Why is it hard to startup a company outside of Silicon Valley?
This may sound like a dumb question to some, but I need to be edified. I'm in DC, and it seems more and more that you're probably working in something government or defense related. In other cities, like Dallas, it used to be telecom related (The Telecom Corrdior). How do these clusters start, thrive, and/or die? How does it continue to thrive in Silicon Valley after some 20 to 30 years of startup success stories?
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The only problem is that 90% of Silicon Valley startups are that kind of meringue and marshmallow that VC love. The record companies love Britney Spears and VC's love Twitter. It's all a big get-rich-quick scheme and a waste of time. Sadly, as a native of Silicon Valley, it means that true innovation, when it is happening, is occurring everywhere.
Besides, plenty of hackers do interesting stuff outside outside the open source world (and that's not even considering hardware...).
Nor are their investment choices what you think they are. For every frothy social app SV investors fund, they fund two boring b2b companies that you don't hear about because you are not the target market.
Fareed's comment is weird. Where is there a parking garage on Sand Hill Road?
Astons, bentleys, high end benz's... the works.
I work on Sand Hill and there's very very few garages around here. Just lots of open parking lots all over the place.
Also the culture here is to leave the fancy cars at home and drive a high-end (but not exotic) german car to work. In fact, tons of guys drive Priuses. Not too many bentleys - it'd be considered too crass.
Its really easy to start conversations with these people upon noticing a Django error page on their laptop or an ebay employee badge. The conversations are great.
Also there are lots of meetups, lectures and parties for startups. The place just breathes technology (can be frustrating as well if you additionally like other things such as frisbee or women).
A friend just moved from LA to SF and said the exact same thing. That's one of the most exciting parts of moving to the area for me (which I will be doing). The least exciting part is how crappy a lot of the city of SF is.
The Valley is where you go to be a successful technology entrepreneur. It's that global perception that gives it the hard-to-identify edge over everywhere else. Hollywood has the same advantage.
As a competitor I'd fear a startup in The Valley a lot more than an otherwise equal one that's located anywhere else.
Having a hard time finding a co-founder? More difficulty getting funding? Look at the resources available to you in your community and take advantage of those. Don't have any resources? Create some yourself. Many times, problems can be solves with the right network. Read /Never Eat Alone/ and start building yours.
And ultimately, if you think a move out to SV will solve your problems, move out to SV. But realize that the grass is never greener--just different shades of brown that, from a distance, look greener. Out in SV, you're likely to have a different set of problems: greater competition for talent (both partners and employees), higher cost of living, greater competition for angel and VCs.
It all comes down to the realization that there are trade-offs to every situation. Challenges to every startup, no matter where you are. Focus on the challenges you're facing and find creative ways to solve them. That's when you'll be successful. Not when you're lamenting about how easy other people have it compared to you.
My impression is that high-tech startups in the Boston area tend to sell products or services to larger companies, so that each customer brings in five or six figures worth of revenue. All the Valley startups I hear about, by comparison, aim for the mass market.
I know that PG doesn't like the idea of starting a consulting firm and using the consulting revenues to bootstrap product development, but I worked for one company and interviewed at two that did exactly that. (The one I worked for, Kenan Systems, never took a dime of outside investment, until the founder sold the company to Lucent for $10 billion. Things went downhill from there. But I digress.) Maybe the knowledge and contacts such entrepreneurs gained from consulting helped them make their first five-figure sales?...
Not literally, of course; but rather in the general sense of social pressure against creating a startup. In the Valley, you can say that you're thinking of creating your own business, and people will tell you that they think that's cool, will talk about startups they have been involved in, and generally support the idea. In most of the rest of the world, people will look at you as if you've announced that you're planning on getting a sex change: A small amount of admiration for making such a hard decision, mixed with a large amount of skepticism about your sanity. After all, everybody knows that 50%/80%/90%/99% of small businesses fail within X years, right?
I've been very lucky that, in spite of being surrounded by generally skeptical people, I've encountered a lot of support; as my girlfriend put it, "most small businesses fail, but if anyone can succeed, it will be you". If it weren't for how much my friends apparently believe in me personally, I'm sure I'd have been convinced to not even attempt this based on those same statistics about failure rates.
That's funny, that's almost exactly what my girlfriend said too... Must be a girlfriend thing :)
The reactions I've received have either been support mixed with a bit of admiration and envy, or "ah yes I've been through that 10 years ago, if you ever want to do it now's the time" followed by some advice. Only one person reacted with "why would you ever want to do that".
Reactions I receive (since I'm currently churning through the decision) tend to be offers for funding support, some of it not insignificant. To me, that is a much higher confidence indicator, although I have will some skin in the game, too.
The basic loops he identifies seem to be nerds attract other nerds, rich people attract other rich people, and nerds attract rich people as long as they are starting startups that need investment and get rich people richer (please correct me if I am wrong). These are all positive feedback loops, so they keep growing until they hit some negative ones. Some negative ones: saturation of nerds or rich people (not yet), saturation of space (getting there), high living costs (definitely close), nerds not starting startups because they work for Google (hard to tell but I doubt it), nerds not needing investment (increasingly so for Web apps), and other viable places to move (true in some areas like Biotech).
PS. I agree with the original poster "The first mistake startups make is they need VC or angel funding to get moving," if by "get moving" s/he means get started. You might need it when you want to expand, grow, get serious, etc. but you don't necessarily need it at the beginning.
Among successful startups, the ratio of those that took outside money to those that didn't is 100 to 1, maybe 1000 to 1. Where the threshold for success is going public, it's effectively infinite.
All that said, I would still say that if you were a BETTING man, your bets would likely go on funded companies.
http://www.37signals.com/svn/archives2/bezos_expeditions_inv...
I think the main difference is the types of companies that get funded in The Valley. Twitter, for example, wouldn't get funding in Chicago and certainly not Birmingham. Facebook and Google wouldn't have gotten funding either.
But there is money for the right product outside of The Valley.
It seems to be really starting to make a difference though, there's more of a sense of a growing tech community in LA now (a welcome relief from the entertainment buzz). Hopefully it'll keep growing.
So while I agree its definately harder than it is in the Silicon Valley, its not impossible. There are other people out there doing startups, you just have to proactively try and find them and bring them together if someone else isn't doing so already in your area.
I haven't been looking for funding so much, but I've heard frustrated stories from those who have. There just isn't the kind of widespread network that includes angels and VCs like there is up north.
It is nice to see more non-entertainment-related tech startups in LA, but honestly there's a long way to go.
Also, maybe it's just me, but there's still a geographic issue. It seems like startup activity was split between Santa Monica, Irvine, Pasadena, Encino and Hollywood for the longest time.
I think we can say the Santa Monica and west-of-WeHo area has won, at least since Yahoo moved their Overture group to the Santa Monica campus. About time, but this is just the ground floor. Funding sources are still spread all around too.