Why Facebook went west and Boston lost out | Hacker News Reader

Why Facebook went west and Boston lost out

boston.com

18 pointsbyteCoder27 comments

Kirsner didn't explicitly mention this, but notice here that it wasn't another VC that invested in the deal Battery passed up, but an angel. Angels are a lot bolder than VCs.

The big difference between Silicon Valley and Boston in my experience is that the valley has more and much bolder angels. The VCs in the two places are similar. Boston VCs have a bit less testosterone than valley VCs, but it's not a huge difference. The real difference is the angels. And unfortunately for Boston, angels are the deciding factor in how big a tech hub a city becomes.

Which brings me to a question I have always wanted to ask... If a startup already has Angel funding, is there any additional advantage to be derived from moving out west?

Advantages: more hackers, more angels(you can always get more funding, right?), more partnership opportunities, warmer weather, not everyone wheres a Red Sox hat, Arnold will be your governor.

Disadvantages: more expensive, have to build a new network, expensive to move(both time and money), Arnold will be your governor.

Yes. For one thing, it's probably not the last funding you'll ever raise. Plus there are other advantages to being in a startup hub, and SV in particular, besides the investors.

See #2:

http://www.paulgraham.com/startupmistakes.html

Is anyone else really really bored with facebook and all the news stories/hype/hyperbole surrounding it?

kinda

No.

If you don't think it's interesting, then maybe you aren't paying close enough attention. Anyone involved with consumer web should be watching FB.

Why? Not disagreeing at all, but I'm curious about further explanation.

If nothing else, it's an amazing distribution opportunity. People are building simple little apps and getting millions of users practically overnight (and making a surprising amount of money!).

How much money are we talking? I was under the impression that writing facebook apps is not really a way to make money. After all it's not a simple task to incorporate adverts.

People on google are looking for stuff. They'll click on ads if it looks like they'll find the stuff. On facebook people aren't looking for stuff. They're looking for interactions..... with other humans.... not with adverts.

Sure, if you can build a big app and then sell it to a company that just wants to 'brand' it and get some exposure that's cool, but I'm pretty skeptical you can make a 'surprising amount of money'. Care to share some examples?

A lot more than you would guess, but the details are all private (so I can't share examples, though I know of several).

Surely you can share ballpark figures :)

The advertising networks make the real money, they get to take half of what everyone else makes.

The usual is more like 20-30% override for advertising networks. Still a fair chunk of change though.

People are incredibly fickle. Wasn't myspace around this 'hype' status last year? What website will be next year? Probably not facebook.

Myspace is still huge (and growing), but Facebook appears to be much smarter and their platform is very important (especially to other startups).

plus you can't make a Myspace app :)

I think theres a far more subtle reason... because the weather _sucks_ here.

I read this far:

an online phenomenon worth up to $6 billion

Whatever. Until the next thing.

I agree. I'm bored of the over-hyping.

Whatever FB is worth, it would have been a very big deal by Boston standards to have them here.

I suspect even had Facebook gotten early funding from someone in Boston, they would've moved out to the Valley (or at least the west coast) for the same reasons many YC companies do. This is mostly a story about Battery losing a potentially good payoff, not a story about Boston losing its one chance to have a young software startup stick around.

It would depend on how much they raised. YC companies are unusually mobile. Most haven't raised enough to hire anyone, and it's employees that tie you down. Few companies move after they have 20 people, unless they get bought. So if FB had raised enough to hire that many people in Boston, odds are they'd still be here.

I think I probably would've passed on giving The Facebook money at a $15 million valuation during that first year. The article notes that the user base was in the small thousands, so not so much evidence that it had any traction. And there were certainly competitors as well (some of whom actually had a better feature set). Not to mention the whole uncertainty of deriving revenue from the site, an issue Facebook's still dealing with today.

edit: I missed the latter part of the article. It indicates that Thiel chipped in in half of Zuckerberg's "minimum," for well short of his proposed valuation to Battery.

I don't know what numbers they had bothered to graph up but it seems to me that the evidence of traction was very strong from very early on.

1000-2000 users and a $15 million valuation? That seems pretty overpriced to me: even if you could see a positive future, FB's success outside the Ivy league crowd was no means guaranteed.

It's worth noting that Peter Thiel later put in $500,000 for 10% of the company, which would value FB at around $5 million, and that was a few months later.

I found the article disappointing; the headline and lead promised a story about why, in general, the Valley is attracting startups away from Boston, but the article was a story about Facebook in particular.

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