7 ms·

I live in SV and love the quality of here. Honestly though, the situation for early stage startups here is becoming untenable. My theory is the following: - S

by mbesto 9y ago

I live in SV and love the quality of here. Honestly though, the situation for early stage startups here is becoming untenable. My theory is the following: - Seed money is drying up (there's legitimate data to support this) because it's all being saturation in Series Alphabet companies that are all raising on legitimate growth or legitimate track records (but with zero growth and very good connections). - The housing situation is atrocious, and the tech scene is getting older (read -> having kids). - This means employees are saturating towards Google/FB/Apple/etc because that's the only thing you can afford to do in the bay area. When you can afford pay hundreds and thousands of developers $500k all-in packages because your yearly profits alone can sustain the whole of the bay area (looking at you Apple) then it's almost impossible to compete for talent in anything that isn't Google/FB/Apple/etc or a Series Alphabet with strong capital. - The rest of the world has learned all of the failures and lessons of SV and caught up. And yes all of the "inbound content" you created was free consulting to the 5 man shop running out of Madison, WI who is now competing with 3 man Stanford drop-out of the mid 2000's. My bet is on this fund and other similar funds, like the middle market PE funds in tech (PSG, KKR, GSV, etc), Indie.vc, Venture for America, etc. This is the next big horizon in money making tech investing, not the next Instagram...those days are over. It's amazing how many tech companies no one here has heard of but are making very legitimate money and are based in very unconventional locations. Tampa Bay, Minneapolis, Charlotte (and the tech triangle), Knoxville, Orlando, Atlanta, Provo, Boise, St Louis, Denver...you name it. I think we're gonna see many more Bandwidth.com's, MailChimps, Kabbage's, Outcome Healths, etc in the very near future.

stevenj 9y ago
Everything I've ever learned about venture capital is centered around the notion that in order for the economics to work, you have to invest in big winners (companies that exit at valuations of hundreds of millions to billions of dollars), such as an Instagram. Do you disagree with that? And/or are you saying that there are many of those kinds of promising startups outside of Silicon Valley to justify these new investment funds? My personal opinion is that there's just too much money chasing too few good companies. In other words, I think many startups, including ones that are worth a billion or more on paper today, will ultimately fail to generate the necessary returns for many VC investors and firms. And as a result, the access to money at all stages will constrain greatly, and sharply.
- adventured 9y ago
  There are numerous types of venture capital approaches utilized across the US economy. The SV venture capital firms need massive homeruns because of the investing approach they use and the types of companies they invest into. It's not the other way around. They specifically back companies with zero profit, often zero potential for near-term profit, zero ability to sustain themselves, that bleed red ink in exchange for hopefully extreme growth. These VC firms intentionally avoid investing into less rapid growth, self-sustaining, profitable businesses. It's a choice, not a required direction. They want to play it big, they want to be rock stars, they want to get massively rich, they want to find the next Google. They're gold or oil prospectors, looking for the big haul; my opinion is most of them find that game addicting just as any Wall Street rock star does. Mark Cuban is fond of saying that his preferred investing time frame is forever. What he means is, he ideally wants to invest into companies that actually have a sustainable business model, generate profit, and can pay out profits. He's basically a giant angel investor or his own VC firm, and he's on record as strongly disliking the SV model. In general terms, he represents an alternative approach to Silicon Valley. You can find investors like Cuban all over the US. His particular wealth scale isn't necessary at all for what he does as an investor. Finding wealthy angel investors in Pittsburgh, or Salt Lake City, or Dallas, or Atlanta, is not particularly difficult.
  - stevenj 9y ago
    I think angel investors are different than venture capitalists. The former typically make small investments, starting anywhere in the low five figures, up to seven figures, but more commonly capping out in the low to mid six figures and receiving a corresponding stake size in the companies. Venture capital often requires taking sizable stakes in companies by investing millions of dollars, in order to have a chance at producing the returns it's seeking. After thinking about it more, this Rise of the Rest fund for the Midwest, to me, is more like Y Combinator (and likely a competitor to it), in that it's essentially a giant seed fund that will then bring in its big-name investors and business magnates to make VC-like investments in the most promising companies. Instead of having a large network of former YC grads, it has a network of some of the most well-known investors and business magnates in the U.S. With that said, Steve Case is quoted in the article saying, "First and foremost, our goal was to generate top returns.”
thesmallestcat 9y ago
The SV BigCorps have really poisoned the well out there. It's depressing that the majority of good programmers in the bay area are obsessed with the compensation package. Not saying it's the wrong decision, but like you said, it sucks the air out of everything else. I'd want to blow my fucking brains out if I had the typical Google SDE/SRE's job and the most interesting challenges were whether it was worth it to take the Google Bus to work or how to deftly navigate the D'Amore spiderweb, but that's life if you want to work with good people out there. I've interviewed with "top flight" YC alum etc. startups in the area and came away hugely unimpressed. Maybe it was just luck of the draw, but as a startup guy, I have no reason at all to move out that way. Over time stuff like this will result in bland, money-driven talent with good pedigrees and hurt innovation, to echo your point again.
- stevenj 9y ago
  >It's depressing that the majority of good programmers in the bay area are obsessed with the compensation package. I think many people across a lot of industries are primarily concerned with their compensation packages when evaluating jobs.
  - thesmallestcat 9y ago
    What a dull truism. I'm not living paycheck to paycheck, I make silly good money for where I live. The fact that I could be making 400k+ total comp in Google Mountain View hell or Facebook Palo Alto hell does nothing for me.
    - stevenj 9y ago
      I have a hard time believing that the majority of people making 400k+ at either Google or Facebook would consider their work/life situation a type of hell. I understand why some people don't want to work for those companies or in those areas, or aren't motivated by money. But I think many others do, and the ones that are living it now are doing so by choice and for their own reasons.
      - 9y ago
estreeper 9y ago
I have a startup in a state which is very much a flyover: so much so that our license plates read "New Mexico, USA", to assure people that we are, in fact, part of the union. I moved from LA to Santa Fe a year and a half ago and started a company. Was able to buy a 3 bedroom house, big yard, nice neighborhood, walking distance to restaurants, brewpubs, and a grocery store for ~$1500/month, and got a couple roommates which puts our monthly cost at $400. That's a lot of runway. There is a lot of underutilized talent here since there aren't a lot of traditional jobs, and we have two national labs within an hour of us (Los Alamos and Sandia) that feed in a steady supply of engineers and scientists. All of this has created a startup scene both here and in Albuquerque an hour away filled with companies doing really interesting things, none of which are trying to build the next great way to deliver more ads to people. And being able to get outside the city in 20 minutes to go hiking, skiing, etc. is pretty amazing after working through LA commutes. There are things I miss about LA (the ocean!), but there are just so many advantages to having a startup here that now I couldn't see it any other way.
- thesmallestcat 9y ago
  Are companies in the Albuquerque/Santa Fe startup scene ever hiring? Is it all word of mouth? New Mexico would be one of my top choices but all I ever see online are government Los Alamos etc. positions for people with advanced hard science degrees. It would be hard to resist the temptation to move there if there were any clear opportunity.
  - llccbb 9y ago
    I know Descartes Labs is hiring.
- meebs 9y ago
  You can find young talent that is okay with "working for less" (in absolute terms). I see this opportunity as being great for a startup, at least in the initial stages of growth. But are these young talents getting the same amount of value back that you are getting from them? If they are then that sounds great! I'd love to hear more about companies that don't just treat an area with lower median salary as a cost-saving area. :)
AlanSE 9y ago
Mind if I butt in with a noob question? What do you mean when you say "Series Alphabet"? Are these things funded by the company Alphabet? It feels like there a lot more background that I'm not privy to.
- mikeokner 9y ago
  I think it refers to the fact that companies like Uber have had ABCDEFG rounds of funding
- replicatorblog 9y ago
  I think he's talking about Series A, Series B, Series C, etc. compared to seed stage/high risk companies.
  - mbesto 9y ago
    Exactly this.
- deleted 9y ago
  [deleted]
junkscience2017 9y ago
look at the last "who's hiring?" ...every month I see more and more listings outside of the Bay area

by mbesto 9y ago

stevenj 9y ago

Everything I've ever learned about venture capital is centered around the notion that in order for the economics to work, you have to invest in big winners (companies that exit at valuations of hundreds of millions to billions of dollars), such as an Instagram. Do you disagree with that? And/or are you saying that there are many of those kinds of promising startups outside of Silicon Valley to justify these new investment funds? My personal opinion is that there's just too much money chasing too few good companies. In other words, I think many startups, including ones that are worth a billion or more on paper today, will ultimately fail to generate the necessary returns for many VC investors and firms. And as a result, the access to money at all stages will constrain greatly, and sharply.

adventured 9y ago
There are numerous types of venture capital approaches utilized across the US economy. The SV venture capital firms need massive homeruns because of the investing approach they use and the types of companies they invest into. It's not the other way around. They specifically back companies with zero profit, often zero potential for near-term profit, zero ability to sustain themselves, that bleed red ink in exchange for hopefully extreme growth. These VC firms intentionally avoid investing into less rapid growth, self-sustaining, profitable businesses. It's a choice, not a required direction. They want to play it big, they want to be rock stars, they want to get massively rich, they want to find the next Google. They're gold or oil prospectors, looking for the big haul; my opinion is most of them find that game addicting just as any Wall Street rock star does. Mark Cuban is fond of saying that his preferred investing time frame is forever. What he means is, he ideally wants to invest into companies that actually have a sustainable business model, generate profit, and can pay out profits. He's basically a giant angel investor or his own VC firm, and he's on record as strongly disliking the SV model. In general terms, he represents an alternative approach to Silicon Valley. You can find investors like Cuban all over the US. His particular wealth scale isn't necessary at all for what he does as an investor. Finding wealthy angel investors in Pittsburgh, or Salt Lake City, or Dallas, or Atlanta, is not particularly difficult.
- stevenj 9y ago
  I think angel investors are different than venture capitalists. The former typically make small investments, starting anywhere in the low five figures, up to seven figures, but more commonly capping out in the low to mid six figures and receiving a corresponding stake size in the companies. Venture capital often requires taking sizable stakes in companies by investing millions of dollars, in order to have a chance at producing the returns it's seeking. After thinking about it more, this Rise of the Rest fund for the Midwest, to me, is more like Y Combinator (and likely a competitor to it), in that it's essentially a giant seed fund that will then bring in its big-name investors and business magnates to make VC-like investments in the most promising companies. Instead of having a large network of former YC grads, it has a network of some of the most well-known investors and business magnates in the U.S. With that said, Steve Case is quoted in the article saying, "First and foremost, our goal was to generate top returns.”

thesmallestcat 9y ago

The SV BigCorps have really poisoned the well out there. It's depressing that the majority of good programmers in the bay area are obsessed with the compensation package. Not saying it's the wrong decision, but like you said, it sucks the air out of everything else. I'd want to blow my fucking brains out if I had the typical Google SDE/SRE's job and the most interesting challenges were whether it was worth it to take the Google Bus to work or how to deftly navigate the D'Amore spiderweb, but that's life if you want to work with good people out there. I've interviewed with "top flight" YC alum etc. startups in the area and came away hugely unimpressed. Maybe it was just luck of the draw, but as a startup guy, I have no reason at all to move out that way. Over time stuff like this will result in bland, money-driven talent with good pedigrees and hurt innovation, to echo your point again.

stevenj 9y ago
>It's depressing that the majority of good programmers in the bay area are obsessed with the compensation package. I think many people across a lot of industries are primarily concerned with their compensation packages when evaluating jobs.
- thesmallestcat 9y ago
  What a dull truism. I'm not living paycheck to paycheck, I make silly good money for where I live. The fact that I could be making 400k+ total comp in Google Mountain View hell or Facebook Palo Alto hell does nothing for me.
  - stevenj 9y ago
    I have a hard time believing that the majority of people making 400k+ at either Google or Facebook would consider their work/life situation a type of hell. I understand why some people don't want to work for those companies or in those areas, or aren't motivated by money. But I think many others do, and the ones that are living it now are doing so by choice and for their own reasons.
    - 9y ago

estreeper 9y ago

I have a startup in a state which is very much a flyover: so much so that our license plates read "New Mexico, USA", to assure people that we are, in fact, part of the union. I moved from LA to Santa Fe a year and a half ago and started a company. Was able to buy a 3 bedroom house, big yard, nice neighborhood, walking distance to restaurants, brewpubs, and a grocery store for ~$1500/month, and got a couple roommates which puts our monthly cost at $400. That's a lot of runway. There is a lot of underutilized talent here since there aren't a lot of traditional jobs, and we have two national labs within an hour of us (Los Alamos and Sandia) that feed in a steady supply of engineers and scientists. All of this has created a startup scene both here and in Albuquerque an hour away filled with companies doing really interesting things, none of which are trying to build the next great way to deliver more ads to people. And being able to get outside the city in 20 minutes to go hiking, skiing, etc. is pretty amazing after working through LA commutes. There are things I miss about LA (the ocean!), but there are just so many advantages to having a startup here that now I couldn't see it any other way.

thesmallestcat 9y ago
Are companies in the Albuquerque/Santa Fe startup scene ever hiring? Is it all word of mouth? New Mexico would be one of my top choices but all I ever see online are government Los Alamos etc. positions for people with advanced hard science degrees. It would be hard to resist the temptation to move there if there were any clear opportunity.
- llccbb 9y ago
  I know Descartes Labs is hiring.
meebs 9y ago
You can find young talent that is okay with "working for less" (in absolute terms). I see this opportunity as being great for a startup, at least in the initial stages of growth. But are these young talents getting the same amount of value back that you are getting from them? If they are then that sounds great! I'd love to hear more about companies that don't just treat an area with lower median salary as a cost-saving area. :)

AlanSE 9y ago

Mind if I butt in with a noob question? What do you mean when you say "Series Alphabet"? Are these things funded by the company Alphabet? It feels like there a lot more background that I'm not privy to.

mikeokner 9y ago
I think it refers to the fact that companies like Uber have had ABCDEFG rounds of funding
replicatorblog 9y ago
I think he's talking about Series A, Series B, Series C, etc. compared to seed stage/high risk companies.
- mbesto 9y ago
  Exactly this.
deleted 9y ago
[deleted]

junkscience2017 9y ago

look at the last "who's hiring?" ...every month I see more and more listings outside of the Bay area