Why Startup Hubs Work
paulgraham.com
paulgraham.com
One key element to debate is randomness - pg does a good job I think in describing the value of randomness in terms of random meetings, shower thoughts - etc - There are many other examples of this process at work - e.g., in management/strategy: http://www.management.wharton.upenn.edu/siggelkow/pdfs/SOart...
It bears the question - what is this valued randomness in terms of social interactions? And how can we get it in online? Definitely not chatrulette :)
But not "hackernews" type of places either - because in here we are interacting in a very structured manner - on specific topics one chooses, etc - so it's not random - we are directing our thoughts, so we are not randomly exploring things.
How can we find that great balance that physical hubs have? Going to pick up dry cleaning you find a random guy and you say hi - because you have nothing better to do you end up chatting with the guy and discovering he's Sean Parker. But that won't happen online. You just switch to another browser window that is more interesting - no need for randomness.
Is the internet killing randomness? - Or better yet: how can we come up with something that gives that value to people in a way that is not chatrullette?? It should be random but within your comfort zone, in a way that is casual and not sought after (which is uncool and weird).
I wonder what you guys think.
One of the problems is that computer screens are just so small. If displays (or whatever replaces them) were bigger, what they were displaying could be more ambient. There wouldn't have to be as much purpose.
On the other hand, maybe the difficulty of physically getting to a place is an important filter.
Here you have to consciously decide to go where other startups are at. In Silicon Valley I just get a cup of coffee and there's a conversation at the table next to me about startups.
Although, I have to say Twitter enabled more fluid communication in the startup scene here. Enough to where I have been able to spot a couple people not at the typical hotspots.
I'm not so sure randomness is the key. Randomness can be also be thought of as "absence of pattern". For me the key question to ask is to ask what role chance plays in formation of startups? Is it really chance or something process we can't yet fathom?
The last paper written by Alan Turing, "The Chemical Basis of Morphogenesis," [0] ~ http://www.dna.caltech.edu/courses/cs191/paperscs191/turing.... attempted to answer the theoretical explanation of the biological process that defines the shape of an embryonic organism from creation. This process is called "Morphogenesis" [1] This is an important problem because complex organisms appear to be created by some "random" process that organises what appear to be self similar cells.
A lot of recent work has been done to experiment Turings ideas on "reaction-diffusion" processes describing morphogenesis in biology and other natural systems to see if a) they can be reproduced in the lab and b) mathematically model them. [2] This begs the question, "what is the Morphogenesis of startups?" and can the same maths Turing used to describe the process be applied to startup formation?
There is a pretty good broad outline of Turing and Morphogenesis in a BBC documentary, "The Secret Life of Chaos" [3] by Professor Jim Al-Khalili on Youtube. [4]
[0] Alan Turing, "THE CHEMICAL BASIS OF MORPHOGENESIS", http://www.dna.caltech.edu/courses/cs191/paperscs191
[1] Morphogenesis, "the Greek morphe shape and genesis creation, literally, "beginning of the shape", is the biological process that causes an organism to develop its shape.", http://en.wikipedia.org/wiki/Morphogenesis
[2] Brandon Keim, Wired, "Alan Turing’s Patterns in Nature, and Beyond" http://www.wired.com/wiredscience/2011/02/turing-patterns/?p...
[3] Jim Al-Khalili, BBC, "The Secret Life of Chaos" http://www.bbc.co.uk/programmes/b00pv1c3
[4] Jim Al-Khalili, et,al, Yahoo, http://www.youtube.com/watch?v=uF7gdlTrCQY
The missing piece of the puzzle is real-time online location!
The reason we don't have chance meetings online is that we are not aware of who else is using or reading the same site or app as us in real-time. PG suggests that it maybe because of screen size, but I don't think that's the main problem. The real issue is that unless it's explicitly built into an app, like a chat site, we simply don't know who we are sharing that online space with at any specific point of time.
Imagine if you could say, "Oh I was reading this random blog on Tumblr and was surprised to see Fred Wilson reading it too. Didn't know he was into ASCII art, but had a good chat with him."
I can see Facebook doing this at some point. They are already doing it with music on their site. And they already know which of their users are on a particular site at any given time. It's just a matter of letting the users see that too and interact with each other. Turntable.fm is an outstanding example.
It's bound to freak people out, but it should actually make things more open and real-life like.
The problem of course is establishing true identity, and given that we can't literally see people to know it's really them, we will have to rely on a central identity system like Facebook. A decentralized method of identification would be great but is unlikely to happen.
This is something that I think has, oddly enough, gone backwards as technology has improved. BBSs had a very strong sense of location, while the internet is much flatter and amorphous, because everyone can connect to everything.
[4] As I was writing this, I had a demonstration of the density of startup people in the Valley. Jessica and I bicycled to University Ave in Palo Alto to have lunch at the fabulous Oren's Hummus. As we walked in, we met Charlie Cheever sitting near the door. Selina Tobaccowala stopped to say hello on her way out. Then Josh Wilson came in to pick up a take out order. After lunch we went to get frozen yogurt. On the way we met Rajat Suri. When we got to the yogurt place, we found Dave Shen there, and as we walked out we ran into Yuri Sagalov. We walked with him for a block or so and we ran into Muzzammil Zaveri, and then a block later we met Aydin Senkut. This is everyday life in Palo Alto. I wasn't trying to meet people; I was just having lunch. And I'm sure for every startup founder or investor I saw that I knew, there were 5 more I didn't. If Ron Conway had been with us he would have met 30 people he knew.
This sounds a little bit to me about what it must sound like to hear Brad Pitt talk about getting lunch in LA.
I wouldn't make this observation, which I think is superficial, except that I'm surprised to see that Graham didn't mitigate it ("and it's not just because I'm Paul Graham; lots of companies we've funded that haven't even launched have reported the same experience").
Can I say again that I think Graham is probably right in this post?
I think it has a lot to do with just how down-to-earth most people are in Silicon Valley. You can be in any place full of "celebrities" - say Hollywood - and spot a lot of familiar faces/names. But "running into" so many and interacting with them seems to be a Silicon Valley thing. Certainly the level of help that people are willing to extend, gaining nothing but karma in return, seems rare outside of this area.
But I've had a not incomparable experience after having lived in SF for 3 months. Palo Alto is packed full of people doing interesting stuff, and you're bound to bump into them
But the difference is if I flew out to the Valley and knew who to look for there is no doubt in my mind that I could go right up to anyone of the people that Paul mentioned and say something to them and they would listen certainly for a minute or longer. That wouldn't happen in LA. And I'm not Paul Graham.
Way back in 1998 or 99 I sent an email to Tim Draper and had no problem setting up a meeting. That wouldn't have happened in Hollywood. The valley is different. As Paul mentions, the density is important. If you are in fashion, it's NYC. If you are in entertainment - LA. Jewelry? The diamond district in NY. You go where the most people are doing what you want to do. In the case of tech that's the valley.
Startups and nanoparticles can spontaneously form anywhere under the right environmental conditions, but they can just as easily break up in isolation. But if the local concentration is high enough, something magical happens. Even when a person or a molecule jumps ship, another one fills its place almost instantly. Suddenly, these things are "stable" but not only that, they can grow, sucking up bits from the surrounding environment and merging with others.
Critical mass, in SV it's the right kind of people, in nanoengineering it's the right kind of molecule, either way, once it gets going, you just hang on for the ride.
*http://en.wikipedia.org/wiki/Critical_micelle_concentration is one nanoengineering example but there are others.
For instance, here in Blacksburg, VA (Virginia Tech) a few local entrepreneurs and Angels are trying to get the startup community here off the ground. We've gone from little activity, to having a populated co-working space and regular meetups. The community is small and close; which is great for all those involved.
However, most companies that start here still aspire to move out to the Valley. The opportunities there still dwarf the opportunities here, and we're constantly in danger of losing what few founders we have.
Granted, Blacksburg isn't exactly a geographically optimal spot for techies to flock to. But is it possible that the larger hubs such as the Valley have too much pull for smaller communities to really take off?
London Hacker News is now the biggest (or top few) monthly startup meetup here.
1) Huge risk tolerance, and of a different sort than Wall St. The risk model of the startup ecosystem is different than for the banking system., in fact it's the inverse. Wall St. tends to chase returns (especially in trading, which has become a huge part of their revenues), and quarterly performance evaluations are even structured around that. But chasing ever larger returns based on leverage and debt entails ever more risk, exposing you to the possibility of catastrophic, systemic loss. The higher the return, the more exposure to company-ending loss.
In the startup world, many small bets are spread across many companies, 90% fail, 9% succeed somewhat, and perhaps 1% hit it big. But the ROI from that 1% more than makes up for all the small losses of the 90%.
Graphing the startup ecosystem ROI on chart would look like a line with a negative slope, punctuated by positive spikes. Whereas graphing the banking system's revenue would be inverse - a positive slope, punctuated by negative loss spikes.
Silicon Valley seems more comfortable with and tolerant of the periods of negative ROI than any other culture I've observed, supremely confident that the positive spikes do happen, and that you don't even have to guess exactly where they'll come from as long as you play the odds and spread your bets. It's just an article of faith here.
2) Innovation pervades everything, from academia, tech, and business, to social, even spiritual. By way of example, one of the first people I met here was a guy studying to be a Shamman. Anywhere else in the US, especially the east coast, such a thing might raise eyebrows, but here it's just par for the course - unbounded experimentation with anything and everything. For another example, is there anywhere else in the US that something like Burning Man could have become what it has? Doubt it. Innovation is universal here, not applied in some domains (tech) but stymied in others (social, spiritual), it's applied everywhere.
Those two also seem to reinforce each other. Risk tolerance begets innovation begets success begets risk tolerance begets innovation begets ...
Plenty of places have some degree of innovation, but I'm not sure there's anywhere it pervades culture to the extent it does here. That's one more big thing other startup hubs are up against.
We've got strong networks of enthusiastic people (http://www.hackersandhustlers.org) started but no clear roadmap how to go to the next level.
Michigan in general imho has two problems to overcome:
1. Lack of angel investors
2. Experienced people willing to take the risk of working for a startup. The economy has been so brutal here for the past eleven years that it can take a long time to land a new position if the startup fails.
This is "economies of agglomeration", and it's basic urban economics. http://en.wikipedia.org/wiki/Economies_of_agglomeration
I'm going to guess that this happens in the entertainment industry as well. The similarity being that the person you are rooming with or working with who has a bit part on some show with you might be the next big star. So I would imagine people tend to be nice and helpful to people in any field where there is a big prize and it's not easy to tell (like with sports) who the next star or Spielberg might be. Because in addition to skill (which many have, as has been said with acting for example) there is luck and landing that key opportunity that launches your career. And if you happen to have known or have been friends with that successful person it could only help your career.
pg's description of his day in Palo Alto is telling. I don't think he learned anything from these interactions, or if it ever led to any concrete action. But it helps sustain the idea that what you are doing matters, or could matter. That is the single biggest psychological stumbling block for the people I know who are in startups. There's this nagging sense that maybe they are just throwing all this time and effort away for nothing.
It's possible that the reason why other cities are "startup killers" is that this optimism is, to some extent, a shared delusion. If there were a town in the USA where all the lottery winners moved to, the people who also happened to be there would have completely different ideas about risk.
But the Bay Area is that town for internet startups. Although there are real benefits to moving here, I bet there's a strong delusion-enhancing component too. Which is good for VCs, but perhaps actually maladaptive for the individual startup founder or employee.
http://news.bbc.co.uk/2/hi/business/6355289.stm
Funny - I mention a chance encounter helping us a lot (meeting FB's head of data at a party), and then the vibe being optimistic and ambitious (and we were working out of the then Twitter office in South Park). We did also bump into Ron Conway one morning on the way back from kickboxing.
For example, you start a site for college students and you decide to move to the Valley for the summer to work on it. And then on a random suburban street in Palo Alto you happen to run into Sean Parker
Is there much difference between living in San Francisco and Palo Alto in terms of how much living/working there helps your startup?
And in these terms, is there any difference between Mountain View and Palo Alto?
Mountain View is cheaper than Palo Alto. Otherwise they're similar.
This is the key. Stumbling into friendships with just a handful of amazing people will change your life by orders of magnitudes. There's a simple probability explanation:
Let's label the group of individuals who are in the top 10% of driven, creative people "Group X".
If Joe and Bob are both in Group X but never meet, their combined total output is 2.
If Joe and Bob meet and become friends, they multiply their output by 1.1 so their new combined output is 2.2:
Joe&Bob = 1.1(Joe + Bob)
2.2 = 1.1(1 + 1)
And exponentially it grows:
Joe&Bob&Sue = 1.1(1.1(Joe + Bob + Sue))
So you can literally calculate the expected value of Joe's output by simply calculating the probability that he will meet a Bob and a Sue and so on...
Joe's Expected Output = 1(1.1 * Prob(Meets Bob)) * (1.1 * Prob(Meets Sue)) ...
The probability of meeting driven, creative people in the Valley only has to be a tiny bit higher to see drastically different outcomes. It's a lot higher, and so we have orders of magnitude discrepancies.
This is why I think for places like NYC, London, etc (i.e. any financial capital) it will become increasingly difficult to create a startup culture. Being unemployed in those cities is NOT cool.
* Living and working outside a startup hub, you are more likely to encounter a problem nobody else has worked on before. In startup hubs, you have large number of startups working on small number of similar problems, while large chunk of profitable opportunities remain untapped. Why? Typical startup people don't encounter these problems. They are not talked about on startup blogs and you won't encounter that problem walking down University Ave in Palo Alto. In many cases, these opportunities are taken by old school, dinosaurs-like software firms who overcharge customers for their crappy software.
* Living outside a startup hub, you are exposed to users who are a good sample of the general population. This is not true for startup hubs, where users a lot more tech-savvy. While it seems at first that being surrounded by tech-savvy users is a good thing, this in fact may be a problem because building your startup based on feedback from these users may steer you in the wrong direction. You end up with couple of thousand "early adopters" who are enthusiastic about your product, but you are not able to expand further because your product just doesn't resonate with a true average user. On the other hand, if you can get a true average user to be your early adopter, the feedback you get from them will help you make a product which is attractive to a large number of users.
Of course, hubs are way overrepresented in the past success stories. However, more startups are started in the hubs, so it's not clear how actual success rates compare. I would love to see some stats for that.
Your point about the "general population" is well taken too, especially if you're a company selling to other businesses. Most of the big companies in SFBA, and most of the companies you'll talk to period if you HQ out there, are software companies. Selling software to software companies is hard. Whereas if you HQ in Atlanta, you've Home Depot, UPS, Coca Cola, big banks, and so on.
There is clearly a kind of startup that benefits from being in SFBA so I don't want to sound like I'm saying there's nothing to this "startup hub" thing.
Think of it as a market inefficiency (albeit one that is difficult to "fix"): the stickiness of people's locales prevents them from maximizing their opportunities and decreases demand for their services in SFBA and increases their supply in (say) MSP.
99% of all good ideas in computer security were discussed on the cypherpunks list in the 1990s. I'm sure there are or were other subculture groups online equally useful.
Right now issues like effective user interface are being solved and are general enough across disciplines/markets that the results can be shared by everyone for everyone. But as internet startups specialize in finer and finer ways, focusing their products and services on smaller and smaller niches, the struggling entrepreneur will require an equally specialized knowledge. Startup towns have been ideal for sharing the knowledge of how to run an internet startup, but when that knowledge becomes more common and less geographically constrained, I'd wager we'll see Sector Specific regions ascending.
We said we'd move to the Valley if we were accepted to YC this winter, but I think the culture over there might be reason enough to do it regardless.
And it should not be of any surprise in any kind of hub ,that even if collaboration does not happen abetment will happen. Purely because of the large presence of like minded people.
One good thought experiment would be to think of former hubs that have lost their culture. Thinking of that,I realize only hubs formed around matter (cities that sprang up around mines and oil wells) have been lost while those that rose on ideas will stay for a long time thriving with life,hope and innovation.
PS: I am a little surprised that PG notes that he meets so many techie people in his day to day life.
On the same note, the investors, lawyers, and employees in startup hubs have 'standard terms' where as in other parts of the country the terms get extremely complicated with things such as tranches. They understand what it takes to succeed since they've usually done it before and are there to guide the company.
If anyone has any ideas for a data source to look at besides census data, Crunchbase, and maybe national chain cafe store locators, give a shout. pg??? I'd obviously share the report...
1. You sell to startups 2. Your business model is cash flow negative, or you don't have a business model at all
If neither is the case, a "second tier" hub like Austin or Santiago (Startup Chile) will do fine with lower salary costs.
"Having people around you care about what you're doing is an extraordinarily
powerful force. Even the most willful people are susceptible to it."
A key that America has is her ability to allow for iterative steps ( which often pose as failure ) before a great idea can execute commercially. Other countries seemingly have deeper social stigma associated with failing and philistine impatience. This could be changing though at rates faster than perceived within the valley.
http://en.wikipedia.org/wiki/Renaissance is a great study. In particular, characteristics asymptotic re innovation.
" They say that coming events cast their shadows before " - Ada, countess of Lovelace
It's that subconscious influence that makes it so hard elsewhere. If enough people tell you that you're crazy, it takes a really special person to be able to shrug it off. I think the interesting thing here is that having a great co-founder has a very similar effect. I would even go as far as to say startup hubs and co-founders play a very similar role in keeping you going.
I'd appreciate any links to the places you've mentioned this.
In particular,
There are millions of small businesses in America, but only a few thousand are startups. To be a startup, a company has to be a product business, not a service business. By which I mean not that it has to make something physical, but that it has to have one thing it sells to many people, rather than doing custom work for individual clients. Custom work doesn't scale. To be a startup you need to be the band that sells a million copies of a song, not the band that makes money by playing at individual weddings and bar mitzvahs.
I'm not sure it's the best way to distinguish, but it is how the term is often used, especially in the context of startup funding, where "startup" is used as a synonym for basically "the kind of thing a VC would want to fund".
"...a startup is an organization formed to search for a repeatable and scalable business model."
Hit the nail on the head, explains exactly why I'm hungry for a mentor, even more so than an investor, enough though my savings is running out.
One thing I've realized why pg is so insightful is because he thinks really hard by digging in deep, about questions that most people don't spend more than a few minutes thinking about after saying, "hmm. that's interesting." Most people don't spend more brain-cycles after that obsessing over it.
Lesson learned: really really obsess over your area of interest, your craft :)
"Cities, the dense agglomerations that dot the globe, have been the engines of innovation since Plato and Socrates bickered in an Athenian marketplace."
He also has section in the book assessing the "Rise of Silicon Valley", and makes the point the "innovation clusters in places like Silicon Valley because ideas cross corridors and streets more easily than continent and seas." And he points out an amazing correlation of the geographic proximity of patent citations. "...even in our information age, ideas are often geographically localized."
As the NYT book reviewer of Glaeser's work put it... "Greater density is the goal: more people means more possibility."
Ergo, a greater density of people working in similar modalities means a greater possibility of achieving within those modalities. It also means that those working in other modalities can encounter difficulty getting support, especially when directly competing for resources with the dominant modality. (I.e., startups v financial services industry for programmers.)
What's different about NYC is that there are so many people in great density, that it's still possible to have vibrant secondary modalities that may never supplant the (multiple) dominant ones. It also means that there may be cross fertilization between modalities not possible in other innovation clusters.
What's different about Silicon Valley is that it's a "city" with a single dominant modality - tech (currently Internet) innovation & startups. You can walk entire blocks in NYC without running into someone involved in a tech startup, or go days without talking tech at a social engagement. That is almost unpossible in SV. So SV's advantage over NYC's shear density of people is a density of people operating in the same modality.
Lastly, there are many geographically distributed innovation clusters/startup hubs that each operate in a different modalities. PG is understandably writing about the types that occur in Silicon Valley, because that's what he's most familiar with. And, they produce undeniable, and very public, results!
That's why I so much wanted to come to startup school... I was denied, and apparently there isn't a waiting list..? (or, I was also denied the waiting list).
But why not organize another sort of event: a "chance meeting machine" where you would come to some place during a weekend and have many opportunities to meet interesting people. Many different events, maybe all around town.
A Startup school without the "class" part, and therefore with a much less strict numerus clausus.
I have chance encounters all the time with people who have interesting knowledge about startups and startup tools that could help me.
There is a huge social group who don't think starting a startup means being unemployed. The numbers are certainly on my side at hacker news.
At hacker news, starting a startup is both fashionable and reasonable.
I'm just a lurker, but already I get huge benefit. My guess is that people who interact a lot get even more benefit.
What does San Francisco have that hacker news doesn't?
Silicon Valley has a larger concentration of startups per capita, as people from around the country go there to try a startup. As such, I'm sure it also has a higher number of failed startups per capita. Instead of looking at absolute numbers, the chance that a given startup will succeed is the key metric.
This all makes thhe demise of Boston even more stark and sad. It had every advantage except weather!
I don't really have time to put together statistical backing for my argument, but based on talking to a bunch of new startups in security tech, it is definitely an anti Boston trend.
Everyone here is very helpful.
Which is also a stereotype. While I believe there are very many nice and helpful people in NYC, there is a still very much a "me-first" attitude. At the end of the day humans ultimately strive only to better themselves. Take that statement with a grain of salt, because enabling oneself can be manifested through social means. Hence why over time humans have evolved to understand that they can better themselves by social means. Either method is still a medium to which we can attain personal fulfillment.[1]
I think what pg is getting at is that the culture in SV leans much more towards this - that we can better ourselves by the help of others. Financial industries work better when individuals strive independently. I'm not narrowed minded enough to think that these are absolutes but more of leaning towards one medium over another.
[1] - paraphrased from Driven - http://www.amazon.com/Driven-Nature-Shapes-Choices-Warren/dp...
That's an interesting comment. I'm curious as to what you mean. In my limited experience, LA/entertainment culture seems to be the closest thing to startup culture.
I can provide perspective from working for a startup in SF in 06-07 and a startup in Chicago now... In Chicago noone thinks you're unemployed if you say you work for a startup. That was the case a couple of years ago, but with Groupon and a TON of other companies that just isn't the case. The difference is just that more people are doing startups in SF vs. consultants/bankers/fortune 500 workers... Go to a bar here and girls think it's so damn cool that you are running a startup (apparently girls are obsessed with all things geek - http://www.chicagobusiness.com/article/20110924/ISSUE03/3092...).
Re: the coffeshop thing- just by chance (ie we didn't know this going in and it is NOT the startup hub area within Chicago), within 3 blocks of FeeFighters office are: 37signals, SproutSocial, Threadless, Crowdspring, and several other startups. I don't see how it helps us significantly to bump into them (though we have helped our neighbors when they've had merchant account issues). Many people think it is a wasteland anywhere not the valley but I have seen that not to be the case here, in New York, and even in Pittsburgh.
So what is the difference between here and there? The largest differentiator I've noticed between the valley and elsewhere is funding. We raised most of our money in Chicago from VC's we really like, but could have raised easier on the west coast. A lot of top VC's prefer to have you close and told us flat out they would fund us if we moved there. We had term sheets dependent on us being in Austin, SF, and LA. I don't think it has had an effect one way or another on our business thus far.
Startups need money, and often flock to where it is. Things are changing all over the place though (Rich people in Chicago all of a sudden want to fund startups, will be interesting to see if that continues post-Groupon IPO)
It also depends on your type of business. If you sell mainly to startups, you should probably be in the valley.
I encourage startups to base their businesses where they'll have the best chance at recruiting the best talent. The next search engine would be well-served starting in the valley, especially if it's an ex-Google team. Similarly, storage companies continue to thrive in and around Boston, as they can draw talent from EMC. New media startups with a heavy emphasis on design-as-differentiator do really well recruiting in NYC.
By this reasoning, it might even make sense to base your web startup in Florida, if your network high-quality development talent is in Florida. I've seen this approach work well in unusual startup geographies, especially when it's a leader of an ex-team that is getting his or her band back together for second (or third) time.
Pick a geography that will play to your recruiting strengths.
That's because the marginal utility FeeFighters will get on average out of any given serendipitous moment is a lot less than, say, an unfunded startup no one's ever heard of.
If you graphed that marginal utility over time, you'd probably find that it's multi-region: linear in some parts, exponential in others.
What the Bay Area and New York have in technology is an environment where (at least for now) people can bounce back from job loss (a likely eventual outcome of a startup) quickly and without having to move halfway across the country. I think this is a big motivator. Startups can thrive in the Bay Area because a person whose startup fails can find a good job shortly afterward, without having to move to another city.
Also, startup generation is a nonlinear function of the desire to launch them, because of the need to find co-founders and investors.
Continuing the same point: it is in fact not all that stressful finding tech jobs in any major metro area now. I'm in Chicago, we have offices in NYC (our HQ) and Mountain View, and it's hard to hire in all three places.
I'm sure there's a grain of truth in what you're saying, that SF can accumulate talent because talent moves there expecting the red-hot market in the area to mitigate risks. But things can turn quickly.
http://en.wikipedia.org/wiki/Paul_Krugman#New_trade_theory http://en.wikipedia.org/wiki/New_Trade_Theory
People do 'startups' border to border in the US, in communities tiny to huge. Those startups might be a pizza carryout, electrical engineering company, franchised fast food restaurant, white tablecloth restaurant, law firm, CPA tax firm, auto body shop, photo studio, boutique dress shop, Web site design and programming firm, big truck/little truck product supplier, etc. Yes, Silicon Valley has a high concentration per capita of venture funded information technology startups, but there are startups all over the US.
Do the venture funded information technology startups really need a very special environment to keep going?
Let's see: An auto body shop, white table cloth restaurant, or even a lawn mowing service need more expensive capital equipment than an information technology startup. E.g., just a lawn mower can cost $13,000, enough to buy parts enough to plug together 10 good servers. A Web design firm anywhere in the US, or the world, has nearly all the same software challenges as a venture funded social Web site in Silicon Valley.
Does Silicon Valley really have a big advantage on the best creative work?
Let's see: Let's look at some of the best creative work in, say, music: How did Stradivari and Guarnieri build their violins, Vivaldi, Bach, Mozart, Beethoven, Mendelssohn, and Paganini write for violin, Heifetz get started in violin all in really small communities where what they were doing was astoundingly rare and world class on an historic level? I mean, who the heck was Mozart going to go to for help on how to write interesting, novel harmony? Where was Bach going to learn about key modulations? Who gave Mozart the crucial help he needed to write his operas or Bach to write his organ pieces or his violin 'Chaconne'? No one.
Who helped Newton with optics, calculus, the law of gravity, and the second law of motion?
Who helped Watt with the steam engine?
The history of the best works in art, science, engineering, and technology is awash in people doing historic world class work in what in Silicon Valley would look like near total isolation.
So, (1) startups happen all over the US and (2) much of the best work in all of history happened in near isolation. So, Silicon Valley is not needed for either startups or good work.
There's another candidate reason for the high per capita concentration of venture funded information technology startups in Silicon Valley: On average and in nearly all cases, the venture partners have at best meager qualifications in anything technical yet have to justify their risky investments to their general partners and limited partners.
Their best justification is, may I have the envelope please? Thank you. Here is it: "Join the herd!" So, get a place on Sand Hill Road or nearby and do much like everyone else does. So, 'fit in'. Talk to each other a lot like gossip among middle school girls.
So, net, what Silicon Valley has a high concentration of is not really startups but just venture funded information technology startups, and the reason is not that Silicon Valley is an especially good place for the entrepreneurs to get the work done but just that the venture funding is concentrated there because the venture partners do not have the qualifications to evaluate projects on their own and, instead, get along by fitting in and joining the herd. Net, the concentration is due to the propensity of venture partners to form herds.
Once again I'm glad for US national security that the Silicon Valley venture partners are not DARPA, NSF, or NIH problem sponsors.