and Life Sciences companies in RTP. This
base can provide everything from internal skunk works within these companies
to employees leaving to create startups.

The weather ain't all that bad - for the East Coast.

So - what is the real problem - it isn't money.

The problem can be found in passivity, complacency and parochialism.

I was once told (by a Silicon Valley born and bred person), "everyone has
their prejudices - but these folks (around RTP) actually let that get in the
way of making money." The Silicon Valley is not filled with folks singing
"Kumbaya" - but it is filled with folks who are more than willing to put aside
whatever personal feelings they may have if there is a buck to be made.

One of the most prominent venture capitalists in the RTP region once said (in
private) that all the "entrepreneurs" around here are hoping that one day they
can afford a nice beach house on the Coast, instead of . . . . being
entrepreneurs.

Nope - RTP is an example - it isn't only about the money.

It's really about the people.

BUT - money for seed/startup development is essential.

Funding startups shouldn't come from the government - it should come from a
For Profit Seed/Startup fund that works with, supports and Compensates the
Seed Infrastructure (incubators, tech transfers, economic development
agencies). The Seed Infrastructure should not concentrate on being landlords,
academicians or civil servants. The Seed Infrastructure should concentrate on
sourcing, screening and providing post Seed investment oversight for companies
that will ultimately be worthy of traditional Series A investments.

And remember, this Seed Infrastructure is, for the most part,already funded by
local/state governments, academia and corporate sponsorships.

The idea of simply throwing money into a broken system won't work. The idea of
expecting the traditional VC stage of the Risk Investing industry to innovate
or nurture is fallacious. Regardless of what Alan Patricof said in his NYTimes
article - VCs don't nurture. VCs provide growth capital for those Seed/Startup
enterprises which have reached a level of traction and validation.

Thomas Friedman was even more delusional with his idea of giving 20 VC firms
$1 billion each to generate innovation. All you are going to get by giving VCs
$20 billion is somewhere between $2-$2.5 billion in management fees for the VC
firms.

I do not know how you can generate an "entrepreneur" mentality in a short time
- after all, even the success of Noyce and Friends took a while to take hold
after they left Fairchild to start Intel.

But, I do know the way to start - please read (and feel free to comment) -
<http://www.slideshare.net/ElliottDahan/start-fund-feb2009>

Elliott Dahan The Growth Group elliott(a)thegrowthgroup.com

~~~
tom4370
As a MS grad of the UNC CS department who has spent time working with
researchers at both Duke and NC State, it's interesting to me to think about
why we don't have a thriving startup culture. I certainly know people who have
gone through those programs, stayed in the area, and are interested in
startups (as both founders and places to work).

My perspective (which clearly can't cover all the students in those programs
or hackers in the area) is that a small number of successful (ie, more
profitable for the founders than taking a job with IBM, Fidelity - before the
layoffs, NVidia, SRA, SAS, or one of the other, non-tech focused companies in
the area that suck up tech grads) would go an extremely long way in jump-
starting a startup culture.

Heck, I wonder if semi-decent mentorship for founders from people who actually
got something out-the-door would be more helpful than just having some VC
opening the checkbook. I always think of SV as kind of nirvana, where joining
a startup with some decent chance of being successful is much more a normal
story than it would be here in RTP. I think a big part of the lack of a
startup culture here is that people create interesting software, but then kind
of sputter out on getting it in front of people. Maybe RTP has the tech talent
to be a startup hub, but lacks a local and cutting edge,technically-driven
customer base? Or the critical mass of like-minded founders is what we
desperately need as pg speculates in his essay? Certainly the focus at the big
three universities isn't on startups . . .

All that said, in my peer group, several people have gone on to work at small,
startup type companies in RTP. But it seems like the common story here for
hackers who "make" it are ones that seem to involve consulting for one of the
bigger companies in the area or maybe less commonly developing software in 1
or 2 man shops on a custom basis (ie, roll-your-own ERPs and whatnot) for
comfortable income.

I think RTP is getting closer to being more startup-oriented, but we (the area
and hackers in it) need to be more driven in becoming entrepreneurs. But I
don't hear hackers in RTP say anything about being satisfied with a nice beach
house . . . I'm not defending the RTP hackers too strongly here because I do
think we are missing some critical piece of what a startup culture needs but
I'm not sure we can chalk it up to "passivity, complacency, and parochialism."

I would love to hear other thoughts from HN readers in RTP or with connections
to it (ie, did you do school here and head to SV?).

~~~
edahan
Tom4370 - you write - "Heck, I wonder if semi-decent mentorship for founders
from people who actually got something out-the-door would be more helpful than
just having some VC opening the checkbook." . . . .Yes !

The CED should have offered this hands-on mentorship program for
entrepreneurs. And I am not talking about another conference or speaker series
or fraternity mixer.. . . .very disappointing.

And "yes" - there is a very strong talent pool of techie folks, business folks
and support folks (one of the nicest people I know is actually a Lawyer - Fred
Hutchison).

As for "customer base" - 2 points - RTP, depending on your sector has a strong
customer base. But,the necessary proximity of the customer base is more
dependent upon what you ar doing, who can introduce you, etc.

And finally, my comments about "passivity, complacency, and parochialism" were
not directed at just the entrepreneur base - if anything, it was directed at
the VC base, the Incubator base and the Mentorship base you mention in your
comment above.

Entrepreneurs will be entrepreneurs and work hard and innovate and . . . . .
only if the rest of the Seed Community around them gives them a good reason to
be Entrepreneurs.

------
thaumaturgy
_Thank you_ for writing this.

I've been putting some considerable energy lately into trying to grow a
startup culture in my area (Grass Valley, Sierra Foothills) out of thin air.
To date that has involved launching a co-working space, founding a
"solopreneurs" organization, and beginning to pitch the benefits of startup
culture to local investors and shakers/movers.

I'm not looking to compete with Silicon Valley -- for reasons that you and
others have pointed out, I don't think that's possible -- but I do think that
we can create our own unique version of it. We're geographically isolated by
two small arterial highways, there is a lot of scenic beauty and outdoor
activities, and there is a strong push to localize products and services.
There's also a healthy respect for technology here -- Atari was a prominent
figure here back in its early days, Grass Valley Group engineers top-of-the-
line video equipment, Spectrum Sensors & Controls builds various motors and
potentiometers for government and high-tech applications, and the local cities
are keen to attract more high-tech companies. For those reasons and others, I
think there's a chance of incubating a small but successful startup
environment here.

So although on the face of it what you wrote would suggest that it can't be
done here, I think it also indirectly provides some support for it.

------
s_baar
I'm suspicious of the claim that there can be more than one silicon valley.
With founders being more mobile and VC in... shrinkage (less willing to take
risks setting up in new markets), the likelihood of any such concerted effort
being possible is nil. After all, you're not going to get anyone outside the
organizers to move from the valley in significant numbers, so I think the
prospects for natural growth is limited.

I suppose what you say is true, but I don't see any reason to think such a
transplant would ever outstrip the size/clout of the valley. And that's what
it comes down to, is that with the big players already entrenched, and the
weather so nice, no city will come close, even if the transplants do prove a
boon.

~~~
pg
I agree with you. I just wanted to consider what would be the optimal way to
jumpstart a competitor. The chance of any city actually carrying out the plan
I suggested is microscopic.

Which is itself an interesting point, because it shows how unlikely the Valley
is to face significant competition in the foreseeable future.

~~~
alain94040
Great article. But the fallacy in the comments is that most thought about
domestic competitors only.

As an example, the French community in Silicon Valley has been wondering for
years how to get Paris (or some other city) to start resembling Silicon Valley
more. Many French politicians visit for a week and always ask that same
question.

There could be a critical mass of French people living in Silicon Valley who
would love to spend more time in Paris to advise and help the local startup
scene, plus some political will to make something happen. Plus some rich
American angels would love some special angel visa that would allow them to
skip the lines at le Louvre :-)

But this plan doesn't address the general lack of positive thinking in Paris.
As we (the French living here) often conclude, there is a reason we moved
out...

~~~
listic
Sure! Being non-American I read this essay this way too: Can you buy a Silicon
Valley if you're not in US? There's little friction in moving to Silicon
Valley if you're in the US, but much if you're outside of US.

~~~
pg
I did actually mean the essay to apply to all cities, not just those in the
US.

------
jacoblyles
The public generally looks askance at public funds being used for private
benefits. Publicly funded incentives often are used to lure large corporate
manufacturing facilities into town, but these generally are already very large
and looking to employ thousands of locals.

It would be a hard sell to convince the voters that you should give $1 million
of their money to three guys with some laptops that weren't planning to hire
any more people for the next few years.

~~~
timf
Agreed it would be hard to sell to the public. Perhaps if the following point
could be more visceral:

 _"$1B invested in 50,000 startups would conservatively create 250,000 jobs
immediately. If just 2% of those startups became wildly successful they would
create 3 million to 5 million jobs."_

<http://news.ycombinator.com/item?id=497559>

~~~
jacoblyles
Sure. You could make numbers up and hope they are true. Just be sure the
homeless shelters are well-funded for when the money runs out.

~~~
timf
Wouldn't you say the same thing for _any_ public funding of private ventures,
why does the volume matter?

I don't support the government-as-vc idea myself but not because of any job
projection numbers (real or made up). I think science and technology funding
like NSF is a better way for the government to get involved in long term
value/wealth/job creation in this country. The outcomes of the efforts can be
more easily shared by the shared public money put in, seems more ethical to
me.

~~~
jacoblyles
I think inviting 250,000 people to your city with three months of funding is
going to have lots of unplanned side effects, many of which will occur three
months after the initial funding date.

~~~
timf
That comment was more about how to point out the "leverage" that was possible,
not any actual number.

------
mattj
I think access to capital is the first step, but access to employees is what
would present the larger challenge. Sure, you could get a hundred or so new
grads from your university every year, but how many hackers migrate to the bay
every year? What's the turnover rate?

If you have a million in funding, you're probably going to want to hire some
people to help you (you have enough money to shoot for the stars; moreover,
ramen profitability seems both a waste and unable to recoup the investor's
money). Hiring good people outside of SV, especially if you want to use
interesting (read not java / ms) tools, is going to be a bit more of a
challenge. Especially if there are 30 other startups in the area trying to do
the exact same thing.

~~~
alain94040
Good point. One of the things I love in Silicon Valley is that I can hire any
profile I want. If my dream candidate must have worked 5 years at Google on
search and then two years at Salesforce because that's what I need, I know
there is someone out there that fits that criteria.

You can't replicate any of that stuff anywhere else. By definition, if you
want to compete with Silicon Valley, you will want to hire _some_ people from
your competitors. So you have to be here as well. QED (any way around this
dilemma, I'd love to hear).

You can refer to an article I wrote last year called "The limits of the
Silicon Valley model". Unfortunately, it was in print only for an Indian
magazine, I can't find a link to it.

------
brucehoult
Every time you write an essay on this general topic I sit here wondering: Has
he looked at Wellington, New Zealand?

Beautiful city that people want to live in, lots of people living downtown,
good university, a community with several very successful technology companies
that are a source of angel investors and advisors e.g. Weta Digital (Lord of
the Rings etc) and TradeMe (online auction site that beat eBay in NZ and sold
for $750m).

~~~
Dilpil
Moving to new Zealand is a pretty big deal.

------
cperciva
_It would be pretty straightforward to make a list of the most eminent Silicon
Valley angels and from that to generate a list of all the startups they'd
invested in. If a city offered these companies a million dollars each to move,
a lot of the earlier stage ones would probably take it._

This seems like a highly effective way to kill startups. Never mind the whole
"moving to a different city where you won't have many contacts" bit -- if a
startup is still small enough to be able to move easily, throwing a million
dollars at them is likely to give them too much of a runway.

~~~
euccastro
The "not many contacts" part is addressed, according to the OP, by moving no
less than ~30 startups in one batch.

~~~
cperciva
It's useful to have contacts other than people working at other startups.

~~~
euccastro
I agree it is useful. But is it indispensable?

(Not a rethorical question, and I have no idea about the answer.)

------
albertsun
I think you're underestimating the difficulty of creating vibrant
neighborhoods that smart young people want to live in. Merely transporting 30
startups worth of people into a new city wouldn't create that kind of
environment if it didn't already exist. You need the artists and chefs and
shop owners and activists that make up the rest of the community in order to
create the right kind of community.

Of the two example cities, Portland could probably very easily become a
startup hub without this plan to push it, whereas Detroit would probably fail
at it, even with this plan.

~~~
timf
I thought the second to last paragraph said something much like what you are
saying: " _It will be easier in proportion to..._ "

(although I am saddened by the weather part, being in Madison, WI where we
have an emphatic yes to the other criteria)

------
donaldc
There is no way that money alone would be sufficient to recreate a Silicon
Valley. Of course, it would help, but some of the other obstacles are
daunting.

* Non-competes. Within the U.S., California is by far the state least inclined to enforce non-competes. This happened as a historical accident, well before Silicon Valley arose. Getting another jurisdiction to adopt a similar attitude toward non-competes would involve, not money, but politics, which is far messier and more uncertain. The existing large companies in a given state generally perceive, rightly or wrongly, that it is in their interest to have non-competes enforced as vigorously as possible. This, in turn, has two effects detrimental to competing with Silicon Valley: (1) employees often can't go off and start a competing company in their area of expertise without a two-year waiting period, and (2) the really ambitious among them may get around this by moving to California (often Silicon Valley), where their non-competes are unenforceable, thus furthering the Valley's lead.

* Specialized insfrastructure. Whatever a hardware or software computer startup needs, it has access to in the Bay Area. Legal services, financing, management expertise (useful as a startup gets bigger), and above all the hardware and software engineers skilled in even the most arcane (but sometimes needed) technologies. This sort of infrastructure cannot simply be bought, it must be grown.

* Many of the metro areas that conceivably might be able to make a run at competing with Silicon Valley (i.e. those that are not economic basket cases) already have a different industry that is their specialty, and have no good incentive to try and supplant that industry for a clone of Silicon Valley. And without the other industry being supplanted, it's unlikely that the density of computer/web startups will even approach that of Silicon Valley.

With all this to overcome, one billion dollars doesn't seem anywhere near
sufficient.

Silicon Valley will eventually be rivalled by a metro area that specializes in
something related but not quite head-on to what Silicon Valley does. For
example, it's conceivable that Seattle, with its focus on more consumer-
oriented software and web companies (such as Amazon), could gradually ooze its
way into having a bigger share of the more purely web-based startups (such as
Google). But that's very different than trying to create a Silicon Valley
rival from nothing.

------
quantumhobbit
When PG said the next startup hub should be like San Francisco, I thought of
New Orleans. Not for any objective reason but just because when I think of
bizarre tolerant cities I think of those two. If you doubt New Orleans'
tolerance you've never been to Bourbon Street. And they both have streetcars.
Not that the Big Easy would be suited to a Tech Startup, it is the perfect
place for musical startups.
<http://en.wikipedia.org/wiki/Musician%27s_village>

I think that certain cities inspire or attract creativity and weirdness. It
just doesn't have to be tech-related. Any other examples of weird city +
creative pursuit?

------
prakash
_Wufoo seem to have rooted themselves in Tampa on $118k, but they're an
extreme case._

How would the evolution of Wufoo differ if they had be in the valley instead
of Tampa?

~~~
pg
They may actually have been better off in Tampa. They've ended up slowly and
gradually creating something really excellent, and that suits their
personalities very well. But they are unusual people (in a good way).

~~~
cperciva
Can you elaborate on this? It sounds very similar to something I was saying
about tarsnap recently -- that if I had been in San Francisco, I'd have
launched tarsnap twice as fast and it would be half as good as a result; and
that being in Vancouver gave me enough distance from the startup world that I
could avoid getting carried away with hype -- but I might be reading more into
your comment than is really there.

~~~
herdrick
I think by the time the Wufooers moved back to Tampa they knew more about
doing a startup than you do. That's partly due to their YC experience and
partly because they really know and obsess about design and user experience.
(There's a lot of overlap there.) Spending time around people in Silicon
Valley who talk about those two things a lot would help you in that
department. And promotion. And marketing.

Maybe you shouldn't listen to me since I've recently failed. But please do
change some things you are doing, at least in the design area. I'd like to see
you do well.

~~~
herdrick
I know I'm judging your private beta product by its public face. But
statements like this: <http://news.ycombinator.com/item?id=360561> are also
worrisome. UI and promotion aren't easy, nor 'easy'. They are hard and a lot
of work.

(Boy, telling a Putnam winner he doesn't know enough about something makes you
choose your words carefully. And then it makes you wonder why you don't always
do that.)

~~~
cperciva
_your private beta product_

Tarsnap is in public beta right now, actually -- you can go to the website,
create an account, deposit some money, and start backing up your data within
the next five minutes. :-)

 _statements like this:<http://news.ycombinator.com/item?id=360561> are also
worrisome. UI and promotion aren't easy, nor 'easy'. They are hard and a lot
of work._

If you read that link carefully, you'll note that I didn't say anything about
promotion being easy -- and in any case, the scare quotes in "that's all
"easy" stuff" should have been a tip-off that I didn't really mean that
everything I mentioned would be easy. I was effecting the mathematician's
habit of referring to any solved problem as "trivial" -- for all that there's
a lot of work involved in creating a GUI, porting software to Windows, et
cetera, those are all things which people have done in the past, whereas the
core functionality of tarsnap -- secure snapshotted online backup -- required
solving entirely new problems.

~~~
herdrick
Oh no, getting a good user interface/experience for tarsnap _is_ a new
problem. Only if tarsnap were simply an better implementation of an existing
utility would that not be true, and only then if you were happy with that
utility's current interface.

------
euccastro
Meta: You've written quite a bit about what would it take to replicate a
Silicon Valley. Is that merely an exercise to try and better understand
startup ecosystems, or have you actually been asked for this kind of advice
(by governmental institutions, I presume)?

~~~
pg
Mostly I think about it as an abstract exercise, but we've had people from two
European countries (Switzerland and Sweden) visit YC to learn about what we
were doing. I had very interesting conversations with them.

------
pchristensen
"It depends what your city values. If what you want is football, spend the
money on the stadium."

I loved the essay, but this line alone was worth the time it took to read it!

~~~
gcheong
I can't think of a single major US city (san francisco bay area included)
that, if it came to a popular vote, would likely choose the start-up fund over
a stadium.

~~~
budu3
I agree with you. Selling the idea of a billion dollar startup mecca to their
constituents would be a though sell for any politician.

------
or
How do you define what is and what is not a 'Silicon Valley'? that is, when
would you declare such an experiment as a success? It has to be some measure
which is not only scale - for otherwise a small scale (30 start-ups) pilot
could never be considered a success. For example, Route 128 in Boston and RTP
both have start-ups and other IT companies yet in a smaller number than SV.
What is it precisely that they are lacking and would have made them 'smaller
SVs'? I recall seeing a statistics saying that Israel has the largest number
of start-ups per capita in the world. Yet it is far too small to have a
'critical mass' for being able to compete with SV. In that sense, can the Tel-
Aviv - Herzelia area be considered as a successful 'small SV'?

------
leelin
Interesting timing for the essay, since starting March 1st New York City seems
to be attempting this exact experiment (I know there is already at least one
HN thread post about it already).

<http://www.nytimes.com/2009/02/19/nyregion/19bankers.html>

To be fair, convincing laid-off quants to stay in the city and form startups
isn't quite the same as trying to get SV #2. The city probably wouldn't mind
falling into PG's footnote #1 trap, because in the worst case the program
would be an alternative to paying unemployment benefits with a free option
should someone hit a jackpot.

------
davidw
My guess is that the way to get the rich, angel people somewhere else is to
offer a better environment than SV, in the literal sense of the term. It
seems, for instance, that Boulder has attracted a fair amount of angels,
startups and the like, despite (or maybe because of) being a fairly small town
in proportion to the bay area. For instance, if I made a pile of money, I
would not live in the bay area (I don't live there anyway, so maybe I won't
make a pile of money, either:-). After all, rich or not, stuck in traffic on
101 is stuck in traffic on 101.

------
fauigerzigerk
The idea is certainly worth trying, but I fear where this falls down is the
most important kind of funding, which is publicity.

Tech media, bloggers and so on, they're all in the Valley, and they are very
narrowly focused on local startups. They will hype the startups next door
relentlessly and mostly ignore everyone else. Sometimes they will even
ridicule or actively bully outsiders as astute techcrunch readers will have
noticed.

Startup culture takes more than startups I'm afraid, but startups are
certainly a start, so why not try?

------
evertb
Paul, very interesting essay, especially seeing that I (and others) are trying
to do something similar in Limerick, Ireland to counter the unemployment due
partially to the redundancies announced by Dell and the knock-on effect it has
on the local economy. Limerick has a good infra-structure for an effort like
this; it has a very good university, an institute of technology, an
international airport and is located very centrally. Whats more it has a good
innovative and entrepreneurial culture. What's important is not so much the
investment by larger funds but rather the very early stage investments. These
will enable a good idea to be developed into a product or service tied into a
company that has all the right ingredients to grow by raising larger amounts
of funding and expanding it's management team. The availability of early stage
funding will also create a culture of innovation, creativity and
entrepreneurship. Apart from the money there should also be hands-on support
and a culture of networking and sharing of experience as well contacts. We're
trying to create exatly this through the GreenHouse
(www.greenhouselimerick.com) and I am amazed by the support that we have
received by individuals and the private sector. Would love to have a chat with
you sometime as there are a lot of parrallelels between Ycombinator and our
plans here in Limerick.

Evert Bopp.

------
edahan
Folks seem to be constantly confusing the Seed stage of the Risk Investng
industry with the traditional VC stage. They are differnt.

The point for this conversation is that the VC stage does not create jobs or
innovate. The VC stage provides growth money, business development contacts
and a network for team building.

Innovation and initial job creation (which is then expanded upon during the VC
stage) is created during the Seed stage.

Please review the powerpoint - The START Fund -
<http://www.slideshare.net/ElliottDahan/start-fund-feb2009>

Please review interview from VC Experts -
<http://vcexperts.com/vce/news/buzz/archive_view.asp?id=642>

And - the last thing anyone should hope for is having the People's money go to
VCs. Scary thought.

The People's money is already helping to support a good Seed Infrastructure of
Incubators, Academia, Tech Transfers and Economic Development Agencies. The
People's money should continue to go to the Seed Infrastructure.

Private money should go to investing in worthy portfolio companies of this
existing Seed Infrastruct5ure. And, this private money should be investing on
a For Profit basis

------
sgman
The question is: is there something in silicon valley that makes startups more
successful here? If there is, then the companies you fund will be working
against competitors that have a significant advantage over them. I don't think
a sample size of 30 is large enough to answer this question one way or the
other. Therefore, while the initial prototype requires minimum investment, it
likely will not give you the information you need to decide whether to
continue with the program or not.

~~~
pg
There definitely is. The question is whether a free million dollars would be
enough to compensate or not.

It's interesting we're even unsure of that. It means we're at least
considering the possibility that merely being in the Valley is worth a million
dollars to an early stage startup.

~~~
cperciva
_It means we're at least considering the possibility that merely being in the
Valley is worth a million dollars to an early stage startup._

Close, but not quite -- we're considering whether _staying_ in the Valley is
worth a million dollars. It might be that _being_ in the Valley is worth far
less than _staying_ in the Valley simply because moving sucks so much... even
if you're not "tied down", it's still a couple weeks of
packing/travelling/looking for an apartment/unpacking/figuring out your way
around a new city/etc which could be spent coding.

------
subhash
You seem to be considering only cities in the US because it doesn't seem
practical to ask startups to move across countries, especially if they are
very different. As a corollary, a city might benefit instead by exploiting the
local peculiarities to espouse a startup culture.

For example, in the city I live in, it's perfectly acceptable to live with
your parents all your life. And that's a perfect fit for lowering living
costs. There is also an obsession to live in or close to your hometown, which
might force college grads to start up instead of working for a big company in
a big city. There is a strong sense in society of admiring entrepreneurship as
opposed to employment because of a (convoluted) communistic ideal. There is a
lot of investment money readily available from expatriates from the Middle
East that they cannot use in their country of residence.

This might mean that there is a different route to becoming Silicon Valley and
it is all the more difficult to determine because it is not generic.

------
xenoterracide
@detroit HEY!! no you're totally right except detroit is right next to Ann
Arbor, which is actually one of the bigger tech startup area's in the nation,
or so I've been told... I don't think downtown detroit could be an SV, but I
think you could turn part of metro detroit into one. If you could somehow
avoid all the morons and corruption...

~~~
netman21
Ann Arbor is actually a great supporting argument to PG's essay. It has the
University, walkable neighborhoods, diverse culture, and a complete lack of
willing investors. Case in point: Arbor Networks. It moved to Boston at the
behest of its investors even though the founders still live in Ann Arbor.

Ever take a Monday morning flight from Detroit to San Francisco? First Class
is packed with frequent flyers that have to fly to SV every week. Not only
does SV attract startups, it sucks the brain power and experience out of other
cities.

------
dutchkabuki
I love all of pg's essay, but this one is a startlingly superficial, and
naive, commentary on a topic that has been thought about for +20 years. Also,
I think pg has become too focused on the types of companies he funds ("ramen
consumer web 2.0 companies") and he thinks this is applicable to broader
issues. it isn't.

------
ivankirigin
I think this essay also describes a way to get a good number of intelligent
people to move to a new country based on an island or seastead. While starting
a good university is hard, the new country, probably small, supports the other
suggested criteria for a startup hub.

The feedback of the system would be excellent too, as the companies that move
to the new country would hire people that are interested in freedom and
startups.

The startups would have a particular advantage after moving, in no regulations
or taxes to deal with. They'd only need to pay rent (depending on how property
taxes, currency, and private property work on the seastead).

Considering the numbers described here, there must be thousands of people who
could bankroll both the infrastructural parts and the social parts like this.

------
kurisutein
I think we can do this in Los Angeles.

With the way the broadcasting of television and the availability of content
online is evolving I think there is great opportunity to distribute this
information more efficiently.

In LA we have the producers, the actors, the funding, the networks, the nice
weather, good schools, mobility, the mindset - there are so many angles to
pitch this to start ups. Could the available options in this city lower the
costs for start ups.

Theres opportunity in the distribution of music, video...all of entertainment.
Theater, fashion, - are reality shows still a big hit? How about a website
that consolidates a bunch of reality shows - even home grown.....

Maybe this posting will get deleted because i went on a tangent?! - thank you
for the inspiration Mr. Graham.

------
yef
"The organic way to do it is to establish a first-rate university in a place
where rich people want to live."

Obviously not the case. We can just go down the list of top universities and
look at the ones that are in desirable places that aren't Silicon Valley. We
can even have a laugh at all the names people came up with, like Silicon
Alley, Silicon Hills, etc.

One very important reason is that the tech talent in the top tech hubs is old-
growth, and recycles between all the different tech companies. And it's
_huge_. Funding 1,000 startups for just 5 years still seems very, very small
compared to the existing ecosystem in Silicon Valley, let alone the logistics
of finding enough of them, vetting, competing with other funds, etc.

~~~
pg
I did go down that list. See the second section of
<http://www.paulgraham.com/siliconvalley.html> .

~~~
yef
Right, that's exactly my point. None of those places can really compare with
the size and power of Silicon Valley. The fact that there's only _one_ Silicon
Valley is proof enough. The rest are smaller tech hubs. So there must be some
other factor working in favor of Silicon Valley.

~~~
billswift
The most likely is also the most obvious - Silicon Valley has had longer to
grow.

~~~
yef
Wrong again. Harvard and MIT were founded in 1636 and 1861. Stanford and UC
Berkeley were founded in 1885 and 1868. The Boston area saw much of its
population growth occur in the 19th century. The Bay Area saw much of its
growth in the 20th.

So, the Boston area has had more time with its universities, rich people, and
population base to develop. Yet Silicon Valley developed faster and came to be
the bigger innovation center. Again, I suggest there's something else at work
besides the presence of top-flight universities, rich people, and time.

What _is_ interesting is that New England was a major force in innovation
during the second half of the 19th century, helping to drive the
industrialization of the US. So, whatever factor that brought innovation to
the Bay Area had to have been strong enough to unseat the existing innovation
centers.

------
rms
Pittsburgh's Alphalab has a stuck in Pennsylvania provision because they are
funded by the state of Pennsylvania and ultimately their goal is to create
jobs in the state of PA. If you leave, you have to pay back the $25k.

------
pbrown
Tangent:

"Startup founders are mostly hackers, and hackers are much more constrained by
gentlemen's agreements than regulations. If they shake your hand on a promise,
they'll keep it. But show them a lock and their first thought is how to pick
it."

I love this quote, and agree wholeheartedly. Hackers are typically some of the
most honorable people I know, and when they say something, they mean it.
Likewise, they're some of the most ingenious people I know. When it comes to
taking something apart or putting it together, hackers can usually do it.

------
trent
'Do you have good weather? Do people live downtown, or have they abandoned the
center for the suburbs? Would the city be described as "hip" and "tolerant,"
or as reflecting "traditional values?" Are there good universities nearby? Are
there walkable neighborhoods? Would nerds feel at home?'

All the above sounds like Richard Florida and his Creative Class stuff. Not
sure I buy into it all, but guess where he lives now...
<http://en.wikipedia.org/wiki/Richard_Florida>

------
ntoper
Actually France is almost doing what you describe. They do an almost full tax
exemption on startup during 8 years (provided you fill a lenghty and time
consuming application).

They also give easily between 50K to 100K 'no string attached' (provided you
use them for R&D)

The drawback is you need to fill a lot of paperworks, meaning it's useful for
startup with revenues.

These are some of the reasons why my startup decided to stay in France.

As opposed to what you say, they fund the good and the bad and let the market
decides.

Nico

------
Hexstream
Typos: Goverment, tradional.

~~~
pg
Thanks, fixed.

~~~
asdflkj
Also: "I just wanted to explore what it take if one did." is missing
something.

------
amitu
In India, the city that most qualifies the requirements if Mumbai(Bombay). It
has got an IIT, and well rich people love to live here.

Banglore, Hyderabad, even Pune and New Delhi belt are seen as thriving IT
cities of India largely because of the government incentives to companies
offering to setup shops there. The employees all hated that those places. A
lot of batch mates of mine went to Banglore or Delhi and preferred Bombay to
live, but big companies are not around.

I guess what is lacking is success stories.

------
StephanF6
Why is more government always the only answer to solving a problem? Looking at
all the other attempts to create a Silicon Valley that have pretty much failed
and they were all government sponsored. It seems obvious that government can't
solve that problem either. With all the social networking capability now it
should be easier to find other hackers, founders, and angels in any city of
sufficient size. We need a facebook for founders to bring all of this
together. Though getting the funders to notice might be an issue.

------
MikeGale
It's not a fixed place that interests me.

In a world where on-line places are still a failure I'd love to see the rise
of "online places" full of people who you can have a useful, short
conversation with.

Not hordes of people you "meet" once or twice but small and vibrant and you
talk fairly often. People you go out of your way to meet physically, even when
they are on the other side of the world.

Places like that can be dispersed over the planet and might incubate some
interesting business.

------
Ennis
This is very good. Thank you Paul. There is a city in Ontario called Waterloo.
I think it fits the characteristics you've laid out. Unfortunately this is
Canada and big money moves slowly here. My university exports the greatest
number of graduate hires to Microsoft. I am at a loss what it would take to
jump start this place. If you have any ideas I'm all ears!

------
thingsilearned
Great insights as usual PG.

We're dealing with an investment group that has this (in a much much smaller
scale) in mind. My major concern for them is that I'm not so sure it can be
done on a smaller scale.

Do you think cities can do a small version of this and become not the next
Silicon Valley but at least startup friendly?

------
subhash
When a good startup compares two funding offers, it does not automatically
pick the one that gives the highest valuation. It has to consider the other
intangibles like VC advice, contacts, good PR etc. Given this, a city offering
just money is like a loser VC who's really desperate. Why would a good startup
want to take that?

~~~
pg
Because they need the money. There are plenty of really good startups who
struggle to raise money.

It would be better than taking money from a loser VC, because you wouldn't be
stuck with the loser VC on your board afterward.

------
messel
Instead of trying to reinvent the Nile, why not focus on the features that
make it ripe for farming? Fertile soil and easy transport of goods. Can that
be done artificially? If so can it be done virtually? It could take a never
ending supply of money to sustain another Silicon Valley. Look at Dubai
Internet City.

------
velshin
@netcan, well said. Economic incentives that only serve their intended purpose
are rare!

------
YuriNiyazov
Quite prolific lately. Clearing out the buffer?

------
jf781
Great stuff Paul. Welcome to Silicon Valley.

------
r00k
Another typo: "bring in a thousands startups"

------
trevelyan
Give more money to the VC industry in California because they're the only
players capable of picking winners? Where is the evidence the VC industry in
California is even competent?

From the outside California looks like its waking up from a ten-plus year orgy
of mal-investment enabled by a mountain of easy credit driven by irrational
international capital flows. I understand that Paul's role is encouraging
investment, but this is disastrous advice for cities. Give away a million
bucks? Talk about welfare capitalism. A much better approach would be a
matching funds program for local ventures.

~~~
pg
_Where is the evidence the VC industry in California is even competent?_

All around you. The cpu of the computer you used to make this comment, and the
routers by which it got here, to start with.

~~~
trevelyan
Neither the CPU nor the router were invented in the last 10 years Paul, and
the retreat to hardware makes for a weak case since new FABs are generally
financed by banks and corporate bonds rather than venture capital. Neither my
router nor CPU were produced in the United States, although that is beside the
point.

My point was that IPO and M&A activity are highly correlated with stock market
performance. I can't run a regression analysis linking exit opportunities to
international capital flows because there are no statistics on international
investment in US stock markets, but it hardly seems radical to point out that
the VC boom of recent years has been fueled significantly by the stock market
boom. If strategic investment decisions were the primary driving force behind
the success of the industry the industry should not be facing such a bad
liquidity crisis right now.

And perhaps this is harsh, but I don't see a lot of competence in the
investment decisions which have been made in my own industry so I find your
argument unconvincing. A lot of startups are competing against other startups
and most funded companies in my space are disasters. But they all love
AdSense, which means that as these companies flame out my ad-spend is going
down and life is getting much nicer. Your suggestion that public policy should
involving giving significant sums of money no-strings-attached to groups that
seem responsible for major capital misallocation and band-wagon investment
behavior seems beyond unjust. It seems crazy.

~~~
pg
I just started with hardware since I can safely assume you have to use that.
But I'm guessing you also use Google, no?

~~~
trevelyan
I'm not sure what the n = 1 Google argument is supposed to accomplish - is
boo.com relevant too? These are single data points in an argument about
aggregate investment quality and the only meaningful statistic is aggregate
ROI now. I think it's interesting you're jumping back to the late 90s again,
because if you had a stronger argument vis-a-vis the quality of VC investment
over the last few years, I really don't think you'd need to go there.

You could be absolutely right. There could be a lot of fantastic companies
just sitting in VC portfolios making profits and waiting for the market to
turn in order to maximize their exits. That is true. But it's also true that
owning profitable companies does not generally incite the sort of liquidity
crisis that seems prevalent in the industry right now.

I'm not saying you're wrong. I'm just saying there's very little evidence that
the people you're proposing get a massive windfall in the form of a $30
million turn at the roulette table know what they're doing. And some of what
they're doing hurts people who are competent and profitable. So in my
industry, I don't think the word incompetent is really that strong. They could
be making money, they're not. YMMV.

------
onetime
Honestly, Silicon Valley has one killer asset that is hard to match.

Hot, smart, friendly Asian women.

~~~
jleyank
I did a quick skim, but I didn't see any mention of the laws of the state for
things like IP, employee mobility, etc. As I recall, MA is rather restrictive
and so things like non-compete clauses have some meaning there. CA, on the
other hand, ignores such things. I would think that the "business environment"
is critical - too pro-management and the workers won't go and take their risks
in that environment.

The comment re: NC/RTP is spot on. The natives are content, slow-going folks.
The imports are more active, but the slow-n-easy environment probably slows
them down eventually. The triangle's a bubble in the midst of a lot of
farmers...

------
ssanders82
Who thinks Paul Graham's essays have jumped the shark? (I'm aware this will
not be a popular opinion on this site.) Raise your hand and I will elaborate.

~~~
pg
Sure, I'd be curious to hear why you think so. I'd be interested to see how it
compares to the other explanations I've heard of this perennial phenomenon.

