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Comment by cjf4 | Hacker News Reader

To me this leads to a question about the Bay Area centric techno-spehere: at what point do the prices become so high that companies/ecosystems in other parts of the country become relatively attractive?

I understand that the SV network is a real and powerful thing, but holding all else equal (indulge me), wouldn't it make the cost of startups more attractive for all stakeholders if an alternative, viable network were in Buffalo or Nashville or Boise or wherever? Is it just a matter of lack of coalescence?

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A siblung comment writes:

> doing startup things

I believe the network in the Bay Area is valuable. However, I don't know concrete examples of benefits that being based in the Bay Area brings. From my perspective as an upcoming newgrad, the companies in the Bay Area are great, but their location is decided by the founders/stockholders/executives. I'll try to see what are the pros for these people.

Off the top of my head:

- Nice weather

- Proximity to LA, meaning access to nice events or parties

- Proximity to friends. People who you've met through events in the area

- Proximity to other startup executives to exchange thoughts on company matters. (The bigger the company to share thoughts with, the better)

+ Same for counselling investors

- Proximity to investors or possible investors

+ Tangent: if your connections can afford to live in the area and are relatively comfortable, then they might have many thousands of dollars to spare.

- Proximity to Stanford, Berkeley, and other big name universities

- Culture that appreciates tech, such that many people like to discuss new technology

I can't think of other big benefits of being based in the Bay Area from the perspective of the biggest shareholders of a company/founders/executives.

These people are on the site, let them speak for themselves.

I don't see what a clueless new grad, wildly speculating, adds to the discussion.

Especially as you say the weather first, while the real reason is probably money, money, money, money, money.

When you're shooting for one company to return 100x your investment per fund, a 2x difference in cost to get the best possible environment for the company you're funding is worth it.

One wouldn't need a 100x if one hadn't over-funded all the bad bets.

And lots of bets would do fine if they didn't have to perform 100x

Note: there are lots of successful small startups that never explode..

This is not the investment strategy of venture capital, though; they're not trying to be "smart" by picking a few good bets. They're placing a lot of small (small for them, "overfunded" for you) bets in order to increase their odds that one of the bets is really, really good. The more bets they make, the more likely they've bet on a 100x winner.

There's a certain element of myopia in SV, I think, in that people there seem not to understand that places like Austin, Fairfax County, and the Rt 128 Corridor do in fact currently exist and are full of startups doing startup things.

That myopia is so strong that my friends that grew up in SV seemed surprised that the bay area included anything north of Fremont or SF.

I think people vastly underestimates the social factors involved (e.g. status) and are willfully assuming that there is some rational economic factors to explain it.

To some degree it matters how interchangeable a founder is with an employee at a high paying tech co AND how much those high paying tech companies continue being the highest paying firms (in turn setting prices).

I suspect the answer to both of those questions over the medium-term is yes; if the entrepreneur's life (esp. their own network!) is already in the Bay Area (with the fallback being working at a high paying tech company here), there's a lot of cost to move to these lower cost areas. Even more so if the entrepreneur has family.

However, less tech intensive start-ups (say operations focused) may very well start popping up in higher numbers outside the Bay Area.

There are two big factors driving it:

(1) Branding-- many companies actually maintain a faux office in the Bay Area because having a Palo Alto or Menlo Park address makes you look smarter or more legit.

(2) Investors-- talent and opportunity is everywhere, but smart tech investors are super-concentrated in the Bay Area. The further you get from it the less knowledgeable and more conservative the investment climate becomes.

In the long term I think (1) will fade and (2) will get disrupted by crowd funding.

Yesterday.

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