Increasingly, we see wildly successful startups emerging outside of the valley. These startups may be considered “technology companies” because they use the Internet as their platform but their disruption is not technology but rather business models eg. Groupon, Gilt, RueLaLa, The Ladders.

Jeremy Liew has a good post on this: http://lsvp.wordpress.com/2010/04/19/business-model-innovation-is-making-silicon-valley-less-important-as-a-startup-center/

I spent 7 years in the east coast before I relocated to SV. I don’t think I can ever survive another winter or the humid summer of the east coast ever again. And the one summer I spent in Austin was definition of hell. Sorry guys… even without the start up advantages of silicon valley, it’s just a lot more pleasant place to live and is well worth the extra cost to live here.

Mike Maples gave an excellent talk recently that discusses this in detail: http://techcrunch.com/2010/02/21/mike-maples-talks-venture-capital-and-thunder-lizards/

Certainly there are places that are more expensive, however, SV is indeed extremely expensive. Competitors hunt-down your best talent shamelessly. I worked for a company based in Mountain View, right across from Google, and saw a number of employees leaving for other firms withing a fairly short amount of time.

Attrition for your business is what the the cost of living to you… Two negatives do not make a positive.

There’s a reason why you see so many CA license plates in Austin TX these days.

Actually… ice-cream enchildas sound quite good…

Most start-up entrepreneurs need a good dose of reality, I’m afraid. It’s quite likely that 99% of us will NEVER create a ‘winner takes most of it’ let alone a ‘winner takes all’ business.

For most people, moving to SV or it’s environs simply makes you think you’re doing something of value to the startup – the money spent and disruption experienced could be better spent on achievemnt within the business.

In the film industry there’s what are called ‘Cappucino Producers’ – people in Hollywood or London who are in the right place, at teh right time, with the right ideas, meeting lots of people, but who never actually manage to get a project off the ground because they’re distracted with the lifestyle.

Don’t become an Espresso Entrepreneur.

Thanks for great posts here and on Venture Hacks.

Kind regards
Kevin

http://bit.ly/8bHSbG

The assumption you are making is that consumer internet markets outside US and Western Europe can be dominated by being in SV. There are many business models for which you need local knowledge and need to start locally.

I hear a lot of people say that it is less and less important to be in Silicon Valley, but my team isn’t buying it for the reasons you described and are moving to Mountain View soon.

I look forward to getting more insights from you!

i think that its also a very small community where traction is measured by just being there..

I wrote at length about this subject in this post about where to locate your startup

Where else can you find that large number of 5 year+ of real-world large scale consumer internet operations experience?

Some of the most crucially important meetings for your startup could be those random meetings on the street- running into Jack Dorsey at Sightglass coffee, your next investor at a Commonwealth Club meeting or your next potential developer at a bar on a friday night out. Silicon Valley is small, and San Francisco is even smaller- by leveraging its built in network you’re able to accomplish things much easier than just pounding twitter/FB/email.

Silicon Valley is by no means the only place this happens, but for tech-focused startups, there doesn’t seem to be a better place to be. If you’re a financial based startup- New York may be better. Biotech- Boston, but find where that center is and be there in some way shape or form. Rent may cost a bit more, but the better question is- can your startup afford the opportunity cost of not being in the valley?

1. Anyone who needs ‘local access’ to a partner to make a BD relationship work is making their partnership decisions for the wrong reasons. Further, the idea that BD happens only in informal settings is a misinformed approach that goes against having firm criteria and a strong sense of merit-based reasons. Web-based talent lives everywhere and while local is nice, making it a prevailing criteria is insecure and flawed.

2. Good BD is by no means ‘informal’ and should be the result of careful thought and rigorous vetting — getting along is great but far from a requisite criteria.

I have lived and done BD in Chicago, SF and NYC and think this view is myopic, poorly-informed and lacking in any basis. Consumer web stuff is founded, built and wins from non Silly Valley places all the time.

I agree with you as far as companies like foursqure and twitter are concerned, but that is, let’s be honest, a tiny market. While facebook does have serious market share, consider companies like salesforce or survemonkey or naviance or 37 signals. These are multimillion, or multibillion dollar companies that are reaching non-technical consumers.

If you want to design haute couture like websites, for the technorati, by all means be in silicon valley. If you want to reach the mass consumer market, nobody cares if you use foursqure or nexus one, and nobody has heard of quora.

Also, from a legal perspective, California lawyers are much more familiar with the rules of start-ups. This is a big deal as it cuts transaction costs.

I’m not all that familiar with the Valley, but I can see New York someday growing enough to compete. New York will likely need a few lucky breaks along the way to truly establish itself as a competitor to the Valley, but it has a shot because of its ability to attract intellectual capital. However, overall, I think that you’re spot on in your analysis.

However, you don’t have to move to a big pond to become a well-fed fish… and the skills can also be caught, before they flock to the valley.

This is a young industry, and the clients do not live in the valley. Client understanding is the oil that greases an average software company’s productivity, with exception to the minority of businesses that supply direct-to-consumer services.

What do you think?

Massimo

Hey, I’m not saying the Valley is bad. Obviously its great. But its not the only option. As open source and cloud computing continue to drive down the capital requirements of tech startups, investors become less important too.