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Beyond the Valley: More on the Impact of Location on Building a Tech Business

  9 years and 2 months ago 15 Jul 2009 Fundraising;

Believe it or not, great tech business can – and are – sometimes built outside of Silicon Valley. No, seriously.

During a recent Founder Institute talk, Adeo Ressi said that if he started a company in NY and someone started an identical company on the West Coast, the NYC company would be worth 1/5th or 1/10th. The idea that any business not started in Silicon Valley is automatically inferior is ridiculous – as is the idea that simply by starting your business in Silicon Valley that it will automatically be worth that much more.

Silicon Valley champions love to point at the number of big companies that have come out of Silicon Valley, but looking at this statistic alone ignores the fact hat there are more businesses period started in Silicon Valley. This also means there are an order of magnitude more failed businesses and bad deals in San Francisco. Fred Wilson attacked this fallacy in a recent post:

Let's look at the facts. Seattle has produced Microsoft and Amazon. Boston has produced DEC and Lotus. Austin produced Dell. NYC produced Bloomberg and Doubleclick. Europe has produced SAP and Skype. I'm doing this at 5am on my blackberry on the redeye because I can't sleep so my examples are what I can muster at this moment. I could do better with a clear head and an Internet connection.

But the point is this. Not every great tech company comes out of Silicon Valley and you don't have to be there to be a successful entrepreneur.

The West Coast clearly has certain advantages, but it’s important to recognize that you’re trading one set of problems for another. As Fred put it, “[f]or all the benefits … like density of great engineers and VCs, you have negatives like hypercompetition for talent and the creative cost of living in an echo chamber” – and of course higher costs talent and office space and related expenses.

The thing that really bothers me is when others give prescriptive advice that you “must” start or move to Silicon Valley in order to be successful. Giving advice like this while blindly ignoring the context and circumstances is a disservice to budding entrepreneurs. Your network is the most important source for building a great team (and thus business); if you have a great network in Pittsburgh or Ann Arbor, you’re probably going to have better luck attracting and retaining talent there than in Silicon Valley. Launching a business involves a lot of hard work and sacrifice; if your support system is in Austin, then you’ll probably find it easier to stick with it there when the road gets tough than if you’re out by yourself in Silicon Valley.

And, as Alan Warms discussed, a whole slew of services (such as Twitter) have really made it easier for people to connect with the Silicon Valley crowd even when they are not physically present. (Alan is a serial entrepreneur and investor in Chicago).

The area where we definitely were lacking in before was the whole networking game - 10 years ago you flew to the Valley at least once if not twice a month — plus you attended 5 or 6 tech conferences a year. But nowadays, with all the new collaborative technology out there — i can see what VCs in the Valley are thinking by reading their blogs and reading BuzzTracker Venture Capital — I can track the technology news by going to BuzzTracer Technology. And by commenting on these blogs and using new services like MyBlogLog you can really start to develop new relationships online.

Ultimately, I think Fred makes the point best in his conclusion:

When asked to summarize my thoughts on business models at the end of last night's panel, I said "there's more than one way to do it." And the same is true of locating your startup. You can build a great startup in any of the dozen to two dozen startup hotbeds around the world. Pick a place you want to live and work and possibly raise a family. And then get busy.

Quite simply – you shouldn’t buy the inferiority complex that they’re selling. San Francisco is great, but there’s no reason you can’t build a great business anywhere. (Well, within reason). 

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