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The "second alternative" makes a lot of sense, but building a startup ecosystem is a difficult, long-term play involving a ton of variables. You need universit

The "second alternative" makes a lot of sense, but building a startup ecosystem is a difficult, long-term play involving a ton of variables. You need universities driving research and producing competent technical graduates; you need to foster a entrepreneurial attitude and provide resources (accelerators, mentors, office space, etc) to would-be companies; you need a source of capital to fund these companies. And then you wait for these companies to grow. Courting a single, large entity is a lot simpler: they tell you what the want; you give it to them; jobs. That's a much easier sell for politicians and local governments. You'd need decades of cooperation between incoming and outgoing politicians to build a successful startup ecosystem.

Kalium 8y ago
You've nailed the political calculus of it. Setting the stage for an ecosystem is the work of decades, and little of it pays off politically until things are successful. Bringing in BigCo pays off in an electoral cycle or two.
mygo 8y ago
it seems you entirely glanced over the fact that it also costs to bring large successful entities to your city. They’re usually also being simultaneously courted by other cities. They don’t just want to employ a workforce, they want business incentives. They want tax credits, they want prime location, they want natural resources, they want special exemptions. Often times the city ends up paying for the companies to come there in one way or another. Instead of being the quick payoff you describe, it can very much turn out to be a long and drawn out courting period (how long has this Amazon process been so far?) and also a long-term investment in terms of the projected payoff. And once the large company has used up the incentives they may still decide to uproot themselves from the community they had implanted themselves in and go elsewhere. So it’s still risky. Either way, whether growing local businesses or courting big ones from elsewhere, it can be a risky investment.
- bradstewart 8y ago
  I wasn't trying to say that bringing in large businesses is a quick payoff with no costs, but rather offering a possible explanation as to why we typically see cities going after large businesses. Should have made that clear. There is absolutely a cost associated with either option. There is absolutely a payoff period in years or decades with either option. However, I do think it's easier to get a single company to say "yes", than it is to build an ecosystem; particularly in the context of an elected official's term in office.
  - mygo 8y ago
    I disagree. The type of city that a big company would say “yes” to is the same type of city that could grow an ecosystem. Big established companies don’t like moving their headquarters into no-where-ville, they like being in places that any number of startups and fledging businesses could thrive in if the local municipality made that their economic development focus. Look at the 20 finalists for Amazon’s second headquarters: Atlanta, Georgia; Austin, Texas; Boston, Massachusetts; Chicago, Illinois; Columbus, Ohio; Dallas, Texas; Denver, Colorado; Indianapolis, Indiana; Los Angeles, California; Miami, Florida; Montgomery County, Maryland; Nashville, Tennessee; Newark, New Jersey; New York City, New York; Northern Virginia, Virginia; Philadelphia, Pennsylvania; Pittsburgh, Pennsylvania; Raleigh, North Carolina; Toronto, Ontario; Washington, D.C.; All of these places are capable of developing their economy via creating an ecosystem that supports small business growth. And some of them, like Austin Texas and Denver Colorado, already have! I wager that it’s better to support the 2X growth of 20 local businesses that are already doing 1 million dollars in profit annually (so companies of size ~5-10) than it is to bring in one 20-million-dollar business. It’s just not as sexy.
baybal2 8y ago
>The "second alternative" makes a lot of sense, but building a startup ecosystem is a difficult, long-term play involving a ton of variables. The "startup ecosystem" in the way SV denizens know it is terrible economy-wise. ROI - microscopic, human costs - humongous, employment impact - small, success rates - 0.2%. Compare it, say, with a factory cluster: annual average ROI - ~8.75% (averaged over last 12 years, Chinese data) capital costs - sane, capital recovery - certain 60%-70%, success rate after 3 years - 60%-70%, employment impact - undisputedly apparent, human costs - you don't have to stake 5 years of your life on the latest fad. People who advocate for copying that, advocate for copying a clearly failing model.
- bradstewart 8y ago
  What are those factories producing? You have to continue developing and building products to drive factory demand. Silicon Valley certainly didn't do everything (or maybe even most things) right, but to claim it has created no economic value is silly.
- djrogers 8y ago
  You're conflating 'startup' with 'internet/app/social startup'. There are a lot of other types of businesses that start small and grow...
- nostrademons 8y ago
  By the numbers, Silicon Valley does a lot better than those. Annual average ROI for Google over the last 10 years has been 21%; for Facebook, 86%; for AirBnB, almost 170%. Initial capital costs in each of these cases were nearly zero. Employment impact: tens of thousands of new millionaires created. The human costs of factories are not nil either. Beijing is a polluted wasteland where if you wipe your nose it comes away black. Silicon Valley is still dealing with the toxic wastes from the last generation of industrial powerhouses, the semiconductor companies that dumped toxic waste straight into the ground. I would far rather waste 5 years of my life on the latest software fad than have 30 years of my life shaved off by cancer. Don't romanticize the past. The average professional in Silicon Valley enjoys a standard of living much, much higher than the average factory worker in Shenzhen, or in Cleveland for that matter.

Kalium 8y ago

You've nailed the political calculus of it. Setting the stage for an ecosystem is the work of decades, and little of it pays off politically until things are successful. Bringing in BigCo pays off in an electoral cycle or two.

mygo 8y ago

it seems you entirely glanced over the fact that it also costs to bring large successful entities to your city. They’re usually also being simultaneously courted by other cities. They don’t just want to employ a workforce, they want business incentives. They want tax credits, they want prime location, they want natural resources, they want special exemptions. Often times the city ends up paying for the companies to come there in one way or another. Instead of being the quick payoff you describe, it can very much turn out to be a long and drawn out courting period (how long has this Amazon process been so far?) and also a long-term investment in terms of the projected payoff. And once the large company has used up the incentives they may still decide to uproot themselves from the community they had implanted themselves in and go elsewhere. So it’s still risky. Either way, whether growing local businesses or courting big ones from elsewhere, it can be a risky investment.

bradstewart 8y ago
I wasn't trying to say that bringing in large businesses is a quick payoff with no costs, but rather offering a possible explanation as to why we typically see cities going after large businesses. Should have made that clear. There is absolutely a cost associated with either option. There is absolutely a payoff period in years or decades with either option. However, I do think it's easier to get a single company to say "yes", than it is to build an ecosystem; particularly in the context of an elected official's term in office.
- mygo 8y ago
  I disagree. The type of city that a big company would say “yes” to is the same type of city that could grow an ecosystem. Big established companies don’t like moving their headquarters into no-where-ville, they like being in places that any number of startups and fledging businesses could thrive in if the local municipality made that their economic development focus. Look at the 20 finalists for Amazon’s second headquarters: Atlanta, Georgia; Austin, Texas; Boston, Massachusetts; Chicago, Illinois; Columbus, Ohio; Dallas, Texas; Denver, Colorado; Indianapolis, Indiana; Los Angeles, California; Miami, Florida; Montgomery County, Maryland; Nashville, Tennessee; Newark, New Jersey; New York City, New York; Northern Virginia, Virginia; Philadelphia, Pennsylvania; Pittsburgh, Pennsylvania; Raleigh, North Carolina; Toronto, Ontario; Washington, D.C.; All of these places are capable of developing their economy via creating an ecosystem that supports small business growth. And some of them, like Austin Texas and Denver Colorado, already have! I wager that it’s better to support the 2X growth of 20 local businesses that are already doing 1 million dollars in profit annually (so companies of size ~5-10) than it is to bring in one 20-million-dollar business. It’s just not as sexy.

baybal2 8y ago

>The "second alternative" makes a lot of sense, but building a startup ecosystem is a difficult, long-term play involving a ton of variables. The "startup ecosystem" in the way SV denizens know it is terrible economy-wise. ROI - microscopic, human costs - humongous, employment impact - small, success rates - 0.2%. Compare it, say, with a factory cluster: annual average ROI - ~8.75% (averaged over last 12 years, Chinese data) capital costs - sane, capital recovery - certain 60%-70%, success rate after 3 years - 60%-70%, employment impact - undisputedly apparent, human costs - you don't have to stake 5 years of your life on the latest fad. People who advocate for copying that, advocate for copying a clearly failing model.

bradstewart 8y ago
What are those factories producing? You have to continue developing and building products to drive factory demand. Silicon Valley certainly didn't do everything (or maybe even most things) right, but to claim it has created no economic value is silly.
djrogers 8y ago
You're conflating 'startup' with 'internet/app/social startup'. There are a lot of other types of businesses that start small and grow...
nostrademons 8y ago
By the numbers, Silicon Valley does a lot better than those. Annual average ROI for Google over the last 10 years has been 21%; for Facebook, 86%; for AirBnB, almost 170%. Initial capital costs in each of these cases were nearly zero. Employment impact: tens of thousands of new millionaires created. The human costs of factories are not nil either. Beijing is a polluted wasteland where if you wipe your nose it comes away black. Silicon Valley is still dealing with the toxic wastes from the last generation of industrial powerhouses, the semiconductor companies that dumped toxic waste straight into the ground. I would far rather waste 5 years of my life on the latest software fad than have 30 years of my life shaved off by cancer. Don't romanticize the past. The average professional in Silicon Valley enjoys a standard of living much, much higher than the average factory worker in Shenzhen, or in Cleveland for that matter.