Start-Up HubsPosted on October 19, 2007
Y-Combinator’s Paul Graham has raised the hackles of a Brit or two recently by suggesting that startups would do better if they moved to Silicon Valley!
In as much as Silicon Valley has a greater density of all the aspects of a start-up hub - great human networks, a willingness to support innovation, a community appreciation of the lessons gained from failure, an acceptance of startups inherent risk/reward ratios and large amounts of seed capital - he is of course right….
…. but Mr.Graham is really talking philosophically, as the biggest problem in moving to Silicon Valley is US immigration !
The point he really means to drive home is that “the more of a startup hub a place is, the better startups will do there” and that the biggest startup hub in the world is Silicon Valley - thus - “go west young (wo)man”.
Whilst he makes a valid point conceptually, I believe that his extrapolation of this point to the nth degree fails to consider one major issue - access. Whilst a willingness to support innovation, a community appreciation of the lessons gained from failure, an acceptance of startups inherent risk/reward ratios and large amounts of seed capital are essential to a start-up hub, they are only of benefit to an entrepreneur after he/she has access to human networks.
What “founder fuel” programs like Y-Combinator, Tech Stars and Seedcamp offer are a bit of “feed capital”, but more importantly they provide a clear and simple path for entrepreneurs to access a great human network. Provided that a city genuinely has all the aspects of a good startup hub mentioned before then the benefit gained from going to a bigger startup hub will almost definitely be outweighed by the difficulties of (and importantly the time spent) trying to gain access to the network.
Given the immigration difficulties of moving to Canada as a young entrepreneur, I would like to tailor the following recommendations to Canadians.
If you are in a Canadian city that has, in volume, all the aspects of a start-up hub, and you have good access to a strong human network - then you don’t need to move to Silicon Valley to startup - go there (with the help of your network) to expand or when you want to sell !
(For a self-professed geek, Mr. Graham does a great job at creating PR - but more on that in another post.)
5 Comments
Immigration really is the biggest issue. It is easy to go to Silicon Valley as an employee, but not as a founder. Otherwise, I would probably already have gone a long time ago.
Fortunately, Silicon Island is shaping itself up to be a nice little startup hub!
The best thing happening in Montreal now and for the past couple of years is that people are talking. Montreal has always been somewhat fertile ground for startups, and there have been some notable success stories here - but back in the day, no one seemed to speak to anyone. Everyone seemed to be off in their corner doing their thing.
Great pushback post, I think this idea of “SV or bust” is one that will need a few years to be fully realized, but as with everything internet related, decentralization is always the best (long term) bet.
Until then, you can follow my easy Three steps program to be “in” even if you are “out” of Silicon Valley…
I moved from San Francisco to Montreal in 2002 and it was the best move possible for starting new projects.
The cost of living in the San Francisco Bay Area is sky-high. Many start-ups burn through tens of thousands of dollars a month — even hundreds — paying for ridiculous real estate prices in the hottest part of the city. Building up that kind of debt means losing control of your company and your goals.
For employees, transit, housing, food and basic materials are much more expensive that most places in the world (excepting Tokyo, London, Geneva and the International Space Station). That means that you pay higher salaries for all your employees, including skilled workers like programmers and architects. My back-of-the-envelope is that tech workers in Montreal make about 1/2 of what they make in SF.
Not to mention employee benefits, like health insurance. For most American companies, these make up about 50% of the total cost of employment — in other words, double the salary of every employee in your budget. Do we really pay that much in Canada? I don’t think so.
Finally, there’s attention. Start-ups in Montreal get front-page business section news stories about them; start-ups in Silicon Valley have to throw lavish parties just to get reporters (or bloggers!) to show up and eat their free food. Does that get them any ink (or electrons)? Sometimes, but not always.
I think the best thing that someone with a tech startup idea can do is move somewhere inexpensive and get the time needed to really make it work. Being in a hub means that you’re running in a race against hundreds of other entrepreneurs, and don’t we have startups to avoid the rat-race?
I moved from Montreal to SF and then back to Montreal. Loved my experience but the main elements of my life where missing: the family, my network of friends ans business relations, my love for 4 seasons (yes you can find all seasons in the areas of SF but it’s not the same)…etc.
One thing that I noticed when I was there is that it is difficult for a guy from Quebec…or even from Canada…to get attention over there. Maybe I was too young at the time (back in 1996)…maybe it’s changed…not sure.