5 ms·

San Francisco's Real Startup Secret Sauce

78 points by melindajb 13y ago

dools 13y ago
Making it less risky to work on risky things is exactly why I think socialism is great for business. Australia is often called out for it's "lack of startup eco system", and lack of early stage capital for tech businesses, however it's a hotbed of micropreneurship and the primary reason is that no matter what, you've got a reasonable level of healthcare, your kids have a reasonable level of education and you have a reasonable level of housing. I started from (financially) virtually nothing. I mean ... let's be honest everyone says that and yes I had advantages others didn't have and my family was essentially middle class but financially speaking I was always essentially what you would call "poor" and raising 2 daughters whilst being this poor and not having a "real job" for the past decade would be much scarier in the US than it is in Australia. The benefit to the country is that ultimately, I have the chance to build something great which creates jobs and grows the economy (yeah ... I'll urr let you know when that's done!) but if I fail, it's no big deal really.
czr80 13y ago
SF is a startup hub because it happened to get a little traction from a few early companies, and then network and scale effects helped it take off. Same reason Detroit was once a big auto hub, China is today a big manufacturing hub, Facebook the biggest social network, etc. Once a regional agglomeration like this is established, it's hard for someone else to match (just like it's hard to set up a new Facebook). And, also, once such a hub is established, people of course look for reasons to explain why it won. Mostly they're hagiographic "just-so" stories, of no real benefit to anyone looking to replicate it.
qwerta 13y ago
With internet you can run your startup anywhere on planet. Why would you choose the most expensive area on planet? You could be on tropical island for fraction of the cost. Also smaller costs gives you longer runway, it is big difference to have 3 months or 3 years.
programminggeek 13y ago
I think there is something else about the startup culture of Silicon Valley that I don't see in say the midwest and that is the understanding of what a startup is - and it's not just a new tech business. As PG wrote Startup = Growth http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html What strikes me as a Silicon Valley outsider is the idea of 5-7% growth rate... per week. Comparing that to companies outside of the valley that grow that per year or per quarter and call themselves a startup and you see that there is something fundamentally different going on in the cultures. That growth oriented/obsessed mindset I just don't see in the midwest. Things move slower, can be less numbers driven, and it's far less about the big exit. There's nothing specifically wrong about that approach, but it's not the same startup mindset as YCombinator has. If the bar to being a successful startup is 5-7% weekly growth, than many/most non Silicon Valley areas don't have the same high bar for startups as SV does. Having a high density of quality people is great, but isn't not just the high density of people who are doing startups, so much as a high density of people doing rapidly growing companies. It's not just the tech, it's the marketing, the relationships, all of that. It's also possible that Startup = Growth is one big marketing lie and Silicon Valley is just lucky, but I doubt it.
- greghinch 13y ago
  I would argue that any successful small business that could be considered a startup is growing some metric much faster than 5-7% per year. Likely somewhere close to the per week rate. You just have to pick the right metric. What you're referring to is likely a 5-7% growth in revenue per year, and that can be surprisingly good. There are probably "successful" YC companies that aren't growing their revenue that quickly for the first couple years. But some other KPI is going crazy.
  - programminggeek 13y ago
    Sure, I'm just saying that there are plenty of companies that think of themselves as startups that don't have KPI's growing at 5-7% a week or even a quarter, unless they invent some metric that makes them look good even if the needle isn't moving.
aashaykumar92 13y ago
"second, there is a far greater level of information sharing between entrepreneurs here. Putting a sharper point on that second one: In New York City they ask you to sign NDA's, and in San Francisco we don't. And what may feel a bit risky for the one turns out to have a big positive benefit for the many. I think this is such a huge, and excellent, point that most other "Why Silicon Valley is the startup hub" arguments miss. The idea of openness is simply taken for granted in the bay area while the rest of the world still lives in fear of someone stealing their idea if they say too much. And it goes beyond that. Two simple examples, both YC companies actually: Airbnb and FlightCar. I am from Pittsburgh but go to school in Ann Arbor. I've talked to friends from both cities about each of those startups and I get the same response every time, "But would you really give up YOUR place to a stranger?" or "Would you really want to give up your car to a stranger?" Airbnb takes me a little less convincing now that it is so successful but FlightCar, holy shit...I am told that I am way too trusting and quite crazy. So in whatever way you look at it, the sharing culture is something that is embraced in the bay area while the rest of the world is just starting to catch on to it. Now that I mentioned that I'm from Pittsburgh, I'd also like to nix the 'Stanford is a great engineering school" argument as well. Why? Well because so is Carnegie Mellon--has boasted the #1 Comp Sci program in several rankings but Pittsburgh is galaxies away from the bay area in being a startup hub. Playing devils advocate, however, I do feel that a city like Pittsburgh may also have the greatest chance of booming into one given that a great school such as CMU is based here. Look at it this way--right now, almost all CMU CS students interested in startups, whether their own or to be a part of one, want to get to get to the west coast. What if they all started to stay here? I think you'd naturally see a boom of startup culture here. Just a hypothetical thought/situation.
- minimaxir 13y ago
  Recent CMU alum here: the college is pushing startups very heavily. More and more tech companies are being founded in Pittsburgh as well.
- w1ntermute 13y ago
  > Now that I mentioned that I'm from Pittsburgh, I'd also like to nix the 'Stanford is a great engineering school" argument as well. Why? Well because so is Carnegie Mellon--has boasted the #1 Comp Sci program in several rankings but Pittsburgh is galaxies away from the bay area in being a startup hub. Right, it's not that CMU has a bad engineering school, it's just that Stanford is so close to Silicon Valley (and helped create much of it) that it holds greater prestige in the startup community. I don't think anyone looks down on CMU as far as getting a good education goes.
aantix 13y ago
I moved to SF in Sept of 2010. My wife and I went to the Folsom St fair because we were determined to experience what we couldn't experience back home (Nebraska). Might I say, a fair like that would have been SHUT DOWN WITH SWAT TEAMS in Nebraska. I can't imagine anything remotely close to that being tolerated. It didn't bother my wife or I, but when the extremes can be stretched pretty far with a general tolerance, you find that the middle is further than away from most people's average. I don't know how the tolerance for the extreme factors in to things, but I think it's at play with SF's success.. P.S. If you want to experience it, it's usually in late September. Do it once in your life.
- rdl 13y ago
  Right, but Palo Alto/Mountain View are pretty much like Nebraska in terms of what you'd see on the street (super-rich Nebraska, though), and they also have plenty of startups, so it's not just bare hairy man ass that generates startups.
- lifeisstillgood 13y ago
  The recent post about stepping over the homeless is probably SF most worrying problem - if the tolerance that SF is famous for is at play in SV success (and I do agree its causation not just correlation) then developing an enclave mentality will mean SV will revert to its own mean irrespective of the surrounding town. Engage with your community Silicon Valley
hendzen 13y ago
Contrary to what is said in the article, I find that NDAs are fairly pervasive at Bay area tech firms - maybe with the exception of very early stage startups. At most of the big co's you have to sign an NDA just to walk past the front desk to attend an event on their campuses or to interview. I also experienced this at a well known late-stage SF startup when they hosted a developer meetup in their office.
- michaelochurch 13y ago
  Yes, my experience is that Bay Area companies are a lot worse with the NDA nonsense. New York companies, in general, only make you sign an NDA if they're actually discussing trading strategies.
- gkop 13y ago
  > I also experienced this at a well known late-stage SF startup when they hosted a developer meetup in their office. That form is not what I think of when I think of NDA - it's one very brief page. And they don't review what you write. In fact one staff member said "Just print your name" when questioned by a guest. I see it more as just a reminder for guests to behave themselves.
kevingadd 13y ago
NDAs are alive and well in Silicon Valley even if VCs don't get asked to sign them. I've interviewed with dozens (if not hundreds) of companies here and given product/engineering advice to dozens of other companies and in almost every case, once a real conversation is going to start they want a signed NDA. I don't even think there's anything wrong with that, but I've not noticed any difference in terms of secrecy between the SV software companies I've talked to and software companies outside of SV (in places like New York, Seattle, LA, etc.)
- kunle 13y ago
  I think what he's getting at with the NDA point is the start of the conversation. As an ex-finance/NYC guy, you see this all the time in New York (thankfully its getting less frequent but I just had it happen again the other day): you meet a founder, he/she has an idea, and in order for him/her to share the idea, they ask you to sign an NDA. Just to hear the idea. Happens with alarming frequency.
  - michaelochurch 13y ago
    [Y]ou meet a founder, he/she has an idea, and in order for him/her to share the idea, they ask you to sign an NDA. Just to hear the idea. Happens with alarming frequency. I just don't talk to those asshats. If I were going to steal something, it would be the resources to implement my ideas, not theirs.
michaelochurch 13y ago
Money. That's all. You can find smart people all over the world. What you can't find is easy money, in large quantities, looking for outsized returns. New York and Silicon Valley have a critical mass of people who have enough money to put into high-risk endeavors. In New York, they give money to young, eager people who start hedge funds. In Silicon Valley, it's "tech". Actually, venture capital funds tend to lose money, but that's another story. It's kind of amazing that with all the illegal collusion and note-sharing (I'm sorry, I mean "co-funding") they do, the industry still can't turn a profit.
logicallee 13y ago
San Francisco's real startup sauce is people with fucking imagination. Try this experiment anywhere in the world "Hey, I've written this great thing that can change millions of people's lives. I'd like to start a company around it!" Typically you can expect: "With what?" "What makes you think you can run a company?" "You're, what, 27?" "There are teams of dozens of people who can do the same thing, why would you succeed where they can't?" "Even if you do the work that literally thousands of teams all over the country can do and have actual resources for, what will you do next, you don't have a company" "Even if you make sales, you are losing way more money than you could by just working as a coder. You're delusional". "Let's say you get some customers and make more than you would otherwise. You still don't have a business. You haven't run a business! Would you enlist in the olympics without ever having even TRIED the sport?" etcetcetc versus San Francisco typical reaction: "Can I see it?"
- potatolicious 13y ago
  I think that's dramatically over-romanticizing the startup scene. > ""Hey, I've written this great thing that can change millions of people's lives. I'd like to start a company around it!" I've been pitched a lot of startups before, in San Francisco and elsewhere. I have never heard this line even once. The vast majority of founders (in SF or elsewhere) want only one thing: their big exit. They couldn't give two shits about changing the world, disrupting some huge evil industry, or anything like that. They want to get theirs, and any type of righteousness in their message is just posturing. To portray SF like it's some sort of haven for young people who want to change the world is grossly inaccurate. It's not like that in SF, it's not like that anywhere. Sure, once in a while you get something that genuinely seems to be a work of passion. Github is a nice example. For ever Github you have to wade through two dozen yet-another-photo-sharing-app, yet-another-social-location-mobile, etc etc, who are all in it for the me-too and the get-rich-quick. San Francisco is a very small number of people trying to change the world while a whole lot of other people ride along, posture a bit, and hope they get mistakenly swept along for the ride.
- trustfundbaby 13y ago
  That's what I think is holding Austin back. Startups here tend to be pragmatic and a bit dreary, Indeed just had a big exit, but how exciting are they? The big idea companies (gowalla) or the ones doing something truly new (five runs) have either not done very well or have been bought out (Other inbox, Hey Ride). I think its because most of the hackers, VC money and technology leadership here come from Java and semi-conductor backgrounds where the kind of truly creative thinking and crazy experiments that lead to world changing companies aren't exactly encouraged. But in addition to that, the gravitational pull by Silicon valley of talent, ideas and money is going to be very difficult to overcome, without some really deliberate effort and resources.
deleted 13y ago
[deleted]
herdrick 13y ago
That SF map is bullshit. In general you would never see such an even spacing of startups (or most anything) unless someone were trying distribute them very carefully. And specifically there are a number of super dense hotspots that should stand out in a map like that. Someone just painted those dots according to what might look good.
6ren 13y ago
my tl;dr: the magic of Silicon Valley is making it *safe* to work on *risky* things. reduce the risk of failure by having a lot of people around who will hire you next

78 points by melindajb 13y ago

dools 13y ago

Making it less risky to work on risky things is exactly why I think socialism is great for business. Australia is often called out for it's "lack of startup eco system", and lack of early stage capital for tech businesses, however it's a hotbed of micropreneurship and the primary reason is that no matter what, you've got a reasonable level of healthcare, your kids have a reasonable level of education and you have a reasonable level of housing. I started from (financially) virtually nothing. I mean ... let's be honest everyone says that and yes I had advantages others didn't have and my family was essentially middle class but financially speaking I was always essentially what you would call "poor" and raising 2 daughters whilst being this poor and not having a "real job" for the past decade would be much scarier in the US than it is in Australia. The benefit to the country is that ultimately, I have the chance to build something great which creates jobs and grows the economy (yeah ... I'll urr let you know when that's done!) but if I fail, it's no big deal really.

czr80 13y ago

SF is a startup hub because it happened to get a little traction from a few early companies, and then network and scale effects helped it take off. Same reason Detroit was once a big auto hub, China is today a big manufacturing hub, Facebook the biggest social network, etc. Once a regional agglomeration like this is established, it's hard for someone else to match (just like it's hard to set up a new Facebook). And, also, once such a hub is established, people of course look for reasons to explain why it won. Mostly they're hagiographic "just-so" stories, of no real benefit to anyone looking to replicate it.

qwerta 13y ago

With internet you can run your startup anywhere on planet. Why would you choose the most expensive area on planet? You could be on tropical island for fraction of the cost. Also smaller costs gives you longer runway, it is big difference to have 3 months or 3 years.

programminggeek 13y ago

I think there is something else about the startup culture of Silicon Valley that I don't see in say the midwest and that is the understanding of what a startup is - and it's not just a new tech business. As PG wrote Startup = Growth http://www.paulgraham.com/growth.html http://www.paulgraham.com/growth.html What strikes me as a Silicon Valley outsider is the idea of 5-7% growth rate... per week. Comparing that to companies outside of the valley that grow that per year or per quarter and call themselves a startup and you see that there is something fundamentally different going on in the cultures. That growth oriented/obsessed mindset I just don't see in the midwest. Things move slower, can be less numbers driven, and it's far less about the big exit. There's nothing specifically wrong about that approach, but it's not the same startup mindset as YCombinator has. If the bar to being a successful startup is 5-7% weekly growth, than many/most non Silicon Valley areas don't have the same high bar for startups as SV does. Having a high density of quality people is great, but isn't not just the high density of people who are doing startups, so much as a high density of people doing rapidly growing companies. It's not just the tech, it's the marketing, the relationships, all of that. It's also possible that Startup = Growth is one big marketing lie and Silicon Valley is just lucky, but I doubt it.

greghinch 13y ago
I would argue that any successful small business that could be considered a startup is growing some metric much faster than 5-7% per year. Likely somewhere close to the per week rate. You just have to pick the right metric. What you're referring to is likely a 5-7% growth in revenue per year, and that can be surprisingly good. There are probably "successful" YC companies that aren't growing their revenue that quickly for the first couple years. But some other KPI is going crazy.
- programminggeek 13y ago
  Sure, I'm just saying that there are plenty of companies that think of themselves as startups that don't have KPI's growing at 5-7% a week or even a quarter, unless they invent some metric that makes them look good even if the needle isn't moving.

aashaykumar92 13y ago

"second, there is a far greater level of information sharing between entrepreneurs here. Putting a sharper point on that second one: In New York City they ask you to sign NDA's, and in San Francisco we don't. And what may feel a bit risky for the one turns out to have a big positive benefit for the many. I think this is such a huge, and excellent, point that most other "Why Silicon Valley is the startup hub" arguments miss. The idea of openness is simply taken for granted in the bay area while the rest of the world still lives in fear of someone stealing their idea if they say too much. And it goes beyond that. Two simple examples, both YC companies actually: Airbnb and FlightCar. I am from Pittsburgh but go to school in Ann Arbor. I've talked to friends from both cities about each of those startups and I get the same response every time, "But would you really give up YOUR place to a stranger?" or "Would you really want to give up your car to a stranger?" Airbnb takes me a little less convincing now that it is so successful but FlightCar, holy shit...I am told that I am way too trusting and quite crazy. So in whatever way you look at it, the sharing culture is something that is embraced in the bay area while the rest of the world is just starting to catch on to it. Now that I mentioned that I'm from Pittsburgh, I'd also like to nix the 'Stanford is a great engineering school" argument as well. Why? Well because so is Carnegie Mellon--has boasted the #1 Comp Sci program in several rankings but Pittsburgh is galaxies away from the bay area in being a startup hub. Playing devils advocate, however, I do feel that a city like Pittsburgh may also have the greatest chance of booming into one given that a great school such as CMU is based here. Look at it this way--right now, almost all CMU CS students interested in startups, whether their own or to be a part of one, want to get to get to the west coast. What if they all started to stay here? I think you'd naturally see a boom of startup culture here. Just a hypothetical thought/situation.

minimaxir 13y ago
Recent CMU alum here: the college is pushing startups very heavily. More and more tech companies are being founded in Pittsburgh as well.
w1ntermute 13y ago
> Now that I mentioned that I'm from Pittsburgh, I'd also like to nix the 'Stanford is a great engineering school" argument as well. Why? Well because so is Carnegie Mellon--has boasted the #1 Comp Sci program in several rankings but Pittsburgh is galaxies away from the bay area in being a startup hub. Right, it's not that CMU has a bad engineering school, it's just that Stanford is so close to Silicon Valley (and helped create much of it) that it holds greater prestige in the startup community. I don't think anyone looks down on CMU as far as getting a good education goes.

aantix 13y ago

I moved to SF in Sept of 2010. My wife and I went to the Folsom St fair because we were determined to experience what we couldn't experience back home (Nebraska). Might I say, a fair like that would have been SHUT DOWN WITH SWAT TEAMS in Nebraska. I can't imagine anything remotely close to that being tolerated. It didn't bother my wife or I, but when the extremes can be stretched pretty far with a general tolerance, you find that the middle is further than away from most people's average. I don't know how the tolerance for the extreme factors in to things, but I think it's at play with SF's success.. P.S. If you want to experience it, it's usually in late September. Do it once in your life.

rdl 13y ago
Right, but Palo Alto/Mountain View are pretty much like Nebraska in terms of what you'd see on the street (super-rich Nebraska, though), and they also have plenty of startups, so it's not just bare hairy man ass that generates startups.
lifeisstillgood 13y ago
The recent post about stepping over the homeless is probably SF most worrying problem - if the tolerance that SF is famous for is at play in SV success (and I do agree its causation not just correlation) then developing an enclave mentality will mean SV will revert to its own mean irrespective of the surrounding town. Engage with your community Silicon Valley

hendzen 13y ago

Contrary to what is said in the article, I find that NDAs are fairly pervasive at Bay area tech firms - maybe with the exception of very early stage startups. At most of the big co's you have to sign an NDA just to walk past the front desk to attend an event on their campuses or to interview. I also experienced this at a well known late-stage SF startup when they hosted a developer meetup in their office.

michaelochurch 13y ago
Yes, my experience is that Bay Area companies are a lot worse with the NDA nonsense. New York companies, in general, only make you sign an NDA if they're actually discussing trading strategies.
gkop 13y ago
> I also experienced this at a well known late-stage SF startup when they hosted a developer meetup in their office. That form is not what I think of when I think of NDA - it's one very brief page. And they don't review what you write. In fact one staff member said "Just print your name" when questioned by a guest. I see it more as just a reminder for guests to behave themselves.

kevingadd 13y ago

NDAs are alive and well in Silicon Valley even if VCs don't get asked to sign them. I've interviewed with dozens (if not hundreds) of companies here and given product/engineering advice to dozens of other companies and in almost every case, once a real conversation is going to start they want a signed NDA. I don't even think there's anything wrong with that, but I've not noticed any difference in terms of secrecy between the SV software companies I've talked to and software companies outside of SV (in places like New York, Seattle, LA, etc.)

kunle 13y ago
I think what he's getting at with the NDA point is the start of the conversation. As an ex-finance/NYC guy, you see this all the time in New York (thankfully its getting less frequent but I just had it happen again the other day): you meet a founder, he/she has an idea, and in order for him/her to share the idea, they ask you to sign an NDA. Just to hear the idea. Happens with alarming frequency.
- michaelochurch 13y ago
  [Y]ou meet a founder, he/she has an idea, and in order for him/her to share the idea, they ask you to sign an NDA. Just to hear the idea. Happens with alarming frequency. I just don't talk to those asshats. If I were going to steal something, it would be the resources to implement my ideas, not theirs.

michaelochurch 13y ago

Money. That's all. You can find smart people all over the world. What you can't find is easy money, in large quantities, looking for outsized returns. New York and Silicon Valley have a critical mass of people who have enough money to put into high-risk endeavors. In New York, they give money to young, eager people who start hedge funds. In Silicon Valley, it's "tech". Actually, venture capital funds tend to lose money, but that's another story. It's kind of amazing that with all the illegal collusion and note-sharing (I'm sorry, I mean "co-funding") they do, the industry still can't turn a profit.

logicallee 13y ago

San Francisco's real startup sauce is people with fucking imagination. Try this experiment anywhere in the world "Hey, I've written this great thing that can change millions of people's lives. I'd like to start a company around it!" Typically you can expect: "With what?" "What makes you think you can run a company?" "You're, what, 27?" "There are teams of dozens of people who can do the same thing, why would you succeed where they can't?" "Even if you do the work that literally thousands of teams all over the country can do and have actual resources for, what will you do next, you don't have a company" "Even if you make sales, you are losing way more money than you could by just working as a coder. You're delusional". "Let's say you get some customers and make more than you would otherwise. You still don't have a business. You haven't run a business! Would you enlist in the olympics without ever having even TRIED the sport?" etcetcetc versus San Francisco typical reaction: "Can I see it?"

potatolicious 13y ago
I think that's dramatically over-romanticizing the startup scene. > ""Hey, I've written this great thing that can change millions of people's lives. I'd like to start a company around it!" I've been pitched a lot of startups before, in San Francisco and elsewhere. I have never heard this line even once. The vast majority of founders (in SF or elsewhere) want only one thing: their big exit. They couldn't give two shits about changing the world, disrupting some huge evil industry, or anything like that. They want to get theirs, and any type of righteousness in their message is just posturing. To portray SF like it's some sort of haven for young people who want to change the world is grossly inaccurate. It's not like that in SF, it's not like that anywhere. Sure, once in a while you get something that genuinely seems to be a work of passion. Github is a nice example. For ever Github you have to wade through two dozen yet-another-photo-sharing-app, yet-another-social-location-mobile, etc etc, who are all in it for the me-too and the get-rich-quick. San Francisco is a very small number of people trying to change the world while a whole lot of other people ride along, posture a bit, and hope they get mistakenly swept along for the ride.
trustfundbaby 13y ago
That's what I think is holding Austin back. Startups here tend to be pragmatic and a bit dreary, Indeed just had a big exit, but how exciting are they? The big idea companies (gowalla) or the ones doing something truly new (five runs) have either not done very well or have been bought out (Other inbox, Hey Ride). I think its because most of the hackers, VC money and technology leadership here come from Java and semi-conductor backgrounds where the kind of truly creative thinking and crazy experiments that lead to world changing companies aren't exactly encouraged. But in addition to that, the gravitational pull by Silicon valley of talent, ideas and money is going to be very difficult to overcome, without some really deliberate effort and resources.

deleted 13y ago

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herdrick 13y ago

That SF map is bullshit. In general you would never see such an even spacing of startups (or most anything) unless someone were trying distribute them very carefully. And specifically there are a number of super dense hotspots that should stand out in a map like that. Someone just painted those dots according to what might look good.

6ren 13y ago

my tl;dr: the magic of Silicon Valley is making it *safe* to work on *risky* things. reduce the risk of failure by having a lot of people around who will hire you next