Why are more startups in Silicon Valley?

The New York Times today says "Its Not The People You Know. Its Where You Are" I have done startups in Silicon Valley (Forte, Alta Vista, Napster) and in Boston (Bowstreet, Groove Networks) and I don't see any difference other than size and scale. Tech startups and good ideas can happen anywhere, but it happens most often in Silicon Valley.

Silicon Valley is the epicenter of the universe for technology startups. There is a "force field" of energy there that I haven't found anywhere else. They have some of the best technology universities in the world. Sand Hill Road is home to the largest venture capital firms. And, they have a pool of startup talent that is unrivaled anywhere. It is a powerful combination.

Boston fits the description well too. Great universities like MIT, Harvard, BC, BU, Northeastern. Top notch VCs like Polaris, Matrix, North Bridge, Highland, General Catalyst, and others. And startup talent from DEC, AltaVista, Lycos, Lotus, PTC, Akamai, Groove, and others.

There are other cities that have some level of the necessary ingredients. Places like Austin, Seattle, Chicago, and New York. The difference is scale. Success attracts more success. If you think of insurance you think of Hartford. If you think of investment banks you think of New York, more specifically, Wall Street. If you think of advertising, it is Madison Avenue. If you think of automobiles...it is Detroit. If you think of films...it is Hollywood. Country music? Its Nashville. It is the natural order of all things that centers of excellence emerge and attract more talent.

All of these cities became the epicenter of their industries by historical serendipity. While other cities have some measure of all the elements necessary to support a particular industry, (universities, money, people, infrastructure) it is rare that any city can replicate the success of the dominant center.

Success attracts success. The best and brightest people want to make it to the top where the competition is at the highest level. Employees are the same way...they want to work with well known successful people.

Once an entrepreneur has had some success they can move anywhere they want and do another startup. The VCs will fund them because they have already proven they can do it. Future employees will relocate to join the new startup.

Like most things in life...it is all about the people. The people tend to gravitate to where the action is. Tech startups are done in all parts of the world, it is just that more of them are done in Silicon Valley than anywhere else.

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Comments

[Brandon Watson]

Don,

Interesting take on the article. As an ex-MSFT guy myself, I always wondered why there wasn't a flood of startups in Seattle given the talent level. One theory always held that past 1996, most people hired into MSFT were not innately suited for an entrepreneurial venture because they had never learned how to do without - the resourcing levels inside of MSFT did not force rationing. I learned that lesson the hard way at the startup I went to after leaving MSFT.

I'll tell you what, there's something to be said about being outside of the Sand Hill Road reality distorition field...I feel much less antsy here in TX. It's easier to focus on getting things done. We're doing some good things down here in TX. Be curious to hear what you think...

[Don Dodge]

Brandon, My guess is that in the early days Microsoft had lots of entrepreneurial people who left to start companies. Real Networks comes to mind.

Big companies (10,00 employees) don't normally attract entrepreneurial people, so not many startups spin out of them.

Austin and Dallas are great places to do a startup. An experienced entrepreneur can do it anywhere. A great idea will make it no matter where it eminates from. BUT, the absence of an experienced founder, or the absence of a great idea, will seriously lower the odds of success.

[pwb]

All things being equal, it's better to be physically in the Bay Area. That alone explains most of it.

[Farhan Lalji]

Don, what do you think of the international reach of start ups. Do international tech start ups need to move to the US (and more specifically to the Valley) to be more successful? Interesting article on Technology start ups in the UK from the Guardian last week, http://technology.guardian.co.uk/news/story/0,,1923179,00.html

[Roman Rytov]

here is an amazing article (didn't say I agree with all it says) on the topic: http://www.paulgraham.com/siliconvalley.html and a long long discussion with all major areas in US in the following section of comments