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I think even a million dollars per startup may be necessary but not sufficient. You also need a culture - funding 30 all at once provides some level of a commu
by sachinag 18y ago
I think even a million dollars per startup may be necessary but not sufficient. You also need a culture - funding 30 all at once provides some level of a community. That's well and good, but would the accountants and lawyers in that city be as good as the ones in the Valley? No. So that money goes back to the Valley, too. And they have a gravitational pull that would make it more likely that a company would go back. Not for sure, but more likely.
So you'd have to make sure you had a rock-solid, streamlined process to make sure that the legal/accounting talent in the city (hell, white list them) knew the ins and outs of 83B elections, DE incorporation, how LLCs aren't appropriate for funded startups, and all that stuff that small business lawyers/accountants don't need, but are essential to not making it hard to get that 2nd round of VC funding.
And then you'd have to have the press. TC, VB, CNet, and whoever else can actually drive "mainstream" pickup are located pretty much in either the Valley or (to a lesser extent) New York. So your costs of getting press or going to conferences to network/"run into" partners and VCs is higher too.
Oh, and what about when the million dollars runs out? You need to have a local angel investor base that can give another million, or at least another half. People invest in what they know, for better or worse. And two hackers with laptops are going to be a lot more familiar in the Valley than anywhere else then you have to find a replacement for that infrastructure, as well - maybe you have to have the local business community have a co-investment fund or something.
The point is, I don't think any amount of money can create a culture conducive to the information-enabled software/internet companies we're talking about that even begins to approximate the Valley. Sure it can be done from elsewhere, but it's twice as hard. First thing JamLegend did when it finished the LaunchBox program was move west - and they had an awesome product with tons of favorable press. (The only counter I can think of is TipJoy, who moved east - but only after they presented to 30 angel groups out west who said no.[1])
As to a specific city I know well, I've been very vocal - there's no better place on earth to bootstrap an internet/software company than Chicago, but you'd be hard-pressed to find a city that's worse to try to raise funds in. (There are many that are as bad, but worse is a small set.) And if there aren't those support structures, then the founders will take their laptops and move west. Money alone can't solve that.
[1] http://www.masshightech.com/stories/2008/09/08/weekly7-Y-Combinators-firms-mostly-heed-go-West-advice.html http://www.masshightech.com/stories/2008/09/08/weekly7-Y-Com...
- jibiki 18y agoOddly enough, Chicago (or, rather, Evanston,) already has "a first-rate university in a place where rich people want to live." (At least, for some definition of first-rate.)
- sachinag 18y agoThere's also the University of Chicago (clearly world class) and a raft of other institutions - DePaul, UIC, Loyola, Chicago State, and IIT. And everyone who went to a Big Ten school ends up here for a short period of time. (Plus, we have a bar for pretty much every Division I-A school in the country.) Chicago has no trouble being attractive to young talent, and it's cheap, too.
- noonespecial 18y agoChicago has no "space in the margins". http://www.paulgraham.com/marginal.html http://www.paulgraham.com/marginal.html All of the space that could be in this category is rendered unusable 9 months per year by the winters there. When you're on the ramen budget, I think climate is more important than most people realize. Enclosed temperature controlled space is brutally expensive even in the "cheapest" cities. I find that even when the space is afforded, being trapped in cars and buildings many months per year because it literally hurts to go outside has a huge impact on my productivity.
- Agathos 18y agoCompared to California, not so good. But heating is a lot cheaper in Chicago than in Boston, because the housing stock is newer and has some insulation.
- RobGR 18y agoThanks for posting the link to that essay, it's one of PG's that I missed and I enjoyed it. I like the observation that marginal space matters. That is one of the reasons why I left the Boston area, after staying there a while after school. I would add that other factors include "marginal time" and "marginal income" -- places where people work 80 hours a week, and places where rent is half your income and no one saves any money, are also unlikely to produce revolutionary startups. You can heat a leaky garage in Chicago for less than it takes to rent a garage in balmy California. You will probably have to spend $100 on insulation -- get the rolls encased in plastic by Johns Manfield so you don't fill your workspace with itchy fibers -- and you will still have to wear a sweater in there. The garage door itself will basically be a seive, but there is this blue colored, flexible foam sheet product, that they use as a house wrap like Tyvek, that you can staple over it on the inside. If you really want to do a startup, a Chicago garage can be made "good enough". Or better yet, if your startup does not involve hardware assembly, just rent a 3 bedroom house in some other part of the country for the cost of renting a garage California, and work inside.