Sunday, December 20, 2009

Is there a Silicon Valley advantage?

One of the advantages of being in the "job market" is the opportunity to gain some distance and reflect on some fundamental assumptions we take for granted. One such assumption for me was that "You have to start an Internet startup in Silicon Valley!" I have now come to realize that this assumption not only is false, but can be quite an impediment to success in building and growing your company.  Here are some data points that have helped me reach this conclusion:

1. There are plenty of very impressive, financially successful Internet startups that are headquartered outside of Silicon Valley, even outside of the US. Examples abound, but some companies off the top of my head are (Seattle, WA), Club Penguin (Vencouver, Canada), Metro Lyrics (Vancouver, Canada), Cymax (Vancouver, Canada), and (Silver Spring, MD). You may not have heard of some of these companies, but that may say more about the media coverage bias rather than actual financial success or user adoption.

2. Many successful Bay Area startups are recruiting heavily from outside of the Bay Area rather than locally, and have found the candidates from outside of the Bay Area to be as technically competent, with very strong work ethics coupled with a dose of humility to boot. As an example, social dating site Zoosk, which recently closed on a $30 million financing round, has recruited most of their employees from outside of the Bay Area.

3. Many Silicon Valley venture capitalists are looking outside of the Bay Area for investment opportunities. The math is as follows:

Lower valuations + lower labor/infrastructure cost + more available resources = higher likelihood of survival and success.

4. Most of the founders of successful Bay Area startups are not "locals", but first generation "immigrants" from other parts of the US/world.

Certainly, the above does not mean that in order to succeed one should sever all ties to Silicon Valley. The ecosystem of entrepreneurship that exists in Silicon Valley does not have a close second in the world and every successful startup should have a strategy about how to plug into the Valley ecosystem. But doing so does not necessarily mean you should headquarter the company from inception in Silicon Valley.

Indeed, for some startups, the right time to establish a presence in Silicon Valley may be many years after founding the company, reaching millions of users, and obtaining that elusive positive cash flow. As a matter of fact, as of December 1, I myself have joined one such startup ( in order to help them plug into the Silicon Valley ecosystem through partnerships and collaborations now that the company has reached the scale, user base, product and platform stability that can credibly support such efforts.

So, next time you are thinking about where to start your company, don't automatically assume it has to be in Silicon Valley.

P.S. This will likely be my last post of 2009, so I wish everyone Happy Holidays and an auspicious start to 2010!