Why to Move to a Startup Hub

"Back East, engineers, no matter how gifted, ranked below doctors, lawyers, Army colonels, Navy captains, business executives, and professors of English, history, biology, chemistry, and physics. This piece of European snobbery never reached Grinnell, however, nor did it turn up in many of the thousands of small towns in the Midwest and the Far West. An extremely bright student, the one possessing the quality known as genius, was infinitely more likely to go into engineering in Iowa, Illinois, Michigan, or Wisconsin than anywhere Back East."

That's from this: http://members.forbes.com/asap/1997/0825/102.html . It's great.

Coming from Cornwall (a rural part of the UK) I can't tell you how much we spend sending sales people to the cities for face-to-face meetings.

I liked the bit about VCs from Silicon Valley Vs Boston. I see London VCs, Parisian VCs, German VCs don't even get a sniff. Most amusing, and so very true. I think that may be more evidence for the argument.

monk.e.boy

1) It creates software for users to use. 2) It creates a company that owns the rights to certain software and accompanying intellectual property 3) It creates a community of users 4) It creates a team that has proven that it can create and ship a software product.

#1 is not geographically limited. You don't have to be in Silicon Valley to write software. Anyone in Duluth, MN can create software and load it on a server for users all over the world to use or purchase.

The market for numbers 2, 3 and 4 are geographically limited, however:

#2 and #4) The highest concentration of software companies in the world is in Silicon Valley. This in generally your market for #2 and #4. Your chances of interaction with someone interested in buying your IP are much higher in SV than in Duluth. Your chances of finding someone interested in paying top dollar to acquire a proven group of developers increases exponentially in SV.

#3) Many companies are interested in purchasing large communities of users. These tend to be located in large urban areas, however. If I'm Chief Acquisitions Officer (CAO) for BigMediaCo, and I'm interested in acquiring a startup that has a big community of users, it's not going to hurt if that company is based in Silicon Valley. It adds to the CAO's prestige if he has to travel to silicon valley to acquire a startup.

But, ask yourself this question: How would that CAO feel about traveling to Duluth to talk about the acquisition?

Also, the value of a network increases exponentially with the number of users in the network. In SV, it's hard to avoid networking with entrepreneurs and people in the software industry. It's really not that large, and after you've been here for any length of time, there are no more than 2-4 degrees of separation between you and everybody else in the Valley, including people who want to fund you or acquire you.

Case in point: I've been here for 1 year, and I know for a fact that there are 3 degrees of separation between myself, Guy Kawasaki and Woz, and 2 degrees of separation between 3 different VC's and me. That would probably never happen in Duluth.

Also, leverage.

A $20 mil fund in Boston acts differently than a $20 in the Valley. But take the Valley mentality, double the fund size to $40 mil, and while the approach will still very, the dollar size of investment all of the sudden becomes very similar. Funds in the Valley are bigger, they have more cash to invest, and have a much higher risk tolerance than their counterparts on the East Coast

http://www.j-lp.com/blog/2007/10/move-to-silicon-valley.html