New York venture capitalist Fred Wilson, in a blog post and in a private email, asked the question:
Does starting a company in Silicon Valley increase your chances of success?
Here’s what I would ask Fred: Are you more likely to succeed in the finance world if you’re located in New York City? I would strongly argue yes. You can be equally or more successful than a New York finance person if you’re based in Chicago, San Francisco, Los Angeles or anywhere else. However, due to the congregation of finance-resources in New York City, your chances of success improve there.
The counter-argument is that by going to a smaller pond you aren’t fighting for finite resources. In other words, chances for success improve if you’re a big finance fish in San Francisco than a medium size fish in New York City. It’s a somewhat compelling line of thinking, but not ultimately persuasive: To maximize your chances of succeeding in finance or law, you should go to New York City.
To maximize your chances of succeeding in a movie or acting career, you should go to Burbank or Los Angeles.
The analogy carries over to start-up technology and the Bay Area. It’s the biggest pond in the world. Your chances of succeeding increase due to the sheer volume of resources and networks. Here’s an example. I’m now living in Boulder, CO and engaging in the entrepreneurship scene here (after 5 years engaging in the SF tech scene). There’s tons happening here and it’s a great place to do a start-up. But it’s a small ecosystem. A start-up here won’t be exposed to the same range of ideas and people as in the Bay Area and won’t have access to the same amount of capital or talent. Moreover, the ecosystem seems unipolar in the sense that influence and power is concentrated in the hands of fewer people, whereas in the Bay Area it’s more distributed. This hardly precludes success in Boulder, but it makes it a tad more challenging.
Now, someone should not choose where to live and start their business on the basis of maximizing possible professional success alone. I haven’t met a single person in Boulder who moved here to “Give their start-up the best shot”. They’re here for quality of life, for skiing, for a low cost of living. And by the way, they also run a tech company. I haven’t met a single investment banker in San Francisco who’s there to “try to become king of the hill in i-banking”. They’re there because San Francisco is the most beautiful city in the world. I think this is fantastic — quality of life should trump all.
But if you’re a person who doesn’t care about those other factors — like 20-somethings who don’t have a family to raise — you might end up choosing your geography based solely on maximizing your possible professional success. And that’s why many work-driven tech entrepreneurs end up in the Bay Area, and end up creating some of the world’s most prominent technology companies.
My friend David Cohen, of ColoradoStartUps.com, says:
So don’t pack up and move to Silicon Valley just yet. If it’ll work there, it’ll work here too.
I would say that is probably true. But this is probably more true: if it won’t work in Silicon Valley, it won’t work here too. Given that most start-ups fail, do you think there are failed start-up entrepreneurs who ask themselves, “I wonder if this would have gotten off the ground if we did it in the Valley.” Probably, just as there are SF-based investment bankers who probably ask themselves, “I wonder if I would be partner already if I were based in New York.”