

Just How Important is the Valley?  Let's Look at some Data. - webwright
http://www.tonywright.com/2009/just-how-important-is-the-valley-lets-look-at-some-data/

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axod
Very interesting...

>> "I took some public lists of technology acquisitions in 2007 and 2008"

Not all startups are after the 'Acquisition' event either. I'd say if anything
that would bias results in favor of the Valley. I don't know how you can
really get a handle on the millions of 'startups' that just make money
reasonably quietly.

Communities like HN, IRC channels, etc make me wonder more what the Valley has
to offer. There's a whole array of cool online communities, and if you build
something cool, people will start to contact you. I think face to face contact
is needed less and less these days, unless you're trying to raise money.

~~~
abstractbill
I agree in some respects, but there definitely are still some real advantages
to being in the Valley.

I've been doing a lot of work towards monetizing justin.tv lately, especially
with video ads. These products tend to be very ad-hoc, and are usually quite
poorly documented. Sometimes we've tried to get an integration working by
having me try to follow the docs, and call/email when things don't work
properly. It usually works out in the end, but it's frustrating and takes too
long (sometimes several days of back-and-forth).

To contrast, with the ad companies that are in the Bay Area, we just ask them
to send a developer to our office. Both of us sit on my couch, while I do the
integration and make bad jokes about the quality of their documentation. We
usually get it done in an hour or so this way.

~~~
10ren
I think it depends on how integrated vs. modular the business is.

Disruptive business ideas usually require many deals between different parties
- there's the business integration, and the technical integration that you
mention (as video ads become more common, technical and business standards
will probably emerge, making it modular).

But some business ideas are more modular, in that customers can just slot the
produce/service into an existing business role, and into an existing socket in
their system. They are plug-compatible, in both senses.

This plug-compatibility also applies to partners. If you need to interact with
content providers and hardware manufacturers (e.g. as Apple needed for the
iPod and iTunes), some kind of Pond is essential, not just for access to those
parties, but also access to helpers of the connection (e.g. lawyers who
understand the issues in these kinds of deals). I think this is probably true
whether you have a novel disruptive business, or just an ordinary one: if you
need to make deals, a Pond makes things much easier.

But if you can modularize (systematize) your interactions with your "partners"
to such an extent that they become "customers", you don't need to be in the
same pond. An example is the "partners" of Google Adwords - there's a standard
interface that people use all over the world, and it works well even though
there's no customer service.

New ideas tend to not be modular - standardization comes later - so a Pond
there.

~~~
timr
It's true that some businesses are more nimble than others, but Bill is still
right: the ability to sit on the couch here is a more efficient integration
mechanism than any other. You're far more likely to complete a deal when the
technical work can be done extremely quickly.

I've worked at startups in Seattle and San Francisco now, and in my
experience, the startups here are faster. At the risk of sounding like a
cliche, it's just something in the air here. Things are always on fire.

Is it worth the cost of living? I don't know. But there's definitely a
difference.

------
webwright
This post is a result of this thread:
<http://news.ycombinator.com/item?id=563810>

I did a bit more digging. As the previous commentors pointed out, the data is
not perfect and I'd be careful about drawing any conclusions about it. But, I
thought it was interesting nonetheless.

~~~
trapper
Regardless of whether the data is "perfect", I haven't seen anything more than
anecdote supporting the SV hypothesis. Great article!

------
vlad
I posted a reply here:

<http://news.ycombinator.com/item?id=567497>

------
DEinspanjer
I thought this data was interesting, and I used it as an excuse to play around
with some data analysis / visualization tools that I've been exploring lately,
Many Eyes and DabbleDB.

I wrote a quick blog entry discussing how I used them to perform some further
analysis on the data:

Visualizing and sharing data ( <http://daniel.yipyip.com/77049.html> )

~~~
thorax
One of the interesting things here was this graph (when you change it to $ per
state);
[http://manyeyes.alphaworks.ibm.com/wikified/acquired_startup...](http://manyeyes.alphaworks.ibm.com/wikified/acquired_startups/GroupedByUSAState:USStateMap)

Texas brought in almost as much money as CA in acquisitions in this snapshot
of data.

------
pxlpshr
While this blog post certainly rings pleasantly in my ear (based in ATX), I
think there's more to being in the valley than simply the success rate of a
startup. I'm very envious of the enthusiastic community and people you meet in
the area, whether you're at the bar, having a cup of coffee, etc. However, I'm
not envious of the cost of doing business and basic living.

RE: 2008 stats, I think it's a reasonable assumption that the economic
downturn is certainly being felt first by the east and west (capital capitols)
before it hits other tech satellites like Austin, Boulder, etc. It will be
interesting to see who bounces back first and at what velocity... Compared to
Web 1.0 => Web 2.0, things could be drastically different this time around
given the market's significant retraction, and displacement of VCs in web
startups.

One thing about business here, we haven't had the luxury of big VCs so most
startups here have a different challenge that generally results in a
profitable web business, not big exits.

------
edw519
_The Valley offers no edge here– in fact, some people wonder if the “echo
chamber” doesn’t actually get in the way of understanding the rest of the
world._

This was my experience at Startup School last year. I regularly run into
business owners who need all kinds of technology, but no one I ran into at the
meetups knew anything about it.

If another person had pitched me his flash card app, I would have jumped out
the window (except no building had more than 2 stories).

~~~
comatose_kid
Damn you for harshing on my flash card app for small business owners.

------
10ren
Without harshing on your data (esp the denominators of population size as you
remark), you do show that it's far from absolutely necessary to be in the
Valley.

But to put it in perspective: in _Valley_ vs. _World_ , it's doing
disproportionately well.

------
mariorz
This data isn't of much use for analysis without all the startups that failed
or didn't get acquired. This is like trying to analyze average height by
nationality using a sample consisting of professional basketball players for
each country.

~~~
frossie
Actually, I think it might be a bit better than that. The question is - what
biases are there to acquisition with regards to location? Let's say you are
more likely to be acquired if your are successful (surely we can all agree on
that). If SV is the navel of the world, then you would expect startups in SV
to have a _higher_ chance of being acquired, than say a startup in
Philadelphia.

Now the question is - is being acquired a good trace marker for a not-
particularly successful startup? The answer is it doesn't matter - because the
original PG essay was talking about being a major economic driver, so in some
ways it is irrelevant what the non-successful startups are doing.

What it comes down is, is acquisition a fair sampler of successful startups. I
don't know the answer to that, but I think a fair number of people would be
surprised if it was "Hell, no".

Back to the sporting analogy, it is like trying to figure out the fastest
nationality by looking at their 100m record. If each country trains and sends
to the Olympics its fastest people then yes - but you have no simple way of
knowing whether that is true. However you may draw some conclusions about who
the fastest race is, on the basis that you would expect any bias to work
against them.

------
vaksel
correlation does not imply causation

~~~
rjurney
Why do people routinely make this cliche comment, thinking its going to give
them genius points, when it only kills their karma?

~~~
swombat
Well vaksel has more karma than most small countries, so I don't think that
was a consideration for him. :-)

