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As I'm sure Patrick knows a first degree of accuracy you could of course substitute "Ireland" for "outside Silicon Valley" and the point about acquisitions is e
by petenixey 14y ago
As I'm sure Patrick knows a first degree of accuracy you could of course substitute "Ireland" for "outside Silicon Valley" and the point about acquisitions is especially well made.
Even in London we're seeing that the companies here are giving investor valuations that simply 1/5 of the valley and on most levels I have to say that I can't blame the investors for their pessimism as there are so, so few exits here.
Exits (large or small) perform three important roles for establishing a startup scene:
1. They create wealth for founders who are themselves much more likely to become investors
2. They create wealth for investors. Whether an investor is actually in on a deal or not this changes their attitude and their optimism and makes them more likely to invest due to the perceived good climate
3. As Patrick said, they increase the likelihood of high calibre individuals doing startups. Good people can do very well in other jobs and if they see the likelihood of success in a startup as being negligible, they'll stay elsewhere.
All of these three tend towards self reinforcement which is powerful. It's worth noting that none of them depend on the net P&L from angel investment to be positive, only that the net gain in perception to be positive.
One of the simple reasons it's very hard to sell the types of companies we discuss on HN outside the valley is that to sell a company you really need to actually meet someone willing to buy a company. These things still tend to start face to face.
Outside the valley there are far fewer biz-dev teams and, perhaps more importantly, far fewer engineering teams. The types of companies that create a lot of wealth are usually product focussed and get bought by product / engineering teams. Most of those acquiring teams are based in the states. FB only has a very small outpost in London and while Google's is huge and does include engineering it's predominantly sales support and does not (as far as I know) make many purchases.
I was fortunate enough to be able to sell my last startup (Clickpass) but there is no way that would have happened outside the valley. For that reason among many others we're moving back out to SF in January. I love SF and I'm happy to move back but sad to leave London and my life here too. However I too have come to the conclusion that it simply doesn't make sense to be outside the valley, you just set the odds too far against yourself.
- objclxt 14y agoTo add a little colour to your engineering comments: Facebook actually are in the process of building up a substantial engineering team in London, and they moved into new offices about 4-5 months ago to facilitate that. Google's been expanding their London engineering teams for some time now - both companies have a pretty significant focus on mobile. From my perspective (I work for a Valley based company, but head up the London engineering team) I see lots of large players and established start-ups creating engineering centers outside of the valley. I think there comes a point as a start-up where the benefits of scaling up your local engineering are outweighed by the advantages of opening up new global locations, especially when you're globalising your product..
- grey-area 14y agoIf you're not planning on trying to sell your company early, it doesn't matter whether there are companies nearby who might buy it. I agree it's still going to be harder to do elsewhere at present as getting funding for further expansion might be harder, but it is possible to bootstrap to success, and going for an early exit is not the only route startups can take.
- petenixey 14y agoNobody plans to crash when they travel on a plane but that doesn't mean it's not worth knowing where the exits are ;)
- grey-area 14y agoYes of course, I just think it's unhealthy to focus on selling a company early, when the ideal result would be to be a grow to a point where you have a choice of selling or expanding. I'm sure in your case this wouldn't apply, but focus on an exit at all costs can distort perspectives and encourages companies like color which spend a lot of money without bothering to produce anything people want.
- pg 14y agoIn practice, either can work. We consciously built Viaweb to sell.
- YuriNiyazov 14y agoCould you describe in detail some of the "We can do either X or Y, but because we are building this to sell, we will do Y" situations, for specific values of X and Y?
- pg 14y agoThe first that comes to mind is raising a series A. You should not do that if you want to sell early.
- petercooper 14y agoI have to say that I can't blame the investors for their pessimism as there are so, so few exits here. Let's celebrate that. People are building successful, long term businesses making long term profits in the British and European way. Good, long term businesses get investment. Let's celebrate investors who invest for the long haul and take dividends or sell on their shares over time. The last thing we need in London is SV-style bubble-o-rama. We have enough of that with the financial industry in the City.