
Why to Move to a Startup Hub - samb
http://www.paulgraham.com/startuphubs.html
======
jedberg
Paul, here is another point to backup your premise: one of the best ways to
meet potential investors/acquirers is to go to the same social events that
they do. If you live in the same place as them, even if you aren't going to a
startup-oriented social event, you still have a good chance of running into
them and striking up a conversation.

Case in point -- my cousin wants to make movies. So he decided to move to LA
and get a job as a bartender. He went to bartending school and then got a job
at a bar that is frequented by producers and other movie industry folk. One
day he served a drink to a producer, mentioned to the guy that he wanted to
make movies, and is now working on a couple of movie deals. That could have
never happened even if he continued to live in his native Orange County, only
40 miles away.

~~~
iamelgringo
A startup simultaneously creates several products for different markets:

1) It creates software for users to use. 2) It creates a company that owns the
rights to certain software and accompanying intellectual property 3) It
creates a community of users 4) It creates a team that has proven that it can
create and ship a software product.

#1 is not geographically limited. You don't have to be in Silicon Valley to
write software. Anyone in Duluth, MN can create software and load it on a
server for users all over the world to use or purchase.

The market for numbers 2, 3 and 4 are geographically limited, however:

#2 and #4) The highest concentration of software companies in the world is in
Silicon Valley. This in generally your market for #2 and #4. Your chances of
interaction with someone interested in buying your IP are much higher in SV
than in Duluth. Your chances of finding someone interested in paying top
dollar to acquire a proven group of developers increases exponentially in SV.

#3) Many companies are interested in purchasing large communities of users.
These tend to be located in large urban areas, however. If I'm Chief
Acquisitions Officer (CAO) for BigMediaCo, and I'm interested in acquiring a
startup that has a big community of users, it's not going to hurt if that
company is based in Silicon Valley. It adds to the CAO's prestige if he has to
travel to silicon valley to acquire a startup.

But, ask yourself this question: How would that CAO feel about traveling to
Duluth to talk about the acquisition?

Also, the value of a network increases exponentially with the number of users
in the network. In SV, it's hard to _avoid_ networking with entrepreneurs and
people in the software industry. It's really not that large, and after you've
been here for any length of time, there are no more than 2-4 degrees of
separation between you and everybody else in the Valley, including people who
want to fund you or acquire you.

Case in point: I've been here for 1 year, and I know for a fact that there are
3 degrees of separation between myself, Guy Kawasaki and Woz, and 2 degrees of
separation between 3 different VC's and me. That would probably never happen
in Duluth.

------
clem
So how valuable is it to move to a strange city where you don't know anyone
versus staying in the less optimal city where you actually have friends and
connections? It's great that Silicon Valley and Boston have this bubbling
startup culture, but if you didn't graduate from school there it seems less
likely you'd be able to tap into that resource.

~~~
pg
That is a good point. Off the top of my head, at 25 you should move, while at
35 connections might be enough to compensate for the difference between, say,
Boston and SV.

~~~
PeterBell
I'm 37. I have set up businesses in London, Houston, Chicago, NYC, Edinburgh
and (soon) Sydney. You can hook into a city in just a couple of months, being
from elsewhere sometimes helps in creating interest, and the people who will
be of most use to you in a start-up are likely to be very open to new people
if they've got the skills, drive and charisma needed to succeed. Just my 2c.

------
jkhart
This essay really strikes a chord with me. In fact, I followed Paul's advice
about three weeks ago when I left Charlotte, NC to move to Sunnyvale, CA in
hopes of starting a start-up (or at least working at one). In non-hub cities,
I would hear all the time about how I needed 10-15 years of experience to
start my own company; maybe 1 out of 20 people would take me seriously. (To
tell the truth, most people would assume I was starting some sort of
manufacturing-like company. They would ask me where I was going to find the
capital for such a huge investment). That sort of negative energy can weigh on
anyone, and I knew I had to get to a place where I felt more accepted for this
ambition.

On that topic, now that I have left my job (for the move), I would really like
to get involved at a start-up out here. I loved working my tail off while I
was at college and hated (barely) working at work for the past year. I really
want to get back into nose to the grindstone working to build something cool.
Anybody have a good idea how to get the ball rolling. I am teaching myself a
few extra programming languages, but I feel like I need to get with the right
people to get things off the ground.

Anyway, great essay Paul. Sometimes I wonder if the start-up companies will
revolutionize "work" in a way that factories and unions changed the landscape
of America during the 19th and 20th centuries. Are we that far away from a
start-up being the norm? I suppose not everyone could work at a start-up, how
could a start-up expand to a larger corporation if everyone is working at a
start-up? But, I could see the mentality switch such that students work
for/start a start-up for 2-3 years after college, if it succeeds, great, if
not, they go work for a larger company or go to grad school. Either way, it
sure would be nice to live in a society where everyone "takes their shot"
before settling in to a nice, steady, safe career.

~~~
ivankirigin
:)

<http://news.ycombinator.com/jobs>

------
ivankirigin
_"if you have a good investor who has committed to fund you if you stay where
you are, you should probably stay. Finding investors is hard. You generally
shouldn't pass up a definite funding offer to move."_

What if you have definite funding from someone who wants you to move?

PG used a similar argument style in Hackers & Painters to show that some
languages are better and Lisp is the best. Reduce it, then refine it. "Rural
areas are clearly very bad"=="basic is clearly very bad", then "SF is the
best"=="Lisp is the best".

It's funny because we're in Boston using Python, the roughly #2 spots in
cities and languages.

------
cperciva
"And just as Jews are ex officio allowed to tell Jewish jokes..."

I don't think "ex officio" is really appropriate here (although I'm sure we
all knew what you meant), since being Jewish isn't strictly speaking an
_office_ which is held. Perhaps _ex genesis_ ("by right of birth") or _ex
sanguinis_ ("by right of blood") would be more appropriate?

~~~
geebee
Hmmm... this depends on how long you lived in England. I was born in the UK
too, but I moved to SF when I was 10 months old. The rest of my family was all
born in the US - mom, dad, older sister, younger brother. And I sound like I'm
from California, not from England.

I may have a UK passport, but I don't think I'd be allowed to pass off any
jokes about England as self-deprecating humor (excuse me - humour).

This reminds me of the convert on Seinfeld who starts making Jewish jokes, but
then keeps on making Catholic jokes as well.

Preist: "And this offends you as a Jewish person?" Seinfeld: "This offends me
as a comedian."

~~~
falsestprophet
I'm Irish. I don't know how entitled I am to make jokes about the English, but
I am eager to.

------
jwinter
> And yet whatever argument you use to prove that startups don't need to move
> from London to Silicon Valley could equally well be used to prove startups
> don't need to move from smaller towns to London.

Well, what if it isn't the raw number that makes a city a startup hub, but
having a certain minimum amount of startups? That argument would then account
for small towns not being as startup-friendly as London, but London (or Boston
or New York) being an equal to Silicon Valley. Maybe the startup friendliness
of a town looks more like a logarithmic graph than a linear one.

~~~
karzeem
PG's point about non-Silicon Valley VCs not knowing their stuff as well is a
good one, but your point helps bolster the other side of the argument.

New York may be underrated as a startup hub, for the reason you cite.
According to Wikipedia, "though it is not often thought of as a 'College
Town', there are about 594,000 university students in New York City, the
highest number of any city in the United States." Similarly, there's a lot of
startup activity in New York, but it's not considered a startup hub because
there's so much else going on in the city. Silicon Valley doesn't have
anything else going on, so startups and the tech industry dominate its image.

~~~
tokipin
not sure about that, but i can say that new york is an ugly city, and i'm
happy it's not a technology hub

~~~
karzeem
There are definitely people out there who cannot stand New York for a minute.
These are the people who associate it much more with the city of _Taxi Driver_
and _Teenage Mutant Ninja Turtles_ than the one of _Annie Hall_.

------
jsjenkins168
It may just be me, but it seems that many Europeans are more nationalistic
than Americans when it comes to certain things. Not in a negative sense, but
as if more of a cultural thing. It does not surprise me that PG speech about
startup hubs might have offended many in the audience, even though the offense
was obviously not intended.

If the situation were reversed and PG came from the UK to give that talk in
SV, I dont think many would have been offended on terms of national pride. I
suspect many startup entrepreneurs from SV would not hesitate moving to a
different city in another country if it greatly increased their prospects of
success. I for one do not have a problem moving somewhere else, and I consider
myself to be at least somewhat of a patriotic American.

Again, not meaning any offense to European citizens in general, just sharing
my observation.

------
twinings
I won't try to disagree with the advantages mentioned about Silicon Valley.
However, I think there are equally important reasons to live in the UK or in
Europe: namely, the quality of life, the way the cities are designed, the
public transportation, the people's attitudes. I am an American who prefers
Europe and I hope to move over there one day. Silicon Valley is a wasteland.
Try riding your bike somewhere. Try strolling around the town center (there
isn't one.) If you are going to actually get rich, then it may be worth it to
live in Silicon Valley. But if you end up being simply middle class, then
quality of life should be considered.

I lived in Fremont for a couple of years, and I can't tell you how much I
hated it. Urban sprawl. Nothing to do.

~~~
geebee
I agree with you that much of silicon valley is depressing. This is actually a
really serious problem for valley companies, because employees don't get to
know each other as well, and everyone scatters off to various suburbs after
work.

My wife worked for a startup in SF next to a cool bar and a cool coffee shop.
When you left work, a couple of your friends/coworkers would often be in that
bar or coffeeshop. So you'd stop in, and start chatting. Often, you'd chat
about work, and come up with new ideas. They might get excited enough to go
back into work to hash it out a bit more - at least they'd have something they
were charged up about.

At the time, I was working for Sun Micro in Fremont, a spiritually crushing
place. On occasion, we'd all agree to get together for drinks at the W nearby.
But it took planning, arranging, getting into your car, driving over there...
not at all spontaneous. And so we didn't get to know each other as well, and
didn't have any fun.

That said - your post is missing one really important thing: San Francisco and
Berkeley have a vibe that is _very_ conducive to creativity, and even parts of
(admittedly suburban) Palo Alto aren't so bad. This is why I drove a
horrendous hour and fifteen minutes to work every day. It's also why I finally
got so fed up with the commute that I faced a choice: quit sun, or move to
Fremont. I quit.

But hey, would you rather live in SF and be an hour from the valley, or in
Munich and be a trans atlantic flight away? One poster called SF a "second
rate new york" in a previous thread (obviously not getting it). San Francisco
is not a big city like New York, so don't go looking for Manhattan. Look for a
small (surprisingly small to some, considering how many comparisons to NY I
hear) but very entertaining city with a terrific vibe and a ton of technical
and creative people to hang with.

~~~
twinings
>>>Fremont, a spiritually crushing place.

I remember trying to make the more than 1 hour drive from there to SF, and
then back again... just to spend a few hours in a the nice city. Yes, I'd
rather live in Munich.

This is a huge topic and it affects the entire USA. Our whole country is
stupid automobile sprawl. "The greatest mis-allocation of resources in the
history of mankind."

~~~
geebee
I agree, a lot of the US is pretty awful. I'm not sure that this is specific
to the US, though - I think it's specific to places that were largely built
after WWII. The outskirts of european cities are generally pretty soulless,
too. But since most of the European cities were built before the automobile,
they've avoided this truly depressing problem. I really doubt it has all that
much to do with Europeans being particularly marvelous people - after all, San
Franciscans like to credit themselves with how pretty their city is (and there
is some credit due - my dad remembers signing the petition to preserve the
trolley cars when he was a kid), but it was too full to build anything else
much after the 50s - so I know I didn't have a damn thing to do with it. (Ok,
there is the factor that some people value the physical environment so much
that they'll shell out 1Mil+ to live in a small 2br house, so some self-
selection may be going on here...)

Hang out in the outer suburbs of Paris some time, and you'll see what I mean -
not a big improvement over the outskirts of SF or LA (actually, don't -
vacation time in the US is precious, and you definitely don't want to waste it
on that).

~~~
twinings
I concur.

There are two possible future outcomes I can think of.

1\. We have an oil crisis, and cities return to the way they used to be, over
the course of time.

2\. Alternative energies gracefully take the place of oil, there is no crisis,
and things continue as they have been.

Oddly, the crisis outcome is more appealing.

~~~
anamax
In the "good old days", a smaller fraction of the population lived in major
metro centers than does now.

~~~
twinings
If you go back far enough, there were no cities at all. Nevertheless, I think
there is a wonderful "city" concept in many old towns around the world, and
especially in Europe. If you move to Silicon Valley, and you spend some
significant fraction of your life there, then your day to day quality of life
is seriously affected by this. This discussion thread may be getting "off
topic", although it is about an article telling entrepreneurs from all around
the world to come to Silicon Valley if they possibly can. I am warning them.
It's not a paradise (in my opinion.)

------
letian
I know some people were asking of other cities.

I have folks over here in Portland that I visit, usually I'm in LA or SV
sometimes. It's a dramatic shock the types of friends you make, even if you
try.

For example, if you're in Portland and try coder or Linux groups, the forums
are dead a lot, the Meetup groups are the same way. Ask around successful
people about who they know. Your network will be limited.

It all adds up in differences.....

The advantage is that you can get the feel of people who aren't bent on
startup -> domination, which is probably the majority of your customers.

Think of it like the art of personal maturing by living for a few years in a
different country. Gives you major perspective and altitude.

------
brlewis
It takes guts to tell Boston VCs that they just don't know startups the way SV
VCs do. Way to call it like you see it.

------
pennyherscher
As a serial CEO I moved my latest venture from NY to Silicon Valley when I
took it over. My reasons were access to talent and access to capital. Our
target customer is Wall St but I felt it was lower risk to be far from the
customer than far from the talent pool to build the technology. Finally, there
are too many fun things to do in Manhattan - and not that many fun things to
do at night in Foster City; this helps startups focus.

------
davidv
I was just reading this article and immediately saw a nice parallel. Take a
look at "The Secrets of Intangible Wealth" -
<http://reason.com/news/show/122854.html>. It's about a World Bank study of
the effect of intangible capital on productivity. One conclusion that can be
drawn from the study is that pure application of financial capital in itself
does not result in productivity - in other words, it's not just where the
money is. It seems pretty clear that startup hubs have a significant amount of
intangible capital related to startups. For economic development in general,
according to the study, natural and financial capital are actually _dwarfed_
by intangible capital: "In the U.S., according to the World Bank study,
natural capital is $15,000 per person, produced capital is $80,000 and
intangible capital is $418,000." It would be great if there were a study on
startup-related development so we had solid data, but it would not be
surprising to me if the effect of startup-related intangible capital in
startup hubs was indeed significant.

~~~
jsteele
Now just a damn minute. If the article you linked to is correct, then the
World Bank is playing a devious game of sleight of hand: They got the idea
that the US must have "intangible wealth" because of the fact that the
domestic resources and domestic production don't account for all the wealth.
The sleight of hand is in the fact that they never consider the fact that the
USA's rich classes operate in dozens of countries. The US imports most of its
natural resources, and it even imports a large portion of the finished goods.
All of these imports benefit American investors. About the only thing they
export are the costs: Those who aren't part of the rich class have to
constantly worry about their jobs going to China, India, Jakarta, and
Indonesia, where labor is cheaper.

All "intangible" means in this case is "Oops, we missed it!"

------
herdrick
A culture of social egalitarianism (as opposed to the material kind) seems
important to encouraging and developing new ideas. Here's Tom Wolfe on the
culture of the places the founders of Silicon Valley came from:

"Back East, engineers, no matter how gifted, ranked below doctors, lawyers,
Army colonels, Navy captains, business executives, and professors of English,
history, biology, chemistry, and physics. This piece of European snobbery
never reached Grinnell, however, nor did it turn up in many of the thousands
of small towns in the Midwest and the Far West. An extremely bright student,
the one possessing the quality known as genius, was infinitely more likely to
go into engineering in Iowa, Illinois, Michigan, or Wisconsin than anywhere
Back East."

That's from this: <http://members.forbes.com/asap/1997/0825/102.html> . It's
great.

------
IanWilson
If I could, I would move my start up to SV in a flash. Its not just the VCs
there but also the angels, where else can you find engineers who are worth 7
figures and can comfortably work for free or even invest themselves?

But this is an almost exclusively US club if you currently have a start up. It
takes years to get a visa and go that route unless you already have, I believe
over $1.5 million funding, which somewhat defeats the purpose of the move
which would be to raise money primarily.

So if you have a start up in London and are not a US citizen and do not
already have millions in funding you simply cannot move to Silicon Valley.

So if you are not a US citizen get a job there for the visa (not at all easy,
remember all of this years allotment of visas disappeared on the first day)
and work on your start up on the side or get the funding and go.

~~~
mulcher
or take a holiday there and aggressively pitch.. Also there is no funding
minimum for instance for a US E2 visa.. but as the article suggests to me, the
ycombinator startup fund might not be enough..

Also consider the following, the std. angel investment is $12k from
ycombinator. That gives you 3 months, which is also about the minimum amount
of time you can arrive on tourist visa.

Can you take that to get up and running and then move to silicon valley? If
your idea is promising then you seem to be ok.. It doesn't seem that reality
gets in the way here, either by immigration policy or the details of a
ycombinator investment.

------
rnakhan
After having spent 7 years in BayArea and still struggling to get a US green
card I gave up and moved to Waterloo Canada. I saw hundreds of my ideas going
stale because according to immigration law I _had_ to work with similar job
profile and always getting paid. I could not even fund myself and work
fulltime on my ideas.

I am surprised that the locational freedom that internet offers (I have hired
people in India and elsewhere whom I may never meet) has not been embraced by
investor community as much as I would have imagined. Hopefully that will
change in future.

------
Zak
If it's a mistake to start your startup anywhere but SV, given the choice,
then why does YC do its summer program in Boston? This is not rhetoric, but a
serious question.

~~~
pg
Seed-stage startups are so mobile that it doesn't matter too much where YC
itself takes place, so long as they get to demo to investors in the biggest
markets.

Also, though SV has the most investors, Boston probably has the highest volume
of hackers flowing out of its universities.

Robert is a professor at MIT and is not moving in the immediate future.

But I would want to have one foot in Cambridge even if it weren't for Robert.
Cambridge is smarter than SV. The smart world and the startup world are
adjacent, but not identical. We'd rather be half in the smart world and half
in the startup world than just in the startup world all the time.

------
robertgaal
Ah, looks like I saw this one coming :)
<http://news.ycombinator.com/item?id=62976>

------
steveparker
I have always enjoyed reading your essays, Paul. I don't necessarily always
agree, but I'm not the one who has made such a success of it :-)

The two claims that "I'm British by birth. And just as Jews are ex officio
allowed to tell Jewish jokes, I don't feel like I have to bother being
diplomatic with a British audience." are so offensive that I initially thought
that you must be joking, but on re-reading, I don't think that you were.

The Jewish claim is just pure racism; the British claim is slightly more
subtle, in that it contains a hidden suggestion that IT in the UK is a de-
facto joke.

I am not usually terribly sensitive about such things; I'm not Jewish, I am
British, and whilst I could write an essay about what is wrong with the UK IT
industry today (and not much about what it excels at), I do not concur that
the state of the UK is one which (in most circumstances, though not yours, of
course, Brother Paul) would necessitate diplomatic skills to discuss.

I am interested to read of your experiences. Ones prejudices are best kept to
oneself.

------
JohnN
Getting a Visa is next to impossible.

Now imagine if your name is Mohammed (not that mine is)

------
wayt
All other things being equal, is Silicon Valley the best place in the galaxy
to start and build a software or web services business? Hell yes. Will lots of
startups that are started and built in Atlanta and Munich and London and
Austin nonetheless be successful? Hell yes - but they should demo to investors
in Silicon Valley.

------
nraynaud
Well, as a French, I'm not really willing to move to Silicon Valley: 1)
dealing with immigration people in US Airports as a foreigner is a enormous
risk by itself. The probability of a bad event is low, but the stake is very
very high if it occurs : you have no law to protect yourself in the
international zone, and international conventions are notoriously ignored in
certain countries. 2) is fleeing your country a really great thing at all if
your life is not at stake ? 3) is going where everybody goes to do what
everybody does really smart ? Is being mainstream smart ?

But I know that this is not taking the easiest path nor is it doing
_everything_ I can do to reach success, since I would raise my success
probability by simply moving to Bay Area.

------
andreyf
Hm, is it just me or, is this the first of Paul's essay that contained
little/no new content? I've definitely heard most of these points before...

Nobody likes moving, so this is an issue that people are going to grumble
about no matter how sound the advice is, or how often it is repeated.

~~~
pg
Some of it seemed new to me. The reductio argument is new; the list of reasons
_not_ to move is new; the proposal for a startup founder visa is new; the
comparison of SV and Boston investors is new, and particularly the simple
explanation of the latter's conservatism; the point that startup hubs are
markets is new, and in fact only occurred to me for the first time in the
middle of writing this.

------
jeanlucpark
There's another element about SV that other places don't have. People. Talent
that is able to walk across the street and go to something that's better
suited for them. Talent so that you can end up with the right team.

Also, leverage.

A $20 mil fund in Boston acts differently than a $20 in the Valley. But take
the Valley mentality, double the fund size to $40 mil, and while the approach
will still very, the dollar size of investment all of the sudden becomes very
similar. Funds in the Valley are bigger, they have more cash to invest, and
have a much higher risk tolerance than their counterparts on the East Coast

<http://www.j-lp.com/blog/2007/10/move-to-silicon-valley.html>

------
mclee
Hi Mr. Graham,

I have translated this essay to Traditional Chinese version at here:
<http://mclee.foolme.net/2007/11/blog-post_21.html>

In case if you feel that is inappropriate, please let me know. :)

------
vanemden
The dynamic you describe is "winner takes all". Expertise attracts expertise,
and face-to-face encounters are essential. In finance it's been like that
since 1300. Fernand Braudel, in his lovely little book "La Dynamique du
Capitalisme" argues that this is also the reason there has always been at any
time exactly one financial centre in the world where all the big deals are
done.

He lists:

Venice 1380 -- 1500 Antwerp 1500 -- 1555 Genoa 1555 -- 1621 Amsterdam 1621 --
1780 London 1780 -- 1929 New York 1929 -- present

(For the future see <http://www.theatlantic.com/doc/200507/fallows>).

Maarten van Emden.

------
Tichy
So suppose one were to move to the valley out of the blue. How long would it
take to feel the effect (ie be socially connected or whatever it takes)? What
are the monthly costs of living there?

------
vd
My input from the Portugal:
[http://lists.paradigma.pt/pipermail/tce/2007-October/000128....](http://lists.paradigma.pt/pipermail/tce/2007-October/000128.html)

------
michael_nielsen
There are many factors to consider in evaluating the value of a move.
Depending on the nature of your startup, it may be more or less valuable to
make the move to the Valley.

Here's a few factors that seem relevant to that evaluation.

1\. Access to capital

If your company has large upfront capital requirements, then being in a
setting with VC's who aren't afraid to take a risk has obvious benefits.
However, a lot of web 2.0 startups have relatively low starting costs. You can
self-finance the development and launch of a product which attracts a rapidly
growing userbase. The main cost isn't even monetary, its opportunity cost.
With this done, attracting VC interest is a lot easier, regardless of where
you are.

2\. Access to talent

Naively, the Bay Area has a lot more talent than other locations and this
makes it a better place to do a startup. Problem is, the competition for
talent is a lot tougher. If you're a startup in a place with relatively few
startups, you have a real shot at attracting the top programmers locally,
because you're the only game in town. In the Bay Area you're competing against
Google, Facebook and all the rest.

I'm in Waterloo, Canada, and this is evident locally. Waterloo has a terrific
undergrad CS program - supposedly, its Microsoft's number one recruiting
School - and lots of really talented developers. But there are relatively few
Web 2.0 companies in town, which means that startups have (if they're willing
to work at it) access to an amazingly talented pool of potential employees,
and a real shot at hiring those people.

I don't think one even needs a top CS school locally. My background is as a
theoretical physicist, and my observation is that at least in theoretical
physics the quality of the top students is pretty much the same everywhere.
I'd be surprised if there was much difference in CS. There will be more
extraordinary programmers in the MIT CS program, but they will still be there
at Podunk State University, and if you're careful and aim high, you'll have a
real shot at getting those people onboard.

3\. Culture

I don't mean art and a nice orchestra. I mean access to a "can-do" culture,
full of sharp people who are plugged in, full of the latest news, insightful
(and original!) analysis, and can act as role models, mentors, advisors, and
so on. Really sharp criticism and suggestions are worth their weight in gold.

This is something where the Startup Hubs have a major advantage. It also seems
to me perhaps the biggest advantage of the YC program - the dinners and other
events. In places that are less of a Hub it seems to me that you need to
consciously build a really wide network of people who can act in that role for
you. This requires work anywhere, but it is a lot harder in somewhere without
a startup culture than it is in the Valley.

4\. Access to other companies

For some startups it's really important to have access to other companies for
partnerships, distribution and so on. For others it's much less important.
Obviously, in the former situation being in a Hub has a major benefit, while
in the latter situation it is less so.

~~~
neilc
> There will be more extraordinary programmers in the MIT CS program, but they
> will still be there at Podunk State University, and if you're careful and
> aim high, you'll have a real shot at getting those people onboard.

I don't think this is the case. I went to another Canadian university
(Queen's), and in my opinion there were perhaps 2 or 3 first-rate programmers
in the _entire_ undergraduate program. I'd expect there to be 10x or more that
number in a typical Waterloo class. Depressing, perhaps, but true in my
experience. There's a strong clustering effect: the best programmers want to
be wherever the other best programmers are.

It's interesting that a similar effect doesn't apply in theoretical physics...

~~~
michael_nielsen
I don't know much about Queens (I just moved to Canada), so I'm not sure if
this is the kind of comparison I had in mind. I was thinking of the comparison
between a top regional University, where there may be 1-3 (typically) students
graduating each year who could become theoretical physicists, while at MIT
there will be dozens. Would you say Queens is a top regional University in
Canada?

------
timr
I know that you're using the term "west-coast VC" to mean valley VCs, but it's
probably important to emphasize that the valley is unique, even on the west
coast of the US.

From what I can tell, VCs in Seattle are approximately as conservative as
those in Boston. In this part of the country, it almost seems like your
"fundability" is tied to your reputation as an ex-Microsoft employee....

------
emad
I'm a cofounder of a startup in the Los Angeles area (YellowBot in Burbank,
CA). I believe that although your location has an impact on how well or how
fast your company can make it, the people behind it has an even greater
impact. The quality of people you choose is a much larger factor than your
geographic location.

------
monk-e-boy
So true!

Coming from Cornwall (a rural part of the UK) I can't tell you how much we
spend sending sales people to the cities for face-to-face meetings.

I liked the bit about VCs from Silicon Valley Vs Boston. I see London VCs,
Parisian VCs, German VCs don't even get a sniff. Most amusing, and so very
true. I think that may be more evidence for the argument.

monk.e.boy

------
derwisch
Paul comes off rather rude by not commenting on the contents of the rebuttal.
Have you only been able to hear the first couple of sentences because you were
in a rush, or could you tell the rest of the talk by the opening and didn't
bother? It doesn't become very clear to me.

------
mulcher
dudes! why you ask if you have to move to silicon valley?? That is such the
wrong question! The reason is because they invest in people that say, hey, you
know what, I'm going to put webcams on my head and broadcast it to the world!!
I mean, if that works so will any other "conventional" silly idea... just make
something that didn't work so well in version 1.0 and make it social or 2.0ize
it.

Justin.tv is the youtube of the future.. Name one VC outside of Silicon Valley
that would have invested in that? When I first heard about it I thought.. man
that'll never work... I was so wrong! It's a webcam, on his head, that simple.

Imagine being a VC and getting this biz plan:

1) put webcam on head and broadbast to world. 2) ??? 3) profit!

I guarantee you that nobody probably knew (even the VC) how the hell they
would make money at it..

------
alex_landefeld
SV would be the ideal. I've lived there, loved it, and found a huge melting
pot of talent. But tech has to be grown everywhere - there are VC's
everywhere, angels everywhere, talent everywhere. It still takes the right
people with the right progression of ideas...anywhere. ..alex.

------
sumit123_j
Rite Paul. I agree with you on every aspects. I just have some doubt. I
operate in India and run my own startup with two other co-founders. We also
tried to pitch to the silicon valley but found a lot of issues and we found it
not worth enough. What will say in regards of the same.

------
nanijoe
I'm willing to bet NY VCs are not as conservative as Boston VCs, yet NY is no
Silicon Valley. Like they say "It is what it is" , the evidence is there to
show that SV favors startups, if any one wants to do their startup in
Newcastle-upon-Tyne , they are welcome to try.

------
jeffreyc
What's your opinion about basing your start-up where the bulk of your
customers are? For example, if you're gearing your product for use by the
public sector, shouldn't you be based in the Virginia technology hub that
supports Washington DC?

------
rokhayakebe
So how is Portland as far as starting a startup. I wanted to move to the
valley, but it is somehow to damn expensive and I honestly do not like
noddles, I am already skinny enough, SO how is portland?

------
intellibitz
I agree. You'll have to go where the funding is. Silicon valley is where the
action is. If you are serious, you must be there.

This does not mean others will not be successful. But you are fighting the
odds, really.

------
praki
Paul,

Great essay as always :)

"Seeming like they will fund you one day is the way investors say No."

We learned this the hard way - by expending our energy and enthusiasm on an
investor who really was saying no. Hope the new startups remember this.

Praki

------
GP
I think College towns with a progressive culture but with few companies to
absorb the graduating students are best for startups, eg: Ann Arbor

~~~
pg
That's like saying you should plant a tree where few others are growing.

------
sanj
An interesting analysis would be to reduce this to actual numbers: what is the
increase in likelihood that you'll be funded in SF vs. Boston?

~~~
ivankirigin
How can that reduction occur without normalizing for the quality of the team
and idea?

How can you quantify quality of people and potential of an idea?

~~~
ivankirigin
I suppose you could look at a number of successful companies, where they
started out, and where they eventually got funding.

I'm pretty sure you'll see lots of companies starting outside SV, moving to SV
to get funding, and then succeeding.

These numbers would be interesting.

~~~
byrneseyeview
Unfortunately, there's a confounding variable: people know SV is a good place
to start a startup (even if they aren't as sure as pg), so more startup
starters will start up there, anyway.

~~~
ivankirigin
Those that moved to SV compared to those that didn't is still an interesting
metric.

------
carter
The main reason to move to a startup hub is that you have much more chances to
succeed if you burned all the briges after you.

------
totallyunbiased
Google actually doesn't have better search results than Yahoo. They just do a
better job monetizing each search.

------
apuljain
A very well written essay. <http://www.renexcel.com>

------
oconnor0
Would there be value in encouraging startups to move to Boston to eventually
create another, rival hub?

~~~
yubrew
It's not the start ups, but the investing circles that make the hub. Start ups
can move pretty freely, but angels and VC's appear to be more set in one
location. If you can convince gutsy angels to move from San Fran to Boston, or
get Boston angels to be more bold with their investments, then Boston has a
chance. Otherwise, it's not worth it for innovative start ups to stay in
Boston.

------
webmaven
paul, there seem to be two ways to measure the 'hubness' of cities: volume
(ie. overall number of startups), and density (startups per-capita, or perhaps
startups as a percentage of the economy). There may be other measures. Which
do you think are the important ones?

------
FrankieCHN
surely it makes sense,however,it all depends,different models should suit
sepecific circumstances,

<http://blog.sina.com.cn/FrankieCHN> I hope I can make kind friends in this
hub,haha^^

------
FrankieCHN
surely it makes sense,however,it all depends,different models should suit
sepecific circumstances,

<http://blog.sina.com.cn/FrankieCHN> I hope I can make kind friends in this
hub,haha^^

------
muneeb
I can't help but wonder if

Silicon Valley > Boston

a triumph of Berkeley-Stanford over MIT-Harvard?

------
pupeno
What is the closest to Sillicon Valley there's in Europe?

~~~
mulcher
Sunnyvale.

------
neelam
great thinking...on a different note -just would like to know PG's perspective
on kelly felix a.k.a. rich jerk and likes !!

------
JamesMitchell
The readers may be interested in "Regional Advantage: Culture and Competition
in Silicon Valley and Route 128" by AnnaLee Saxenian, a professor at Berkeley:

[http://www.amazon.com/gp/product/0674753402/ref=cm_cr_pr_pro...](http://www.amazon.com/gp/product/0674753402/ref=cm_cr_pr_product_top)

The book was written in 1994, one year before the Netscape IPO, but even 13
years ago, the author concluded that Silicon Valley offered enormous
advantages over Massachusetts for entrepreneurship. Two points in particular
are worth noting:

1\. Professor Saxenian paid particular attention to the (back then) highly
successful minicomputer companies: Digital Equipment, Data General, Prime
Computer, Wang. All of them were vertically integrated companies that
attempted to do everything themselves -- R&D, product design, manufacturing,
sales, and after-market service. The SV companies were more likely to focus on
their core competencies and then network with other companies to provide the
missing pieces.

2\. Employment laws make a significant difference. Under California law, a
non-compete contained in an employment agreement is void as a matter of public
policy. In the employment content, California courts simply do not enforce
them, and thus companies do not even bother to ask for a non-compete in
California. Under Massachusetts law, a court of equity will consider enforcing
a non-compete agreement if it is reasonable in terms of scope, duration and
geography. I say "consider enforcing" because to a large extent, it depends on
which judge decides the case; some judges are more sympathetic to the employer
seeking to enforce such an agreement while others are more sympathetic to the
employee who needs to earn a salary.

The upshot of this is that in California, labor is extremely mobile. People
quit their jobs on Monday and start a new company or work for a new company on
Tuesday, and there is nothing the former employer can do in terms of enforcing
a non-compete clause. (I am ignoring intellectual property issues that may
protect the former company.) Because the new employer know that California
courts will not enforce non-compete agreements, it is willing to hire
employees that would not be hired in Massachusetts, and investors are willing
to fund start-ups that would not be funded in Massachusetts.

In Massachusetts, due to the legal uncertainty and the possibility that a non-
compete will be enforced, lots of employees are not hired, lots of start-ups
are not started, and lots of start-ups are not funded, that would be in
California.

Simply put, Massachusetts could increase its competitive advantage (or more
accurately, decrease its competitive advantage) by changing its law concerning
non-competes.

One issue that Saxenian and Paul do not address is the quality of the business
laws and its court system. Ceteris paribus, a state where business laws make
sense and where the courts enforce contracts and handle business disputes
quickly and fairly will have an advantage over other states.

The "gold standard" is Delaware. The Delaware Corporations code, for example,
is clear, well written and is in almost cases unambiguous. The Delaware
Chancery Court (a court of equity that hears all business disputes) is respect
through the world for its smart judges who show no favorites, enforce
reasonable agreements, and decide cases quickly. Their supreme court (Delaware
is small enough so that all appeals go directly to the state supreme court) is
equally well regarded. To some extent, companies outside Delaware can opt-in
to the Delaware legal system by incorporating in Delaware, giving Delaware
jurisdiction to corporate governance issues, for example.

Neither Massachusetts nor California can compare to Delaware. In comparing
Massachusetts and California, I believe Massachusetts has the advantage. At
the Superior Court level, at least in Middlesex and Suffolk counties (the only
two counties with which I am familiar), the judges are very well regarded.
Massachusetts has a ton of law schools who produce an excess number of lawyers
who do not want to practice law. So when a judgeship opens up, a lot of very
good, well educated lawyers apply, and the committee has its pick of the
litter. At the appellate level, the judges are also well regarded.

A recent development in Suffolk county has been the establishment of a court
-- called the Business Litigation Session ("BLS") -- whose sole mandate is to
adjudicate business disputes. Like federal court, the BLS handles the entire
case from the time it is filed to trial. Allan Van Gestel is the judge
appointed to the BLS. He is highly experienced in business disputes and is
very well respected by lawyers who litigate business disputes. So far, none of
the other counties have create a BLS, even though everyone agrees the BLS has
been quite successful.

In California, the court system is less well regarded. The caliber of the
trial judges is very uneven. Appeals in California are often unpredictable --
California is such a large state that different appellate divisions in the
state simply disagree with each other, and thus there is not the
predictability there is in Massachusetts. And the California Supreme Court
does not step in enough to decide the disagreements among the appellate
divisions, again because California is such a large state that there are
simply too many appeals to the California Supreme Court, a small fraction of
which are accepted for review.

James Mitchell jmitchell@kensingtonllc.com

