Techies, VCs, and the press are always swooning over the glory of the Bay area. This is where all the excitement, the money, and the people are, they say. And that’s true to the extent that your great big idea fits the current cultural mold of that environment.
If you’re looking to build the next web 2.0 social media eyeball-collecting application, don’t want to worry about boring details like revenues, and hope to either flip to Google for an early $20 million or get that Facebook billion-dollar valuation, the Bay area is exactly where you want to be. No where else do you have the connections, the people, and the atmosphere available to make that dream happen.
But this strain of startups is a highly inbred line that holds more risks than most people realize. It’s not that they never work financially, enough people are sipping Margaritas on sunny beaches from towering buyouts to prove the contrary. And it’s not that they don’t work socially — I personally enjoy YouTube as much as the next guy. It’s that the Bay area pipeline for building web businesses isn’t optimized to carry much else than these stereotypes.
Other people’s money
If your idea for a web business is more along the lines of the mundane “product * price = profit” (3P) variety, I think the culture of San Francisco and that famous 20-mile radius around Stanford is anything but helpful. I might even go as far as say it’s downright harmful.
The flush availability of other people’s money is simply too tempting. When you’re not spending your own money, it’s easy to splash on a big open office on day one, a staff of 10+ in no time, and have few worries about paying the bills on the 1st of the month. It takes away much of the urgency to make money that I think is critical to build sustainable businesses. It gives you too many resources to be satisfied building simple tools for niche markets. Everything becomes about catching that huge wave.
Fighting for talent
And besides the simple temptation of having a few million dollars in the bank account — even though they’re not really yours and probably never will be — it breeds an asset bubble for everything else. When tons of half-baked startups out there have a million-dollar bank roll, they’re going to be looking pretty sharp when shopping for talent.
If you’re a programmer or designer working in this area, you probably have more than a few friends or acquaintances who got filthy rich simply being on the ground floor of Google or YouTube or some other company that either made them a millionaire through acquisition or IPO. Are you really going to be interested working for a company that simply aims to make a few measly millions for the first couple of years? Why settle for something that’ll take 5, 7, 10 years to mature when you can instead just hop from company to company every 6-18 months in search of that lottery ticket.
So while there is undoubtedly legions of good people available, you’re unlikely to be able to hire or retain them in an environment where every business magazine cover of is telling people that the next billionaire is even younger than the previous. No wonder people feel stressed out to make it huge before they’re 30 and will jump at any opportunity that looks like this might be it.
But where else?
If San Francisco, the Bay area, and Sillicon Valley aren’t good places to start a web business of the 3P variety, where is? Well, I’d say just about any place but. Basecamp came from Chicago/Copenhagen, FogBugz from New York, Campaign Monitor from Australia, Shopify from Ottawa, Freshbooks from Toronto, Blinksale from Texas, and there are tons of other applications of the same ilk that come from all over the world.
So stop worrying to much about where you are and start worrying about how you’re going to make your business succeed the old fashion way: Through having a better product than the competition that people are willing to pay for.
P.S.: None of this means that it’s impossible to build a web business in San Francisco that makes money by selling a product. There are plenty of examples of that too. Like TypePad or FaxItNice. This is an argument that the area is overrated as a great place for starting a company.
Nathan Clark
on 22 Apr 08I was floored with wikipedia moved decided to move their offices from St Pete, FL to the west coast because their decision flew in the face of the reasons you stated above. I didn’t articulate it at the same nearly so well – great overview.
Spencer Fry
on 22 Apr 08I think where you’ll end up being located is all a matter of how many people you need on your team and what stage you are in your recruitment process. Companies with only a handful of employees have a lot more wiggle room when it comes to where to live.
Peter Urban
on 22 Apr 08I absolutely agree. How about Edmonton, where you want to be in the office working on a great app that solves real world problems because outside there is a freakin snowstorm going on in mid April and there is no beach within the next thousand miles ;-)
Dave
on 22 Apr 08Interesting post David. I’m in San Francisco and have a profitable web startup (on RoR no less) that’s based on an advertising model (the horror! but hey, we follow the 3p principle too). I’d agree with you that you can create a startup anywhere. I happen to like San Francisco and have a lot of friends out here, so obviously it’s easier for me to connect with folks, get advice and hire talent when I need to.
The potentially harmful aspects of the Bay Area scene are only harmful if you let them be. Sure there’s that whole crazy Web 2.0 blogger echo chamber and people looking for the next quick buck or influx of venture funding. But there are also plenty of companies that are bootstrapping, building slow and steady, lean and smart and are under the radar filling in a smaller niche (but maybe not getting much press or attention).
The crazy lottery game you talk about is just “noise” for some of us.
Btw – I really enjoyed your Startup School talk.
Alex Hillman
on 22 Apr 08I love my friends in San Francisco, but I really appreciate how you’ve been poking at things like this recently (I also recall your post about the echo chamber of the conference circuit being fantastic).
Here in Philadelphia, we’ve worked hard to put emphasis on embracing our own culture rather than replicating the valley. Through our own initiative at our coworking space, IndyHall, as well as partnerships with other grassroots organizations, we’ve gotten the interest and more importantly, the support of our local government bodies. Technology and innovation are no longer underground portions of our worker culture, and I imagine that many other cities outside of the valley are doing similar efforts. I’m interested to read more comments to see what people are up to in their respective cities that we may or may not have heard of.
To this point, I think that it’s great that posts like this give us a venue to find out what our “neighbors” are up to. It’s silly that we all make the trip to Austin for SXSW just to find out what our friends have been up to all year. Twitter helps, but I like knowing what cool stuff is coming out of my region before it comes out.
Would you be mine? Could you be mine? Won’t you be my neighbor?
Dan Sinker
on 22 Apr 08YES!
Having been out here for a year, transplanted temporarily from Chicago, the difference in cultures is amazing. In Chicago, the first question someone asks is “How can we work to pull this off?” Out here the first question is “How can we get funded?”
They’re fundamentally different questions that produce fundamentally different results.
Dave T
on 22 Apr 08David—I totally agree with you. It’s not to say that the Bay Area is bad, but I reject the notion that it’s necessarily better than other areas or that it is in fact a helpful environment for all possible startups.
The culture seems to me to have become extremely inbred, with people like Arrington and Scoble holding court over legions of minions. “Startupology” is as much about knowing the players and their current valuations as it is about building new ideas. This is fine as far as it goes, but it feels very 1999 out there right now.
Tools like Rails and Google’s App Engine are accelerating ideation. This is great for creativity but it means a glut of concepts out there, almost all of which have rejected any kind of revenue model besides advertising. Can we all become billionaires from advertising? Or will somebody actually have to create something of value that somebody will pay for? I’m betting on the latter.
MK Owens
on 22 Apr 08I’m a developer from Chicago, and the biggest problem here is currently that the community for developers is somewhat lacking. All of the events that happen in San Francisco and L.A. are huge. If all of the Chicagoan web developers banded together to socialize and create a collective atmosphere like that of San Francisco surrounding places then I think that people would look at the development environment in this area differently. I know that there are a LOT of developers like those at 37signals in the Chicago area, and it would be a tremendous community building activity if we all came together for these “Web 2.0 Events” that exist because not all of us can fly all over the states going to events or pay $1000 to go to one event, for that matter.
Dave
on 22 Apr 08@ DaveT, per DHH’s Startup School talk, we don’t all need to become billionaires. There’s certainly a lot of room for millionaires in the startup space no matter what the model.
I’d also like to remind people that advertising is “something people pay for”. Just because the end-consumer doesn’t pay for the advertising doesn’t mean a ad-based model lacks customers. The customer is the advertiser (it’s a B2B play of sorts). Your service/product is as a marketing platform. Your pricing is your ad model. CPM? You pay based on the number of times your marketing message is seen on the website.
The problem with advertising is that too many companies (a) see it as a panacea (b) don’t understand the ad model properly© try to apply it in situations where it isn’t appropriate. I think this is why DHH hammers on the theme that a company needs to have a product and a price and profit. A properly executed ad model also has these characteristics (b/c at the end of the day you are selling a service to companies and advertisers).
DHH
on 22 Apr 08Dave, I can definitely see liking San Francisco as a great place to live. I really enjoyed being there recently. But I was kinda taken aback by how many people are indeed infected by that “background noise”. How many people were running off other people’s money and having no reservations about that.
But at the same time, I did also talk to a handful of people who were doing the simple things and having fun out there doing it. For these guys, though, there was nothing about San Francisco that it felt like made it more possible.
JF
on 22 Apr 08I know that there are a LOT of developers like those at 37signals in the Chicago area
Actually, we have more developers outside of Chicago than in Chicago. In Chicago we have Sam and David. Outside Chicago we have Jamis, Jeremy, Jeffrey, and Mark.
So I wouldn’t limit yourself to geographic region when searching for talent. Not everyone can work remotely, but when you find folks that can you’re in good shape.
Rodger Visitacion
on 22 Apr 08An interesting post indeed, and I always enjoy your, and 37Signals’, counterarguments to traditional “Valleyspeak”.
I just relocated here from San Diego (with a heavy dose of LA), previously Seattle, and participated in that whole Valley-centric argument too. Neither other area is horrible, but probably suffers from what every location suffers from too: the concentration is simply too low to get a critical mass of people coming together and really sharing ideas.
I do agree with your principles, but your argument here is mostly based on avoiding irrational exuberance and focusing on the fundamentals of business. I enjoyed your talk, and fun way of getting your points across, thoroughly at Startup School for that reason.
As other commenters have pointed out, there are plenty people in the Bay Area that are regular people not part of the 250, twitterati, Web 2.0 circuit.
There’s just so much going on here. Being a hop, skip and jump away from Moscone, Stanford and constant free talks by the best of the best is just too much to simply ignore.
So before dismissing the SF and Valley scene completely, my personal experience is that taking in everything this area has to offer with a BIG grain of salt has been the most worthwhile for me thus far.
DHH
on 22 Apr 08There’s no question that you can make money off advertising as well if your application is structured in a way that makes this obvious. The guys from 43things.com have been profitable off advertising for a long time. It can definitely be done.
But there are a ton of applications that don’t lead themselves well at all to advertising. If you’re not a natural Google gateway, it’s a ton harder to pull off.
some guy
on 22 Apr 08Although I don’t quite agree with how you said it, this is a conversation that needs to be had so I’m glad someone high-profile is bringing it up.
Fred Gibson
on 22 Apr 08You talked about lifestyle at Startup camp, and lifestyle is the key reason to want to be in San Francisco. It is simply a great City to live in with the added benefit that almost any escape to the natural world, like skiiing, sailing, etc etc, is immediately available. The downside is some added cost, but the costs here are comparable to Southbay locations and other major Cities. So if you want to build a sustainable business with a lifestyle that you want to enjoy for the long-term, San Francisco is an ideal location.
Hasan Luongo
on 22 Apr 08I wont waste anyones time listing the great tech/web companies with roots in the bay area, we have heard them a hundred times before.
One counter-point I would make for why the bay area is a great place for startups is that there is an ingrained culture around entrepreneurship here, people understand, support, and participate in startups here more than anywhere else in the world. Startups can be a lonely environment and having a thriving scene of other entreps near by is a big asset.
Additionally when recruiting talent this is a place that attracts people from all over the world, again its not to say other places aren’t good, but you don’t get a constant influx of very bright people coming in looking for a great startup or setting up their own in the places you mentioned.
Chris
on 22 Apr 08I work for a SF based startup now, and I understand your point completely. I think the Bay Area is a great place for a younger/less experienced developer to get some experience. There are tons of opportunities out here, and lots of events and networking related situations that allow a newer developer to gain knowledge of the industry.
Once a developer gains that experience and has a more solid understanding of what they want, they can move on to anoher city. The Bay Area just seems like a cesspool of junk, VC-backed companies with no real potential.
DHH
on 22 Apr 08Fred, it’s hard to argue with the beautiful surroundings. And being a place where you love to live is certainly a strong point. But you can get those elsewhere on the West coast in places that don’t come with the same cultural “baggage” as SF for web startups.
Still, I won’t fault anyone for living in SF because of the beautiful city. That just doesn’t seem to be the argument most people use. It’s more about being at the center of the starting startups (rather than companies) world.
pwb
on 22 Apr 08I think there’s a sufficient amount of distrust of the Bay Area to actually make it underrated.
Fact is, if you have an ounce of discipline, the SF Bay Area offers far more assets to entrepreneurs than other locales.
Keith Lang
on 22 Apr 08There is always the option to work in a few places at once. Here at plasq, and I use the word ‘here’ comically… we work in many places at once utilizing skype chat primarily along with trac, an internal wiki, Skitch (of course) and a few other tools.
We happen to be spread around the world;
- Both sides of the US
- Three states of Australia
- France
- Norway
- Brazil
With input from artists from:
- Austria
- Japan
- Chile
You may not want to the concept this far, but it’s certainly possible to have a few teams in a few locations, which as David alludes to, means you can have your pick of the best talent out there.
Having said all this, SF is a lovely place (much like Melbourne, Australia) and is the kind of place where you can bump into your next VC/ Coder/ artist at the local grocery store.
Hope my feedback helps :-)
Keith plasq
alps
on 22 Apr 08Hi David,
I always enjoy your posts!
I have been in the (San Francisco) Bay Area for almost 12 years now (in SF, actually), and I think some of what you say is correct, but not all of it.
Sure, there are people who just want to “flip” things (like they wanted to with houses), but not everyone. If you get caught up in the “culture of San Francisco”, then that is your problem, and not the area. (Note: The non-tech culture is wonderful to be caught up in!)
As your blog name suggests, those who are savvy enough at finding the signal in the noise, are the ones who are going to do well, regardless of where they are. But, I would argue, and agree with Paul Graham, being in an area where you can talk to, and associate with other techies on a regular basis, really helps out. I think that you might agree, considering you are located in Chicago, and not in Naperville or Lake Forest.
On a whole, SF is a wonderful place to live. This is my destination regardless of the tech landscape (but I just happen to be a techie, too). So, in that respect, I agree with you: If you are moving to The Bay Area just to do a startup, maybe some other large city, like Chicago, Seattle, or Boston, etc., would be just as good.
Fred Gibson
on 22 Apr 08Hi David,
I completely understand the idea you are trying to transmit here about the incredible hype surrounding the Bay Area with respect to startups, but as a place to live and a City, there are none others like San Francisco in California, and some would argue in the world.
Dave T
on 22 Apr 08While it is obviously possible to build a business that relies on advertising for revenue, I think that today it is fair to say that to do so wholly unoriginal.
Plus, I think as DHH points out the largest players will ultimately control that market. I do not suggest that anybody wanting to do advertising pack up their bags and go home; obviously there is money to be made there.
But, is this the best we can do? How much advertising can be profitably sold? Seems to me we have zillions of outlets for ads and a lot of people selling it on the expectation that someday somebody is going to buy a hard product, sold at a profit. Is this really happening or is the available supply pool of advertising going to outstrip the demand of advertisers?
Regardless of the answer to that question, I can feel the pendulum swinging again. Just as after the last bubble burst, the game became all about real money and revenues, and this will happen again.
And just as last time, San Francisco will be shaken by that tremor, torn apart, and rebuilt anew. And that’s fine; it’s creative destruction and the natural order of things.
Scott Heiferman
on 22 Apr 08Great post. Holla NYC & Meetup!
condor
on 22 Apr 08I recently quit a high profile start-up in sf, and am professionally moving out the bay area for more or less exactly the same reasons you mention. If you make the effort its definitely possible to drown out the background noise, however it takes real effort to do that, and the effort itself can be a distraction, its not worth it imo. Most of the start up execs I’ve met in the “startup community” have a serious sense of entitlement, success is guaranteed and the founders are already billionaires, its consistently fed to them by their investors, the press, and their friends, and once the “buzz” starts the feedback loop is deafening. What shocked me the most the 2 years I’ve spent here is how cheap money is, I felt like I was in vegas, but instead of $100 bills feeling like twenties, people are pissing away tens of millions a year. That’s real money, its real in the sense that it could have fed a shitload of people, or could have been loaned out to hundreds if not thousands of small businesses around the country as small business loans. Obviously the market determined that the money’s best use was in placing a bet. I accept that, but I’m becoming more and more convinced the venture model is breaking, its being pushed and angled and its busted. I’m calling bullshit.
Adrian Holovaty
on 22 Apr 08Another big plus for working from a non-web-2.0-echo-chamber city is the diversity of people and professions. My friends here in Chicago are furniture makers, architecture students, journalists, professional musicians, philanthropists, cops, lawyers.
While I’d agree that it’d be a great motivator to live in a place saturated with other Web developers, it’s also helpful, from a product focus standpoint, to be around people who don’t know what the f—k RSS is.
Sachin Agarwal
on 22 Apr 08As someone with a startup with three employees in Chicago who charges our users, I cannot disagree more.
The problem is that DHH is assuming that you can overcome a lack of funding with hard work. While hard work can overcome a lot of obstacles, I’d rather have the funding and fight for talent (and to DHH’s point, no reason that talent can’t stay in Chicago or be in Copenhagen or Calcutta).
I’d also state that I believe the community – not just of developers, but more importantly, of lawyers and accountants – that get it is much better out there. Questions about ISOs and employee/consultant and taxes and godknowswhatelse are standard out there. People elsewhere have to look it up.
Let me close with this – I think Chicago is the best city on earth. Period. I also think it’s probably the best – or as good – as any to run a business. I’d much prefer to stay here if we could. There’s a Cubs game that just had first pitch and I could have gone to the game and worked tonight.
But, I think the Valley’s a better place to grow a business and I think our startup has a better chance to succeed if we move. And that breaks my heart.
Thomas
on 22 Apr 08Blinksale came from Dallas, not Austin! Big difference to us Texans, though your point’s still valid. :-)
Matt
on 22 Apr 08This argument could be put towards other industries as well. Entertainment (Hollywood), Finance (NYC), etc. it seems like when you have a big, money making industry, a certain city will rise up and become the capital of it all. That’s where the glitz and glamor of just “being there” starts cheapening the whole thing. If you are doing something for the right reasons, you can probably do it wherever you want and avoid the pressures of trying to be one of the cool kids.
Jeff Putz
on 22 Apr 08I’ve never understood the fascination with the valley outside of its historic significance. I’ve still never been to SF though I’m finally making plans to this year. I don’t have anything against the place, I just take objection to it being “the” place to launch a tech start-up.
I’ve grown tired of Cleveland, where I work for a start-up (Insurance.com), but even here the lifestyle isn’t bad 8 months out of the year. And my house is worth $200k, when it would cost three or four times that around the bay. I’m not going to make three or four times the salary doing similar work. It’s just not going to happen.
But the more I travel around the US, the more I see that there are great places to start a company. And you know, it’s the Intertubes. It’s not like you can’t get a connection in Paducah, Kentucky.
Charlie Wood
on 22 Apr 08FWIW, BlinkSale is in Southlake, Texas near Dallas, not Austin.
(See http://tinyurl.com/3vfjtv)
-c
pwb
on 22 Apr 08Jeff Putz, you make all the classic mis-statements on the subject. At least you state that you’ve never been to the area so that we can tune out the rest of the post.
Silicon Valley is “the” tech startup place as much as Hollywood is “the” movie place. Like it or not.
Sure Cleveland homes cost less…but then you have to live there!
And do not conflate “salary” with total compensation. Not sure how it goes in Cleveland, but in the Valley, equity is a major component of compensation.
Neha
on 22 Apr 08Totally agree. People get too caught up with where the “hottest” place is and forget that there’s great work being done everywhere, and you need to find what fits for you.
I posted about this a while back: If You’re Going to San Francisco
Neha
on 22 Apr 08Oh, and Why Live in a Major City?
Dave T
on 22 Apr 08It’s disingenuous to say that Movies:Hollywood, Finance:(NYC|London), Tech:San Francisco.
The movie business is unionized and requires a lot of physical capital such as sets and an army of skilled specialists. Moving that stuff around is expensive, so it so over time it has settled in one place. Now, however we’re seeing that as more can be done independently with digital, moviemaking is breaking out all over the world.
200 years of history combined with a natural inclination towards centralization (thanks in part to regulation) have caused banking to center on places like New York and London.
The tech industry, by contrast, is the lightest weight of any of the three, has skills that can easily be employed from anywhere, and has virtually no friction from unions or regulation. Therefore, there are comparatively few valid reasons other than laziness or perception for tech startups to be focused in San Francisco.
Your analogy simply doesn’t hold water.
C. Enrique Ortiz
on 22 Apr 08...Austin baby….
...it is where I started my company eZee inc.: http://weblog.cenriqueortiz.com/austin/2008/01/13/austin-tx-is-the-3-best-city-for-jobs-in-america/
:-)
ceo
Ivan Pope
on 22 Apr 08I’ve always thought Brightoncisco is the place to be: UK south coast, loads of action.
Robby Russell
on 22 Apr 08You’re right.
Portland, Oregon is an awesome place for a startup. The cost of living here is so much lower than San Francisco, Seattle… or Chicago. ;-)
Pelle Braendgaard
on 22 Apr 08I moved to SF about a year ago now from Copenhagen. SF definitely has it’s benefits.
The two largest benefits living here from a startup aspect is the behind the networking you get here as well as the hyper entrepreneurial mindset you get here.
It is also a great place to be if you are a programmer and want to work in a startup. If you’re good companies will be falling over you.
This last thing actually makes it a pretty bad place to have a startup as well, at least if you believe in the traditional startup with an office and growing employee count.
Startups here are desperate for people. And they can’t find them. My take on it is that all the best people here are already in a great startup or are planning their own.
Much of this comes from this idea that there is one way of doing things here.
Get Funding Hire/hire/hire Sell outYou also still get that mistaken religion you talked about with the 14 hour days.
PJ Hyett
on 22 Apr 08Having lived in Chicago for 22 years and San Francisco for the last 3, I can say definitively that the weather in Chicago is far worse than the VC chatter in San Francisco.
Don Wilson
on 22 Apr 08Dallas is my SF.
Jared Goralnick
on 22 Apr 08The merits of the Valley is such a tough discussion, and one we in the DC tech/web community wrestle with on a near daily basis. Our tech economy is the second largest in the US…but that’s because of our service providers—not because we have product companies (like the left coast).
37s bootstrapped by being a profitable service company that transitioned into a product company. It’s a great model. It’s the model I use for my own bootstrapped startup (AwayFind), but it’s not one that works for everyone. Fact is: if you need money, the Bay Area is the place to be. Or at least it’s much better than 99% of cities (Austin, NYC, Seattle, and Boston seem to be some of the better cities for VCs/angels)
I think our business community, our economy, and our local attractions are competitive here in DC. If you want to “save [or change] the world” there’s more happening here than anywhere. And for the companies that want to serve the government or other orgs, it works. But, again, product companies (especially early stage) that need money (and many DO) have been struggling and it’s painful to watch.
I’d love to think things were different, but some businesses need funding to get started…and there are better places than others.
Justin Ward
on 22 Apr 08Having just made the decision to move myself out to San Francisco to be a part of this fantastic entrepreneurial center of the universe, this post kinda reads like a simple rationalization for deciding to live in a city you love that you feel to have judged as “more diverse” or “less noise” or whatever. Everyone that I know that lives in Chicago and wants to work in the startup environment seems to think that this is the place to do it simply because others have not done so yet.
I, for one, have learned that sometimes you just need to surrender to the flow and the natural order of things. There’s a reason that not too many startups are here. I’m not saying I know that reason, but I also seem to see a lot of these arguments made after the decision to anchor here was made long ago and must continue to be justified in order to make sense.
Gopi
on 22 Apr 08Ann Arbor, MI is perfect for long term oriented startups – Great Talent, cheap realestate, big airport, recreation facilities – we have it all!
Srini Kumar
on 22 Apr 08Once upon a time, young people flocked to San Francisco to listen to awesome music and start cultural and political revolutions. San Francisco is and always will be a hotbed for these movements. I believe that since Blogger comes from THAT scene, not some Sand Hill Road echo chamber, many great SF Web 2.0 firms and players (Jimmy Wales for instance) are part of that great tradition.
I think you should move to the Bay Area to start a band or get involved with committed anarchists and activists. It’s also beautiful up there. I think it’s a great town to conquer with your application but I also think it’s incredibly isolated from the rest of the USA and your application risks falling into the “chasm” before crossing into widespread adoption. You’ll listen to the early adopters that praise you to the skies and focus on the fetishes of people exactly like you.
These sites synced up with success through launching from not-the-bay-area: amazon is from seattle. flickr had its genesis in vancouver. facebook was created and first proliferated in the great college town of boston. myspace quite obviously emanates from los angeles (as does the concept of pay-per-click via Goto.com). 37signals holds down serious clout in the enterprise from its stronghold in chicago. and let’s not neglect the onion, originally from madison, wi.
how would these companies have done if they were out of the SF Bay Area? it’s like asking what Black Flag would have sounded like if they were from Philly. There is no doubt these projects would have been significantly different.
i think being from not-the-bay-area should mean visiting regularly though :)
- srini (hollywood & chapel hill)
Trevor Plantagenet
on 22 Apr 08I don’t really care much for the “blow it up or blow it out” model of Silicon Valley myself, but historically it emerged because the “build a small business and grow it to a big business” approach that has been rediscovered by people like 37Signals led to a number of companies having their ideas ripped off by larger competitors (those that didn’t get cloned by MS, got their lunches eaten or as the kids now say, milkshakes drunk, by all the other large vendors). It’s not clear that that still won’t happen, and that Google wont make another cloning attempt with JotSpot 3.0 or some VC-funded startup wont throw 30 top engineers at the problem to build a free ad-supported version of BaseCamp. There is a reason why people build companies the way they do, even in the Bay Area.
Jacob
on 22 Apr 08Great article. Being from the midwest it’s sometimes daunting to compare yourself with Bay area startups. I find companies like 37signals (Chicago) and Slicehost (St. Louis) to be inspirational.
Jeff Bonforte
on 22 Apr 08I have done startups in bay area and out of the bay area (Atlanta, Zurich and San Diego) and it is much, much easier to do your startup from SF/SV. There are obvious reasons, but I found the most profound to be cultural.
The Valley embraces startups up and down the food chain. You can get top tier talent, for sure. A smart engineer is easier to lure out of a big company, in my experience, here than outside the Valley. Law firms, landlords, bloggers, press, universities, PR firms, bankers, recruiters, office furniture sales firms, accountants, contractors, even apartment owners all understand the dynamics of the startup market and cater to it. And that type of community cooperation is a hidden benefit of the Valley. Your startup may not need these startup ecosystem elements. But making a YouTube in Peoria vs. Palo Alto is not really comparable. A 10-30 person startup can certainly come from anywhere. But I’ll bet that far more often than not, the multi-billion dollar startups come from the Valley.
Clearly, SF doesn’t have a lock on talent. But the average engineer in SF or SV is pretty darn good compared to the average engineer in, say, San Diego. And the experience of the people that are doing startups in the Valley is fantastic. They bring amazing experiences from Apple, Netscape, Yahoo!, Google and from the corpses of a thousand interesting but failed startups. Relationships are like a lubricant to reduce the coefficient of friction on a startup in the early days. And nowhere in the world is the machine more well oiled than the Valley.
And because the competition for talent, attention and money is so fierce in the Valley, you have to really be on top of your game,
Certainly, you can make a great startup in Minneapolis, Austin, Denver or Chicago. There are tons of great examples. But it is a bit convenient to say that it is a massive advantage to be out of the Valley. I love 37signals. But if I were Jobs and Wozniak, I wouldn’t flee Cupertino for Chicago in 1976. Just wouldn’t have happened, in my opinion.
Jeff Bonforte
on 22 Apr 08Oh, and I know people will say that SV is an echo chamber that provides an unhealthy environment for building real businesses (“Getting Real”). And for some that is inevitably true. But, assuming you are smart enough to understand that element, that is not enough to flee SF to do your startup.
Housing prices, on the other hand might be! :)
DevInSLC
on 22 Apr 08Another place outside of the Bay area is the Wasatch Front. Scads of startups and tech companies from Orem up to Logan. But the quantity and quality of networking is far superior in the Bay area.
Ross Mayfield
on 22 Apr 08You’ve got it all wrong. People live here for the weather. Have a nice day.
kyle
on 22 Apr 08Totally agree the bay area is over-rated. I moved out here in November from the east coast, and I swear, the valley just seems like group think. As a designer, I had much more creative freedom and inspiration working outside the bay area in places like DC or NYC.
The problem for me is that the bay area seems so engineering driven, that it’s just not that interesting working as a designer. Every startup starts to look the same after awhile, and it starts to get boring. Part of the problem as well, is that the industry is so web focused out here that you don’t get some of that natural cross-pollination that you do in other areas.
I will say, though. The weather is ridiculous, and more than anything else will probably keep me from moving anytime soon. I’d love to be back in NYC, but not for the weather.
Ian Clarke
on 22 Apr 08I wholeheartedly agree with this sentiment, you’ve done a great job of articulating my feelings on the Bay Area, and the entrepreneurial culture in the Bay Area.
I have founded and raised venture capital for a number of companies, with varied success, but this time around I made the very conscious decision not to go that route. Instead I went out and found customers for what I was planning to build before I’d even committed to the project.
Furthermore, I moved away from California to Austin, Texas, which I find to be a much more grounded entrepreneurial environment.
I can’t promise I’ll be successful, but having customers from day one allows me to walk taller than I ever did with millions of dollars in venture capital sitting in the bank.
Jack
on 22 Apr 08Very well said, David. I moved from Manhattan (“Silicon Alley” no less) a few years ago to Providence, RI. Quality of life is what attracted me, but it’s the dynamic, super collegial, and growing entrepreneurial scene that will make me stay. If anyone is interested in learning more please check out a couple of groups that I help lead – Providence Geeks and RI Nexus.
Peter Cooper
on 22 Apr 08I started a Web business, got funded (by an angel investor), got profitable, then sold it at a profit in just over two years. All of it was done online (never met the angel or the buyers in real life!) and it was all done from a remote backwater in England (not even close to London or any major city).
If it can be done from a backwater in Europe, people who bitch about it being hard to do in backwater America are not thinking hard enough. I salute those who are just getting it done wherever they are, and have a lot of respect for those, such as 37signals, who are spreading this somewhat commonsense message in an industry that tends to lack commonsense.
Sandeep Sood
on 22 Apr 08I think the main thing missing in this discussion is the growing irrelevance of location. Fine, we can argue about whether San Francisco is better than Chicago is better than Buenos Aires for a variety of reasons. But that misses the point.
If you have a good business model and a simple way to make money online, then do it from Kazakhstan. It just doesn’t matter that much anymore.
Giles Bowkett
on 22 Apr 08I used to live in San Francisco and occasionally consider moving back, but it’s a horrible double-edged sword. It’s so easy to find work there, but it’s so hard to find companies you can take seriously – and the few that do exist, like Google or eBay, are gigantic ossified beauraucracies no sane person would ever want to work for.
I could see myself returning to the Bay for reasons unconnected to my programming career, but definitely not for programming. Great place to get started, horrible place to build something serious.
Mark Wilden
on 23 Apr 08Location does matter, because that’s where you live, not just where you work.
Sounds like a lot of this carping implies that we get sucked into a certain mindset. That’s just nonsense. To an outsider, it might seem that Googlism (and wannabe Googlism) is rampant. That’s because you’re an outsider. You don’t really know what it’s really like to live and work here.
San Francisco is not the best place in the world to work. There is no such place. Arguing that it’s not is just a strawman.
///ark
Ethan Bauley
on 23 Apr 08Watch out for Los Angeles…lots bubbling up here…
And, yeah, it’s ultimately about the weather ;-)
Ferodynamics
on 23 Apr 08Blah blah blah.
Austin, Texas.
IBM, Sun, Dell, Apple, Wordpress, etc.
Can’t beat the music and a waterfront downtown.
Dan
on 23 Apr 08Read your Richard Florida. Place still matters:
Newsweek Interview
NEWSWEEK: The conventional wisdom is that, with technologies that allow us to work from anywhere, place is mattering less and less. Why is that not the case, and how are we getting it wrong?
FLORIDA: What I realized after studying this for a couple of decades is that no one’s ever really given advice about how important the place you choose to live is. We now know that place is really important. It’s part of a triangle of career, family, and the place you live. You know, people said the same thing about trade and technology making place less important when the telegraph was invented. But what we found in our research is that 40 million Americas move each year, and 15 million make really significant moves 50 to 100 miles out of the county they live in. That’s a lot. And young people with high levels of education are the most likely to move. I call this the “brain migration” or the “means migration.” In the past, mostly every city had the same profile of people: some college graduates, some graduate school graduates, some high school graduates, some high school dropouts. But now more and more highly educated people are moving to a smaller number of cities.
What does that mean for a given city?
In a place like San Francisco or Washington, D.C., about 50 percent of the total population in those regions is composed of people with a college degree or more. A place like Detroit might have 10 or 12 percent. And it’s not just educational profile. What we’re also seeing is a migration of people with a certain personality type. They want to have a new thrill, experience new things, and be in an interesting neighborhood. They’re also the kind of people most likely to create new innovations, whether that’s in music or film or high technology. Those people are seeking out a certain number of places, like greater New York, greater Washington, greater Boston, San Francisco, Los Angeles. So from a technology point of view, there’s a link between where people migrate and the psychology of those people, and where people innovate and create new ventures.
Sounds like this is all due to those very same technological innovations—teleconferencing, Internet access, etc.—that led people to the “world is flat” idea that you’re refuting.
Technology makes the world smaller, but it also makes the world spikier. I’m not arguing against Thomas Friedman, but saying there’s this additional force. I think he and others are aware of it, but I think people have glossed over it. Economic activity is not only becoming more concentrated but also more specialized. New York is great in fashion design and investment banking. San Francisco’s great in software. L.A.’s great in entertainment technology. And Nashville is the epicenter of music production. So if you want to pursue a given career, it’s not just that you can make it in any big city, because now there is a smaller number of big cities that will be the key places for you.
BillyWarhol
on 23 Apr 08Well I hear San Fran has Great Bars + Restos so thass always a Good Start! I’ve been sitting on an Idea for well over 3 Years thass like a Slide or RockYou or Flektor but still haven’t got it out the Door* Mainly cuz as U pointed out ya need the $$$ + 10+ Staff in order to Do It!! So if any Rich People are Reading this with Money to Burn ring me* ;))
Anonymous Coward
on 23 Apr 08I sure don’t want to be in Chicago, 34 shooting episodes and 9 people killed last night. I’ll stick to safe Norway.
Jacques Crocker
on 23 Apr 08Loved the talk. But this post is completely misses the point. Competition breeds excellence. After moving to Palo Alto from Seattle, I’m constantly meeting brilliant developers. Sure you can read other people’s blogs, but when you meet and work with them in person, they inspire you to be better.
If you think you’re a superstar developer and want to be taken down a notch (so you can actually learn something), you need to be competing directly with the best in the industry. That’s why the best developers end up in the bay area.
nexusprime
on 23 Apr 08Maybe I’m boring, but I like the fact that my city is fairly sleepy, and I’m only a few hours away from awesome nature.
I get paid well enough, and I do interesting work. But I guess I’m just not focused on making my life revolve solely around my work, so I may not make it “big”.
I make a good living, and I have good relationships with the people that matter to me. In my mind at least, that means I’m a success :)
I like visiting places like SF, it is a bit of a rush to have virtually everyone you talk to “get” exactly what you mean first time…But I can’t see myself being happy there for an extended amount of time, I like being able to “reset” on a regular basis.
Scott Ballantyne
on 23 Apr 08What is fashionable isn’t always wise. The startup I just joined is in Shanghai, China. Our costs are low, so we have the flexibility to take or leave projects depending on how way feel rather than our cash flow. I think doing projects because you think that they are a good idea is maybe better than doing projects because you need the cash
Charlie
on 23 Apr 08Amen, brother.
We’re building Path 101 (www.path101.com) in NYC… We just raised $365k of angel money, just hired two great developers in addition to my co-founding CTO and our developer intern (all NYC based)... The key is that we had a network before. We didn’t expect our city to build an insta-network for us. There’s lots of money and lots of talent out there, but don’t expect them all to jump just because you say so.
JY
on 23 Apr 08I have a question for those who live in SF area. Is it a place viable for a family man to live? I don’t see the pay scales that well with the high cost of living in there. It just seems like fun for single people, or dualincome family with no kids.
how much would you have to make annually to afford a 3br house/townhouse in that area?
i recently moved from nc to dc area. the living cost is so much higher, which really offset what i thought was a good pay the new job offered.
thanks
Jeff Putz
on 23 Apr 08Silicon Valley is “the” tech startup place as much as Hollywood is “the” movie place. Like it or not.
And do not conflate “salary” with total compensation. Not sure how it goes in Cleveland, but in the Valley, equity is a major component of compensation.
Please. Is that why my employer setup shop in Solon, Ohio?
And who is that equity thing going for you? How many companies actually cash out in the build-and-flip crazy valley? And if you do hit the lottery, does it make up the difference between salary here and salary there?
I swear there is way too much mutual masturbation in the valley. I see great businesses starting up everywhere, in tech and elsewhere, and they don’t need to be in a high rent district to make it.
JY
on 23 Apr 08i found my answer:
http://www.city-data.com/forum/san-francisco/63050-s-f-really-worth-cost-c.html
sudara
on 24 Apr 08I think it would be awesome if 37signals gave discounts on their job board to those hiring from “anywhere”
Mike Gowen
on 24 Apr 08We’re (Scrapblog) based out of Miami.
While we’re not the tech mecca, and it can be hard to find talent that will make such a big mone, its very rewarding to be leading the way versus just another minnow in a massive sea of startups.
What’s that expression? “Its better to be the head of a mouse, than the ass of a Lion” Something like that :)
Jonathan
on 24 Apr 08Just moved from Austin to Bay Area. I’m a serial bootstrapper – in my mind there is no other way to build a sustainable business other than to be customer driven.
However, evolving knowledge is a different thing than commercializing technology. While the culture in the Bay Area may be a little backwards with their funding driven commercialization process, it is in part a byproduct of the spigot of innovation that lives in this region.
Profitable businesses can be built anywhere in the world.. but where else could you possibly go if you wanted the best chance of changing the world on the bleeding edge of innovation?
Todd Dominey
on 25 Apr 08At the end of the day it doesn’t really matter where you are, as long as you have good product ideas, the tenacity and talent to execute them well, and the ability to capture eyeballs. The “scene” may be important to some people, and motivating factor as well, but I’d wager you’d get a hell of a lot more done by staying away from it. My 2 cents.
This discussion is closed.