Well, no, actually. YC being in the Valley doesn't actually do that much for the Valley. I explained why here:
http://www.paulgraham.com/maybe.html
It's the stage after YC that makes the Valley what it is-- the angel stage. YC could be anywhere. We contributed as much to Silicon Valley when we were in Boston.
- There is really very little seed stage funding in Atlanta (unlike the valley)
- The people who choose to startup in Atlanta AND need seed funding usually do so because they want to live in Atlanta for the foreseeable future (or have to, for some reason). If they didn't, they would just move to the valley since getting seed funding is so much easier there.
- Therefore, after seed funding, they are likely to stay in Atlanta (The round 1 funding scene in Atlanta is better than the seed funding scene..although not optimal)
- Hence, Atlanta will be one startup ahead because of Shotput Ventures
The gist is that if first time entrepreneurs were going to leave Atlanta after seed stage, they would likely have done so at seed stage since seed stage funding is so much harder here.
So unless they restrict applications, there will end up being little local component, just as with every previous seed firm. Techstars intended to be the YC of Boulder. But IIRC only 4 of the 20 startups they've funded so far have been from Colorado. As far as I know, the same thing has happened to everyone after them as well.
The seed funding business isn't regional. People would like to believe it is, because it's 20x cheaper to run a YC than to do what you'd actually have to do to make startups stick to a particular city. But it isn't.
Basically, if we could at least get the ease of raising seed funding in Atlanta at parity with the ease of raising 1st round for a startup with revenues, it would be a significant win for us.
I do agree with you that if there were more VCs funding at the $1M level in Atlanta, we could keep all the Shotput applicants here and maybe a bunch of startups would move from across the country to Atlanta. But since politicians are unlikely to be as enlightened as making the $1B investment you mention in your essay would require, we'll have to attract private investors. If 1 of those 4 startups has a big successful exit, we'll probably get 1 more large fund to come to Atlanta.
This assumption is off by an order of magnitude. YC funded 61 startups in Boston. Only 3 are still there, and 1 of those is talking about moving to SV. So the assumption should be more like 2-3%.
This is getting me depressed. I am off to go write some code to work it off!
Since then, startup after startup has shown how much value the YC program has provided in exchange for that 5% stake to the point where I bet a majority of young first time entrepreneurs today consider applying to YC.
My point is the same as @lanceweatherby 's. Let's wait for the these new funds to get some results before we judge them.
I have to agree with the spirit of what he's trying to convey in this comment: news.yc would be a more interesting community if a majority of the people didn't default to PG's opinion on everything in general (this is my anecdotal observation and might be incorrect) and YC clones outside the valley being of nth quality bracket in particular (this is a pet peeve since I live outside the valleY) without giving it some thought for themselves.
In fact PG himself seems to spend quite a bit of time thinking about how the valley can be recreated elsewhere seeing how he has written about it in more than one article and says:
"How hard would it be to jumpstart a silicon valley? It's fascinating to think this prize might be within the reach of so many cities."
Surely trying to recreate YC outside the valley can only help?