Tag Archives: Silicon Alley

Crabgrass Theory of Tech Startups

I’m fascinated by Fred Wilson’s recent post he called The Darwinian Evolution of Startup Hubs, on his AVC blog from late last month. This is so much like my own sense of how it was, beginning with the first semiconductor companies appearing in what was then called the Santa Clara Valley in the 1950s. I was in elementary school then, in Los Altos, CA, where all this was happening. His summary:

In my mental model of Silicon Valley, the first ‘tree’ was Fairchild Semiconductor (founded in 1957) which begat Intel (founded 1968) which begat Apple (1976) and Oracle (1977), which begat Sun (1982), Silicon Graphics (1981), and Cisco (1984) which begat Siebel (1993) and Netscape (1994), which begat Yahoo! (1995) and eBay (1995), which begat Google (1998) and PayPal (1998), which begat YouTube (2005), Facebook (2004), and LinkedIn (2003) which begat Twitter (2006) and Zynga (2007), which begat Square (2010), Dropbox (2008), and many more.

I’ve compared this phenomenon to crabgrass. One plant generates others nearby. I think it must have been like this with auto makers in Detroit and steel in Pittsburgh, but that was well before my time. This is certainly what we saw in the Silicon Valley:

If you drill down a bit deeper, you see that the founders, investors and early employees generate a tremendous amount of wealth from these big successes. The later employees don’t make as much wealth but they do learn a ton and make enough money that they don’t need to work for someone else and so they strike out on their own and are often funded by the folks who made the big money in the prior startup. That’s how the seed drops from the tree and starts a new tree growing. This continues on and on and on.

Tree, crabgrass, seeds, and seedlings; sort of the same thing. And I’m seeing what he describes in the growth of other hubs too:

This darwinian evolutionary model of startup hub development is not limited to silicon valley. We have seen it play out in other places, most notably Boston, and increasingly in NYC. It is also playing out in markets like Boulder Colorado and Austin Texas and many other parts of the US and many parts of the world.

Fred Wilson’s VC firm is called Union Square Ventures, and Union Square, in Manhattan, is right in the middle of the growing New York high tech startup hub around Soho and the Garment District. Some call it Silicon Alley. And I’ve also seen this happening in Austin, and, although I don’t know Boulder, I do see Brad Feld’s Boulder influence spreading.

The big follow-up question is what can anybody do to break the cycle and speed it up and get some other location onto the same path. What starts it? What are the factors? 

And how do we get that here (wherever here is)?

(Image: bigstockphoto.com)

Does the New York Tech Boom Have Clues for Everywhere Else?

It was Wednesday night, a full auditorium at the 92nd St. Y in Manhattan’s upper East Side. We’d had a meeting in the late afternoon, got tied up, so we arrived late and took the only two seats left, against the wall. Even the balcony was full. The audience was a total mixup of suits, jeans, gray hair, long hair, slightly more young than old, more men than women, but a pretty diverse group.

On stage, the winners of a recent New York Hackathon. Hackathon? Yes, a 24-hour competition, producing some great results. One of them, locreep.com, includes a hilarious skit on modern singles scene. The audience loves it.

Soon after we’re looking at Bluefin Labs, a fascinating new venture doing social media analytics of mostly-television trends. This one wasn’t done overnight in a hackathon. It took several years.

All of this was at yesterday’s NY Tech Meetup. Once a month the group comes together for demos, sharing, pitches and presentations. It’s impressive. If you’re interested in watching business pitches, and tech enthusiasm, in action, they have videos of last night’s and previous meetings at http://nytm.org/monthly-meetup/livestream/

And that’s just a small glimpse of it, one evening. The hackathons, meetups, educational programs, city programs, investors, startups, and startup juice are bursting out all over. NYU professors getting together with Columbia professors, a city development committee, lots of sponsors, lots of events and opportunities.

You probably already knew about The Silicon Alley tech boom; it’s been covered in the media. But I’m a West Coast guy, with deep roots in the Silicon Valley, so I had this Silicon Valley bias that made it hard for me to see it. And now I do.

This is real. The most recent Business Insider 100 list of top 100 digital startups in the world includes 29 from New York, compared to about 45 or so from Silicon Valley, and just 2-3 each from Chicago, Washington DC, China, Seattle, France, Sweden, etc. And that’s all happened within the last few years. Silicon Valley took a couple of generations. This is time compressed.

All of which reminds me that just last week I received an email from a thoughtful woman bank president from Colorado, asking me for any advice I could offer about generating more startups in her community. That relates to this Silicon Alley phenomenon because here they’ve done it, like nowhere else; and they’ve done it fast. True, New York is a special place, with special advantages. But that was also true 10 and 20 years ago. So what happened here in the last 5-10 years, and how it happened, seems pretty interesting to me. Do you see how it relates to that question in email? And why a lot of people, not just in New York but everywhere else, might care?

10 Points on Where to Locate Your Startup

You’ve got your startup brewing, you love the idea, you’re gathering a team, and you want everything to be perfect. So do you move to Silicon Valley? Silicon Alley? Austin TX?

I know of people who’ve moved from where they were to where they thought they should be, before starting the company. Their assumption, when they do, is that the new place is better. It has better access to investment, management team, mentors, and sometimes even channels and such. New York

Does that make sense? Do you move first, then start? Here’s what I think:

  1. Business is to enhance life, not life to enhance business.
  2. I’ve posted here both home is where business is good, and business is where home is good. I don’t mind the contradiction. It’s another example of how almost everything in small business and entrepreneurship is basically case-by-case. There are no general rules.
  3. One of the great advantages of building your own business is that potentially you can decide where you want to live.
  4. And of course there are trade-offs. If I were independently wealthy I might live in Yosemite Valley, but I don’t think that would generally be a good place to start a business.
  5. We can deny that some locations have advantages. Having a startup community, investors, history, and potential team members can make a huge difference.
  6. But there are lots of ideal places to start businesses. Your preference really matters. For example, I’m biased towards the Silicon Valley because I grew up there and did business planning and consulting and startups there during the 1980s and early 1990s. But as I write this today I’m in New York looking at Silicon Alley, the New York startup world, and that has its advantages too. A lot of people in New York want to stay in New York, and here too they have community, investors, history, and potential team members.
  7. Let’s not forget that costs are different in different places. Office space, living space, housing costs, salaries … and of course these costs are higher in the more well-known locations.
  8. On the other hand, you know the ins and outs where you are. You have connections. You know the territory. That reduces costs.
  9. Moving before you start a business, just for the sake of a business, and not because you want to live there, is a bad idea. That increases your uncertainty and your degree of difficulty tremendously.
  10. On the other hand, moving to somewhere you’ve always wanted to live, just before you start a business, that’s not such a bad idea. You take advantage of the flexibility, you make the jump, and add it to the positives of doing your own thing. Yes it adds uncertainty and probably degree of difficulty, but it’s about living well, and choosing where you want to live can be part of that.

I like it that my wife once said that since we were putting up with the downside of owning our own business, then we should get the upside and move to where we wanted to live. I think that you should live where you want, but, if you’re building a business, within some reasonable framework of practicality. What do you think?