I meet with startups from around the world. There are several reasons that more big tech startups come from here than from any other place.
- Access to role models. One CEO, as we drove by Apple’s headquarters, told me how he watched Apple growing up from a startup, like I did (I lived a mile or two away and got a tour when it was smaller than Y Combinator back in 1977). He said “if Apple can do it, anyone can.” More on why role models are so important later.
- Access to funding. Apple needed funding to get started. So does every startup. Only a few can go it on their own with just friends and family money. But here even friends and family money is easier to get because of the role models. We all know that if we give you $10,000 (what GoPro started up with, by the way, less than two hundred yards from my house) that it could become a billion-dollar company someday. How many people around the world know that’s possible? Not many, in my experiences.
- Access to business infrastructure. Need a lawyer that understands how to help startups? They are here. Need an office with good startup help? Go see something like Plug-n-Play that houses 300 startups. Need a PR firm? They are here. Need a mentor who has built a company before? They are here. Need a launch vehicle, like a conference? They are here. Need a CFO who understands how to get a company ready for an IPO? They are here. Etc etc. Yeah, they might also exist elsewhere, but not in high concentrations like in San Francisco, Seattle, Boston, New York, Los Angeles.
- Access to distribution. How will you get your new service into the hands of people? How about app stores? Amazon, Apple, Google, Microsoft, and Facebook have them. Who else? No one with serious ones. How about search engines? How about partnership possibilities (want OpenTable to distribute your stuff, for instance?) Those distribution and partnership opportunities are probably in San Francisco or New York. Rarely other places. Not to mention that most of the world’s tech press is located in San Francisco or New York.
- Access to monetization capabilities. You want ads? New York has them. Who else will deliver you the USA market, which is still the richest in the world (at least for a few years until China totally takes over). There are other markets that can monetize, but they are not as profitable and harder to kick off a worldwide brand with.
- Access to Talent. The modern company will probably need a big data expert. Someone who knows how to push around a big Hadoop cluster, for instance. Do you have one in your local community? Probably not, but they exist like flies in San Francisco area. Google, and many Silicon Valley tech companies (HP, CIsco, Sun, Yahoo) started at Stanford University, which continues to pour out a lot of top-rate engineering and business talent.
- Access to practiced management. Can you find a CEO that’s led a startup out of two-person eating-ramen mode yet in your local community? That understands how to handle HR problems because she’s done that before? Understands how to deal with the world’s top press? Understands how to get into Larry Page’s office and make a deal with Google?
- Access to production. Oakley, GM, Ford, Boeing and many others make their own products here, which makes it easy to find people who understand how to make things. Apple goes to China, but even there many Chinese manufacturing lines cater to American markets.
- Sheer serendipity. Often when I’m at dinner, drinking coffee in the San Francisco area I meet random execs from startups and big companies. This simply doesn’t happen in mass many other places in the world. I’ve witnessed these kinds of happenstance meetings turn into major business deals. Hard to put yourself in play elsewhere.
The main thing, though, is the belief that it can be done. The company I work for, Rackspace, started up in San Antonio. Part of that was the simple belief, on our chairman’s part, that it could be done without moving to San Francisco. It certainly is easier to have that belief when you’re surrounded with other examples who have done it (San Antonio was also home to AT&T, for instance).
Just the other day I heard two surfers talk about how GoPro started on the waves of Half Moon Bay and now is a billion-dollar business. Even surfers here know that they could become a billionaire, so are more likely to start their own companies. It’s the belief that really gets things going here. That causes people to take risks (and be backed up by friends, family, and community). That rarely happens around the world.