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Tech nerds often seem to believe Silicon Valley is about tech and ideas. Well, partly it is. But a larger part seems to be the financial climate: There is an a

Tech nerds often seem to believe Silicon Valley is about tech and ideas. Well, partly it is. But a larger part seems to be the financial climate: There is an abundance of angels willing to gamble a couple of million on startups. Angels don't do that in Bulgaria or anywhere else in Europe for that matter. And there are far fewer angels. This is mostly because of different tax systems especially when it comes to write offs after losses vs profits.

gii 12y ago
Silicon Valley is built on the demand by NASA and the military industry in the regions. Now angels are chasing successful deals there just because of historical reasons it all started there. In small Bulgaria there are already 3 start-up accelerators.
sz4kerto 12y ago
SV is all about investors. Ideas pop up everywhere, it'd be crazy to think that there aren't as many ideas popping up in Bulgaria, India or London. The problem is mostly with the environment -- investment culture and ease of running a business (how hard is it to deal with the state). *Edit: gii, you're hellbanned.
IndianAstronaut 12y ago
I highly recommend people read the book "The Ascent of Finance" by Niall Ferguson. It was a change in finance and economics that helped propel the industrial revolution. The book really highlights how crucial finance was, above other factors such as new phhsics and engineering discoveries, which made the early days of capitalism possible.
- calpaterson 12y ago
  Do you mean "The Ascent of Money"?: https://en.wikipedia.org/wiki/The_Ascent_of_Money https://en.wikipedia.org/wiki/The_Ascent_of_Money
  - IndianAstronaut 12y ago
    Ah yes that one, I was going off memory.
crdb 12y ago
The largest city by funding after Silicon Valley would appear to be London, which raised 2/3 of the around 1/30th as much funding in the whole of the UK as in the US [1]. I suspect that there are more than 1/30 as many startups but that the average deal size in Europe is much smaller. I would say the problem is less the "local rules" like tax systems - after all, nobody would call California tax-friendly on a global basis - and more the sheer number of existing, successful, wealthy entrepreneurs for whom angel investing is second nature, coupled with a professional, long-established venture funding industry with diversified, long-term committed and professional LPs (such as endowments and pension funds). PG commented on the aggressivity of deal making in the Valley even compared to the established and world-famous hub of Boston [2]. The whole essay expands well on this thread topic. As a Singapore resident for several years, I used to think that "the rules" were what mattered - taxes, government regulation, ease of obtaining visas, cost of living, proximity to large untapped market and cheap talent... but the stories appear in HN and elsewhere regularly for a reason: none of the hubs have even a fraction of the activity of the Valley and are unlikely ever to have it, no matter how much matched funding the government does. Would you rather raise 2m for 10% in 3 weeks, or 200k for 20% in 3 months? Of course, that 200k is several years' funding for an Indonesian startup. In my own attempts at fund raising, I often had to explain what a startup was (thank you PG for your great essays, which are immensely helpful there) to seasoned "classical" investors with dozens of deals under their belt. I don't blame Singaporeans and other "foreign hub" residents for moving to the Valley as soon as they can. The result: typing this on an American-designed Macbook Pro whose OS is based on BSD (where B stands for Berkeley), on a browser designed by Google in Mountain View by the same company that designed my phone. The tech landscape is utterly dominated by American companies even if as much as 40% of their founders are first or second gen immigrants [4]. The sad thing is that governments know full well that the rules have, at best, only a marginal effect on an established industry hub [3], and so get away with a lot more than they should. [1] http://techcrunch.com/2015/04/02/londons-startups-hit-a-high-of-682m-in-vc-funding-in-q1-2015/ http://techcrunch.com/2015/04/02/londons-startups-hit-a-high... [2] http://www.paulgraham.com/startuphubs.html http://www.paulgraham.com/startuphubs.html - "Over and over, I've seen startups we've funded snatched by west coast investors out from under the noses of Boston investors who saw them first but acted too slowly. [...] And yet within a month it had happened again: an aggressive west coast VC who had met the founder of a YC-funded startup a week before beat out a Boston VC who had known him for years. By the time the Boston VC grasped what was happening, the deal was already gone." [3] David Ogilvy mentions in one of his books that his agency paid as much as 73% tax. How's that California tax rate looking now? [4] http://www.forbes.com/sites/robertlenzner/2013/04/25/40-largest-u-s-companies-founded-by-immigrants-or-their-children/ http://www.forbes.com/sites/robertlenzner/2013/04/25/40-larg...

gii 12y ago

Silicon Valley is built on the demand by NASA and the military industry in the regions. Now angels are chasing successful deals there just because of historical reasons it all started there. In small Bulgaria there are already 3 start-up accelerators.

sz4kerto 12y ago

SV is all about investors. Ideas pop up everywhere, it'd be crazy to think that there aren't as many ideas popping up in Bulgaria, India or London. The problem is mostly with the environment -- investment culture and ease of running a business (how hard is it to deal with the state). *Edit: gii, you're hellbanned.

IndianAstronaut 12y ago

I highly recommend people read the book "The Ascent of Finance" by Niall Ferguson. It was a change in finance and economics that helped propel the industrial revolution. The book really highlights how crucial finance was, above other factors such as new phhsics and engineering discoveries, which made the early days of capitalism possible.

calpaterson 12y ago
Do you mean "The Ascent of Money"?: https://en.wikipedia.org/wiki/The_Ascent_of_Money https://en.wikipedia.org/wiki/The_Ascent_of_Money
- IndianAstronaut 12y ago
  Ah yes that one, I was going off memory.

crdb 12y ago

The largest city by funding after Silicon Valley would appear to be London, which raised 2/3 of the around 1/30th as much funding in the whole of the UK as in the US [1]. I suspect that there are more than 1/30 as many startups but that the average deal size in Europe is much smaller. I would say the problem is less the "local rules" like tax systems - after all, nobody would call California tax-friendly on a global basis - and more the sheer number of existing, successful, wealthy entrepreneurs for whom angel investing is second nature, coupled with a professional, long-established venture funding industry with diversified, long-term committed and professional LPs (such as endowments and pension funds). PG commented on the aggressivity of deal making in the Valley even compared to the established and world-famous hub of Boston [2]. The whole essay expands well on this thread topic. As a Singapore resident for several years, I used to think that "the rules" were what mattered - taxes, government regulation, ease of obtaining visas, cost of living, proximity to large untapped market and cheap talent... but the stories appear in HN and elsewhere regularly for a reason: none of the hubs have even a fraction of the activity of the Valley and are unlikely ever to have it, no matter how much matched funding the government does. Would you rather raise 2m for 10% in 3 weeks, or 200k for 20% in 3 months? Of course, that 200k is several years' funding for an Indonesian startup. In my own attempts at fund raising, I often had to explain what a startup was (thank you PG for your great essays, which are immensely helpful there) to seasoned "classical" investors with dozens of deals under their belt. I don't blame Singaporeans and other "foreign hub" residents for moving to the Valley as soon as they can. The result: typing this on an American-designed Macbook Pro whose OS is based on BSD (where B stands for Berkeley), on a browser designed by Google in Mountain View by the same company that designed my phone. The tech landscape is utterly dominated by American companies even if as much as 40% of their founders are first or second gen immigrants [4]. The sad thing is that governments know full well that the rules have, at best, only a marginal effect on an established industry hub [3], and so get away with a lot more than they should. [1] http://techcrunch.com/2015/04/02/londons-startups-hit-a-high-of-682m-in-vc-funding-in-q1-2015/ http://techcrunch.com/2015/04/02/londons-startups-hit-a-high... [2] http://www.paulgraham.com/startuphubs.html http://www.paulgraham.com/startuphubs.html - "Over and over, I've seen startups we've funded snatched by west coast investors out from under the noses of Boston investors who saw them first but acted too slowly. [...] And yet within a month it had happened again: an aggressive west coast VC who had met the founder of a YC-funded startup a week before beat out a Boston VC who had known him for years. By the time the Boston VC grasped what was happening, the deal was already gone." [3] David Ogilvy mentions in one of his books that his agency paid as much as 73% tax. How's that California tax rate looking now? [4] http://www.forbes.com/sites/robertlenzner/2013/04/25/40-largest-u-s-companies-founded-by-immigrants-or-their-children/ http://www.forbes.com/sites/robertlenzner/2013/04/25/40-larg...