Tech Startups Don’t Need the Valley Unless They Need VC | Hacker News Reader

Tech Startups Don’t Need the Valley Unless They Need VC

gigaom.com

It's one reason to go to the valley, but not the only one. When I moved to the valley last year, everyone asked me why? I said "People". Those people could be new friends at other startups, future talent for my company, future informal advisors, potential investors, or an awesome bartender at the Olde Pro in Palo Alto. The Valley exposed me to people that I couldn't have met anywhere else.

If you love technology and startups, you should probably give it a shot out there. Just because you move doesn't mean you'll have magic VC genies grant you three rounds of funding. You will definitely meet some awesome people along the way.

Agreed.

I live over in Australia -- My cofounder and I are in Bay Area (visiting) and the access to having access to the people/minds here is astounding... And as you allude to - it's not just hackers, it's a whole ecosystem of people that can contribute to your idea.

Agree about the other benefits in addition to access to VCs, but it's still arguable if they're worth the higher cost of living. If you're a bootstrapped startup, you'll hit ramen profitability much sooner elsewhere. When you have an infinite runway, you'll have infinite time to find people as well :).

To me the valley seems like a good place to grow if you're already profitable and can't find enough talent in whatever location you started. For a business with a few guys doing product development in an apartment and counting every penny, I just don't see the justification for the cost of living.

OTOH being out here is great for meeting other startup minded technical & business people. You're out here too, what's your experience been?

Living in the Valley is not especially expensive for founders. Buying a house in the Valley is notoriously expensive, because there is so much speculation built into prices (even now). But renting a two-bedroom apartment in Mountain View is no more expensive for equivalent quality of life than in Boston.

We gave groups the same amount of money in Boston cycles as in Bay Area cycles, and we never noticed any difference in how long it lasted.

It may be similar to Boston, but it's far more expensive than living in many other parts of the country (or state).

My father's mortgage payment in North Carolina is one-third of my (shared!) rent payment in San Diego.

When I hear of my younger friends buying houses back home, I am reminded of the real monetary costs of the life I lead.

If you can overcome the drawbacks of being away from a creative urban center, you can save a lot of money on housing.

http://utica.craigslist.org/apa/1077482911.html

$695/mo for a 2-bedroom apartment. Not a great neighborhood but could be worse. You'd be lucky to share a bedroom for $350 a month in Boston.

Many other expenses don't change much, though, like food, and some go up, like heating and electricity. And in Utica, the chance of overhearing someone talking about PhD-level computer science while you're out to eat is virtually zero.

Living in the valley was actually much cheaper for me than Miami. That's from housing to my car (the lease was cheaper out there, so I waited till I was situated to get one) to food (jack in the box value menu ftw). I'd suggest living with others, as the 1 bedrooms do seem to be higher priced to rent. Gas is never fun, but that's most of California. Take the 22 or 522 bus. It runs 24/7 down el camino and costs 60 bucks a month for an unlimited pass.

Like staunch mentions, there are cheaper places to live in than either SiV or Boston. Living in Austin-TX would cost half as much for instance. Living in developing countries would cost even less (at least if one doesn't insist on 100% equivalent quality of life).

Disclaimer: we're based in the valley and are happy for it, but that's because we're profitable anyway.

I did this. I built the prototype for my first startup in Goa, India, using GPRS internet (unlimited access for a fixed price, because it was a beta).

I even recommend it, assuming you can connect with real alpha customers before moving over there, or if you have a bizdev guy stateside. I had to download overnight but it was workable. I spent my days floating in the pool reading books like 'Design Patterns' and Java/Eclipse books to help me understand Eclipse well enough to build my app using it. I programmed by night. I got the prototype done.

The ticket over from Atlanta was $1200 or so. My rent was $400 a month in a 4 star resort on the beach (off season), and that was my only appreciable expense because food was basically free. There was even another entrepreneur with a PhD there doing the same thing, and he had brought his entire book library with him in an ocean container!

BTW - I came home with about six feet (when stacked) of books, because they were so cheap. A good technical book in paperback is about $5 at the TATA bookstore at IIT in Bangalore. I couldn't help myself, I bought a complete library and two suitcases to carry it home in :)

Disclaimer: I heave a 'weak stomach' and I got dysentery twice, methanol poisoning once and other weird stuff in between, but mostly they are avoidable if you get your shots, go vegetarian (they make it EASY), and be super strict about bottled water.

I met several hackers who moved to India to be able to work on whatever they wanted without doing much in the way of consulting. One guy was there productizing Israeli mesh networks to supply wifi and VOIP to Tibetan refugees in Dharamsala. Another guy was building FOSS tools for college professors. There is an entire subculture of people that do this.

Just watch out: its easy to get distracted. And check your calendar and remember the monsoon is no joke :)

Do you have any more writing online about your experiences there?

Not really, no. I wrote a lot about it while I was there actually, in a notebook, but it was stolen on a train. Have any particular questions?

Not really, it's not as if I'm planning it myself. Just generally interesting stuff :)

Seriously you can buy a mansion for $300,000 in Duluth http://news.ycombinator.com/item?id=518379

Yeah, but then you have to live in Duluth

I moved from Pittsburgh, PA to the South Bay last summer. While the cost of living is somewhat higher in the Valley, in my experience it is not as much higher as it is usually made out to be (except for buying a house, as pg mentioned).

* Housing: I'm renting a 4 bedroom / 3 bathroom house in a nice area of Sunnyvale with 2 friends. My share of the rent is about the same as the rent I was paying for a large 1 bedroom apartment in Pittsburgh.

* Food: Restaurant prices seem to be about the same or a little bit higher. Groceries are definitely more expensive. The first time I went to the grocery store, all of the prices seemed 10-20% too high. However, with some careful shopping, you can stock up when items are on sale and not pay much more than I was paying in Pittsburgh. Buying fruits and veggies at a farmer's market also helps keep the cost down and the nutritional value up.

* Car: I drive more often and further now. The Valley is not designed for pedestrians. With the rapid fall of gas prices, this hasn't been a big deal for me, but plan on spending more on gas and maintenance if you don't currently drive much.

* Taxes: California's sales tax is very high. It's going up by another 1% on April 1, to 9.25% (or more, depending on where you live). California also has one of the highest personal income taxes in the country. I'm not happy with this state of affairs, but I think it is worth it to be in the Valley. In the long run, this could really hurt California, though.

In short, it is more expensive for me to live in the Valley than in Pittsburgh, but it's not as bad as I was led to believe. Perhaps this is because I don't have much interest in buying house at this stage in my life. Most of the people who told me the cost of living was "insane" in the Valley were family men who already own a house and were factoring the cost of replacing that house into their calculations. For the rest of us, if you can get by in some other major U.S. city, you can probably get by in the Valley.

Definitely about the people. Unless you are the founder of a company, you are never working for the _current_ company, but instead are working for the next company (in which you will be a founder, or an early stage employee that gets a good chunk of equity) - you need to demonstrate that you are someone they want to hire.

With the possible exception of craigslist, where they manage to accomplish heroic feats with very little in the way of staff, any company that is eyeballing $1B+ market-cap will grow to hundreds, and possibly thousands of employees.

Where else on earth can you find such a concentration of DBAs, Sysadmins, Designers, Tech-Friendly-Lawyers, Developers, Product Manager who have all three of the following characteristics: o Very, Very good at their job. o Real world experience in several major companies. o And, most importantly, willing to go to work for a "lets throw caution to the wind" startup.

Change is the only constant in the valley. People here, for whatever reason, are just comfortable changing jobs, sharing information, and building new things.

The weather is astoundingly good. Never too hot or too cold - 350 / 365 days in the year. And the other 15 usually mean having to actually turn on your heater or open a window on a warm summer night.

The peninsula, for the most part, does suck in terms of lifestyle. There are exceptions (Murphy Street in Sunnyvale, Good portions of San Francisco, downtown San Jose on a Saturday night) - but, in general, it's mile upon mile of suburbia and strip malls. This is not Manhattan or downtown Vancouver. (On the flip side, with few distractions there is more time to get work done)

The major downside is that unless you are filthy rich or already a home owner, the only sane strategy (unless you don't mind commuting for 90-120 minutes each morning) is to rent.

With all that said, if what you are looking to do is grow a company organically, and have your eyes set on something more sane like a $10mm-$100mm market cap over 5-10 years, there are probably a lot of ways to succeed without being in the middle of it all.

Your probability of success is higher in the Valley. Doesn't mean you can't be successful elsewhere. I don't understand why people can't reconcile these two statements.

If you like your lifestyle where you are, by all means, stay. If you can find investors, lawyers, and accountants (assuming you want them) that you trust, stay where you are.

But if you're just a couple of crazy kids with a work ethic and an idea to change the world, and if you are willing to do everything possible to give your startup the highest probability of success, go to the Valley.

Your probability of success is higher in the Valley

Your probability of flipping heads is higher than your probability of rolling 1 on a six-sided die: X = .5, Y =~ .167. I have yet to even hear of a good setup for measuring X or Y, to say nothing of actual numbers for them, for measuring "probability of success in a startup". Heck, I have never even heard a defensible universalizable definition of success for a startup.

Incidentally, and this has always bothered me about statements like "give your X the highest probability of Y": do people routinely get the opportunity to run a simple random sample of startups, marry a simple random sample of women, raise a simple random sample of children, etc? No? Then why do we bastardize statistics in this manner.

Look, you get one bite at the apple per idea/situation. A random sample isn't an appropriate counter-factual. Your job as an entrepreneur is to maximize your chances for success given the situation at hand.

I suppose "chances for success" wouldn't have set you off, and I acknowledge that. But we're at the point where we mock people for using "beg the question" incorrectly and ignore the substance of the argument, which isn't really productive for others reading this thread.

The only people I have heard that say this, travelling around the world, meeting multiple 9+ digit exit entrepreneurs and tons of 7+, are the ones that started in SV.

I tend to think based on what I read that there are a lot more large exits inside SV than outside. But, there seem to be a lot more early deaths and me-too companies there as well.

Are you optimising for the wrong solution (insane exits)?

[edit: early deaths = companies, not people]

You're being very frequentist (http://www.statisticalengineering.com/frequentists_and_bayes...).

You don't have to have a random sample to estimate a probability. In the Bayesian interpretation, you can have a reasonable prior that you update as you collect more data. For example, a meteorologist can look at the clouds and "guesstimate" that there's a 50% chance of rain tomorrow. A frequentist would object and say that you can't take lots of random samples of tomorrow to estimate that probability. The Bayesian is willing to take the meteorologist's guess as a prior, and update it as & when more data becomes available. In this case, I think Sachin's statement is reasonable in the absence of any real data.

You've got a point, in the sense that a lot of the "probabilities" are just best guesses based on anecdotal evidence. But pragmatically, I don't see much of a choice; it would be paralyzing to try and gather all that data before making a decision. And, in my mind, it's usually better to make that decision on imperfect information- like the aphorism that "Your probability of success is higher in the Valley"- than no information at all.

I refer to the book: how to measure anything. Measurement is the reduction in uncertainty, not paralysis by analysis. Often you can get great reductions in uncertainty with simple methods if you think for a few minutes.

Some examples that the book may help you with could be looking at the governmental statistics for new businesses by geographical location (e.g. if they are better, then this must show in turnover right?). Geographical distributions of the last 10 years Fast 50/100, breaking the groups up by funding type.

Are you so certain that the probability of success is higher in the valley? It seems to me that the majority of the people who say this have something to gain, directly or indirectly from this being promoted as fact. This is usually an indicator of a falsehood.

That looks like it might be a worthwhile book. Thanks for the recommendation.

I'm not "so certain that the probability of success is higher in the valley," but there are two main reasons I think there might be something to it: firstly the fact that people whose opinions I respect are saying it, and secondly the anecdotal-evidence-based but sensible conventional wisdom about meeting more relevant people (whether for funding, employees, advisors, bouncing around ideas, etc.) in the valley.

I haven't noticed as much that "the majority of the people who say this have something to gain, directly or indirectly from this being promoted as fact," but maybe I haven't been paying enough attention. :-)

I am a full time skeptic and tend to notice these things :)

I disagree. Have you taken a look at the culture in the valley? They are all about helping each other.

i.e. I think this story was told at LeWeb.

Seesmic founder lets Friendfeed guys know that their products would work really well together. The Friendfeed guys call back and tell him to drop by to discuss it. Loic hops into his car, drives 10 minutes to the Friendfeed offices, and after an hour or so of meetings, Friendfeed adds Seesmic to their site.

Outside of the valley, something like this isn't possible. The spirit of startups lets companies be a lot more relaxed and open to new possibilities.

...outside the Valley, most people have heard of neither FriendFeed nor Seesmic. ;-)

The big advantage of living outside the valley is that you're closer to real customers - people who don't live and breathe technology 24/7. That can help you or hurt you, depending on your target market. Could something like MySpace, AOL or PlentyOfFish have started inside the Valley, considering that they succeeded by catering to idiots?

There are plenty of nontechnical people in SV too. There are dentists and cooks and policemen here just like everywhere else.

AOL, incidentally, did not cater to idiots initially. Before the web it was something a lot of hackers used.

The problem with catering to idiots is that unless you're an idiot yourself--the particular kind of idiot comprising your target market--you have no idea what your customers want. Also, this approach would probably be too demoralizing to sustain for anyone without the record-label-executive state of mind, which is the opposite of the hacker state of mind.

>> Outside of the valley, something like this isn't possible.

We do have email, IRC, etc etc these days.

And the phone.

I was talking more about the fact that it took a few hours from seeing an opportunity, to finalizing the deal. Outside of SV, it would take a few weeks just to arrange a meeting. And chances are the company would end up passing on the partnership because they don't want to trust a fresh startup.

Agreed, but it's way slower at building trust. Especially compared to the opportunities people have in the valley to socialize outside of some deal-making session.

Not in my experience, the example given was a "link exchange request". These go on all the time over email, and work pretty well.

Perhaps it's just me, but I often prefer dealing with people over email/IRC/etc than face to face for a lot of things.

Some people like Silicon Valley, some people don't. To each his own.

Silicon Valley has a huge population of smart tech workers. There are certainly advantages to running a tech startup there. Other aspects of the area detract from the quality of life, however.

I live in the bay area, but can't stand Silicon Valley's feeling of endless suburbia. I don't think strip malls and sprawling apartment complexes make a good living environment for me. Some people prefer it, however. Silicon Valley is for them. It is not for me.

The guy in the video makes a point about external funding: a lot of well-known, large tech companies accepted money only after they were already profitable and did so in order to expand. That seems really sane to me - capital seems like a magnifier for a process that either produces money or consumes money. I suspect a lot of companies that succeed with external money would have succeeded without it and that a lot of companies that fail without external money would have failed with it.

There is not much substance to this article. It doesn't really even build on the title. It's just a bunch of quotes about VC funding and startup culture by a couple bloggers who live in Wisconsin and China. And, a video of a random investor from Texas.

I feel like they're riffing about an imagined startup culture that died out in 2001.

Maybe it isn't what you meant but to me you post comes off as... "What would they know. They aren't from the valley"

I really just meant what I posted - there isn't much to the article.

On the other hand, there is some truth to your comment. Aside from the guy who lives in China, there wasn't anything that suggested the authors had even been to California.

There are real disadvantages to living in Silicon Valley, and they didn't mention any of them. Instead, they brought up things like work culture and being showered with VC dollars, which actually aren't the big problems.

Dude, Google is your friend.

Mike was being coy when he described himself as a "former Microsoft employee", but dismissing him as a "random investor from Texas" is silly.

http://people.forbes.com/profile/michael-j-maples/49137 http://query.nytimes.com/gst/fullpage.html?res=990CE2D81038F... http://www.alibre.com/corporate/management.asp

"..and forces entrepreneurs to build a startup that can make it as a business from day one."

I think the conclusion borders on comedic. Only a miniscule # of companies should not be thinking of this way.

This inspired me:

Looking for a great city to start you startup? http://news.ycombinator.com/item?id=518379

Silicon valley is unacceptable because Norcal has great white sharks, which scare the pants off me and I can't live by the ocean and not surf :(

Of course tech startup don't NEED the Valley, but to me(German resident) it seams that the Valley is a good place to be for a tech startup.

Is it surprising in any way that a bunch of people not from the valley say that being in the valley isn't important?

The rebuttal writes itself, doesn't it.

No more surprising than the fact that so many people in the valley say being in the valley is important.

I notice that in the bay area, or at least SF, "startup" is assumed to mean a web site or web app of some sort. So when I hear claims that the bay area is the best place for a startup, I don't necessarily disagree, but I parse "startup" as "web app startup".

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