Startup Ecosystems Take Time
Saul Klein, co-founder of Seedcamp and one of the top VCs in europe, has a long and thoughtful post up on the evolution of Seedcamp. In it he says:
In my mind, helping to bring some cohesion to our region's distributed network of talent, capital and is a 15-20 year project. ……
Getting to the right point takes time, and the cycles that kicked off what we now know as Silicon Valley began nearly 50 years ago.
Investing legends like Arthur Rock (Fairchild Semiconductor), Don Valentine (Cisco, Apple, EA), Don Lucas (Oracle), Dave Marquardt(Microsoft) and John Doerr (Netscape, Amazon, Google) and the entrepreneurs they backed created franchise businesses that still dominate the technology industry today. But maybe more importantly, all these businesses created the raw materials (talent, seed capital and technology) for next generation of the today's winners like Google, Facebook, Salesforce.com and many many others.
I made the same point last week to Laura Rich of Fast Company who is doing a piece on startup ecosystems. I think it is good to think about decades when you think about the development of new startup hotbeds.
In the first decade, you are largely making it up, copying what works elsewhere, the VCs and entrepreneurs are largely doing it for the first time, and while you can have successes, they are mixed with a lot of failures. That was 1995 to 2005 in New York City and 1965 to 1975 in Silicon Valley.
In the second decade, you start to get it right. The entrepreneurs are doing it for the second or third time. The infrastructure has developed (lawyers, VCs, recruiters). And it is easier to get talented employees to do a startup. This is where we are in New York City now and is where Silicon Valley was from 1975 to 1985.
In the third decade, the ecosystem is fully formed and producing great companies. That is where Silicon Valley has been from the mid 80s on.
The only other startup ecosystem that is as fully developed as Silicon Valley is Boston. It got started even earlier than Silicon Valley with General George Doriot's ARD in the 1950s. Boston is an interesting case study because although it has all the infrastructure in place and plenty of serial entrepreneurs, role models, and success stories, it has had a harder time making the transition from tech deals to web deals. It is getting there now.
So back to new startup ecosystems developing in europe, asia, and elsewhere. It can happen and it will happen. But it takes time. And you can't fast forward because we are talking about experience which can't be manufactured. You simply have to put in the time.
Outside it may be 10.2% unemployment, the massacre at Ft. Hood, etc., but in here it’s like an oasis tapped into the cool waters of 1999. One of the reasons I enjoy reading this blog.
i’m aware of all of that, but i’ve got blinders on for the most part.
Don’t let the peanut gallery get you down Fred. As you know it’s startup innovation which will eventually get us all out of this mess.
Think it’s going to take more than that, Mike. ~17% unemployed + underemployed + discouraged workers and climbing. How many of them are going to find jobs working for Web applications companies?
Who said “Web application companies?” I said “startups”; i.e. could be biotech, green energy, or any other myriad of startup potentials.
Right, lots of jobs for high school grads in biotech and green energy. Look at Spain, world leader in wind power, with its 19.3% unemployment rate. I challenged Fred to think more about this in a previous comment thread. I would challenge you to do so as well.
Well you can be part of the problem, or part of the solution. Your choice.
In order to be part of the solution, you first need to understand the problem. From your cliched response, it’s not apparent that you do.If you’d like to engage with me on this subject, put some thought into your next comment. You have time: I’m heading out for a late dinner with my inamorata.
My cliched response was based on the fact I’ve seen the majority of your comments I’ve read identify problems but propose few solutions. I tend to shy away from engaging people in online forums whose focus is the former vs. the latter. If I don’t understand the problems as you see them then please just count me as someone who is blissful in my ignorance.
False. I did suggest some possible solutions in the comment thread I linked to above, while at the same time noting that I didn’t claim to have all the answers.Again, if you want to think critically about these issues, I’ll be happy to discuss them with you. But if you just want to kiss up to Fred by taking potshots at me, I’m going to call you on it.
Those who know me know I don’t “kiss up” well. I stand by my opinion as an honest one.
Your comment about me was false, Mike. You can stand by it all you want but it doesn’t stand up to an objective appraisal of the facts.
It’s not false, I stated my perception.
and the bull market in unemployment is just getting started! unemployment ftw!!!!
You can bet on that via Nadex, as I mentioned elsewhere a few months ago. I’ve been meaning to give it a try, but haven’t gotten around to it.
oh damn, nadex looks interesting. thanks for alerting me to it
Ha, hedging your bet against unemployment. Whoa, that’s an innovative way to leverage capitalism.Ty for the share Dave.
You are an interesting trader.
Not to be a downer but for most of these bets there are far more liquid (and thus MUCH lower cost) methods to achieve the same goal using CME-traded derivatives on futures.
It looks like the CME does offer a bet on non farm payrolls. Just looked that up. Also makes sense that CME options in general would be more liquid, given the size of the exchange.
It’s our virtual coffee shop/bar. We share one world with terrible attrocities, but we don’t let those acts blind us to all the awesome beauty around us.”think of all the beauty still left around you and be happy” Anne Frank
i’m still not a believer that ecosystems are tied to geography; i think increasingly ecosystems will be tied to niche knowledge. for instance the iphone/android/facebook/twitter/etc ecosystems are IMHO more important than nyc, silicon valley, etc. the implication of this is i think the “death of distance” argument, in which knowledge networks disrupt geographical networks.
maybebut if you are building a big company, you still need employees andemployees still largely work in offices
damn boss i didn’t expect you to go all incumbent on me, i thought you were down with how the digital underdogs roll: small teams, immense scalability due to leveraging the crowd/edge, swapping employees for business deals that can be facilitated due to API development…..this ain’t microsoft, this is craigslist and disqus!!!but most everyone i talk to agrees with your points here and disses me on this issue, so perhaps i am being a bit too idealistic here. i suppose we’ll all get to find out over the next few years.
your approach works for a while but at some point you have to become acompany
I need to think about what that transition entails
perhaps, but CL is a prime example. does it really matter where they are located? if it does, perhaps they need to be located in a hot area for accountants, lawyers, tax advisors and international law, rather than engineers or ad networks. in fact they may even find it advantageous to be geographically dispersed, so that they can more easily switch operations to favorable jurisdictions as necessary. many online forex brokers basically pursue this strategy, seeking to play regulatory bodies against each other. in a way this keeps regulatory bodies in check.i also wonder what the implications of the larger options pools you recently discussed are. if all the employees are shareholders, are there really any employees? i think at that point the “company” is more like an economy owned by a cartel. much like economies in the real world.
Used to agree with kidmercury and now agree with Fred…..there is no substitute for the energy CREATED from having passionate people in the same building.It took working for one of the greatest startups of this decade for me to see first hand how big of a factor this is.
there may be no substitute for the energy you speak of….but there is also no alternative to the costless awesomeness of wikipedia.and death of distance does not mean death of team spirit; we can just do meetups from time to time. just like the central bankers do to create the alliance they need to wage war against the people!
I think there’s merit to both sides of this argument. The death of distance means that a more far-flung organization can still come together for a common purpose. I don’t think you NEED to be part of a start-up “scene” in order to maximize benefits, but the contacts and support system you can gain from going to events with people, meeting for lunch or a drink, and just volleying ideas back and forth is a unique and in my view unmissable experience.As distance continues to die, it may end up a matter of personal preference.
From a financial prospective – early in the stage it may be OK to be dispersed – but as the operations grow – from a financial prospective – these resources need to be reeled for profit measures like economies of scale.The real goal of any business is to make money – thus, if it is more profitable to be in a single location then that is what should happen or visa versa. I always say follow the money – that will tell you what is right.
I very much agree on kidmercury. I used to have company with companies/teams in USA, Finland and Australia. Was better to have 3 x 33 people teams than 1 x 100. We had 3 very different timezones and 3 regions covered and each team was having healthy competition in performance. Also for employees, cross visiting and switching locations for few months, was very exciting & motivating.
I agree with this approach. Three small companies instead of one big one. But they are all companies not people working out of their bedrooms
Agreed. The connectivity enabled by the Internet does not make the need (or benefit) of physical location for people to work together go away. Just look at the surge in coworking across the country; why would it be organically emerging if not for people feeling the need to work around others?(Full disclosure, I’m a partner in a recently launched coworking space in Atlanta.)
A company is like a human network isn’t it?
Indeed. Except when it’s dysfunctional – which is all too common! 😉
I agree with the kid on this, for early stage startups especially in the consumer web space. I am building a startup out of India that isn’t necessarily focused on the mobile market that exists locally. However, I am identifying folks all over the world (see a bunch of them on your comment threads) who are in the niche and creating valuable connections.However, I find myself networking locally a lot more aggressively now to build relationships on the ground as well. Early adopters, discovering new use cases and most importantly for engineering resources.
Having led tech teams in multinational companies: small teams form in 2 or 3 countries, leveraging the big co infrastructure – success depends on how well the manager can use the infrastructure while keeping the overhead off the teams, as well as keeping them in sync. (Applies in HP, Cisco, IBM, Intel). People may be in offices or work from home. Is ‘becoming a company’ about forming the infrastructure to coordinate teams ?
Is ‘becoming a company’ about forming the infrastructure to coordinate teams ?yes! i think that’s a very useful way to think about it IMHO.
What is your opinion on Philly, Seattle and LA for doing a startup?
seattle is fantasticLA is goodPhilly is OK
If there is potential in these cities and many like them – then why is there a silicon valley or NYC or Boston? Why aren’t VCs more spread out? Easier to engage and easier to manage – I would think!
And your opinion of Atlanta for startups?
Good but not yet great. It sure has the potential
So I’ve spent 3 years running a meetup group for Atlanta Web Entrepreneurs and advocating for startup-related events and activities. Now in 2010 I’ve decided to launch an association to advance the startup ecosystem in Atlanta . Hoping to get your input and (maybe even involvement?) in what we should be doing to advance the startup ecosystem in Atlanta?
I’m not that close to it but would be happy to give you some advice
That would be much appreciated. I know you are a very busy guy so tell me what works for you. You can contact me via mikeschinkel at gmail dot com.
Why don’t you send me an email? You can do that by clicking on the contact button on the upper right of my blog
I’m betting you’re right. Hope the search tools I’m working on help those communities emerge, decentralized. Heck if wordpress can do it, it’s worth a shot.
I am in part. I think we reinforce who we are by looking others in the eye and saying: Hello.There is something innately human about the body that we cannot replicated here. My avatar is not me. Nor is my profile. You can’t see how I move, or when I am really scared, or unconfortable, or happy. For that, you need to see my face.And to really understand that, you really have to meet me. Even a camera can’t reproduce the little nuances.
I don’t see it. The west coast is tech, entrepreneurial. The East Coast is finance, politics, establishment. Completely different cultures. I don’t see any multi billion dollar start ups coming out of the East Coast any time soon. Correct me if I’m wrong.
i’m correcting you 🙂
That’s the current, broad-stroke perception– but a lot of things have been turned upside down, and, over the course of decades, things do change.What’s nice about the perspective in this conversation is that it’s on that scale. Changing the ecosystem of a region to be a more startup-friendly area is just not something that can happen overnight, and takes a diverse set of circumstances to come together, so, in some sense, we need to be patient.Participating in the slow process of making that change, however, can be exhilarating.
I would place Israel apart from the rest of Europe. the concentration of entrepreneurs and VCs per square meter can only be compared to what you observe (to a different scale of course) in the Silicon Valley. Europe is really behind i believe, any country taken aside and even all together.
no question that israel is in its second decade and maybe even its third
btw look forward to seeing you again this year at LeWeb! (this time not as avc though…)
I just looked at the list, some very interesting stuff I see being presented….Yummy….
Cusp of its 3rd I’d say. Fascinating environment – have always really enjoyed my time there. Passionate, bright, innovative people. Seems a tad isolated at times which restricts its potential. Which is a shame considering its USA alliances and proximity to Europe. Is perfectly placed to do much better than it does.
Not to open up a tangent, but I’m curious: to what extent (if any) do you think Israel’s economic success has made peace with the Palestinians more difficult to achieve?
The thing with Israel is that political life (mess) and economical life aretotally unrelated and i would even say uncorrelatedHowever one of my belief is that the digital economy and collaborationbetween entrepreneurs from both side will help in recovering from a painfulhistory
I was thinking from the Palestinian perspective: does it increase feelings of resentment, shame, etc. for them that makes it more difficult to come to a modus vivendi with Israel?
i don’t see why this is relevant. The reasons of the conflict are way deeperand not related to the growth of the high tech sector.
I second this. People will just work. I more concerned about why the Jewish part of the country is not at each others throats for a variety of reasons…starting with education. Now that’s controversial there.As in what Ouriel Said. Dave, if you actually walk around, and then look into Jordan, you realize that the Palestians have among the highest average living standards in the region. If anything the conflict has to do with similar versus similar and the feeling that there is a lot of goading and unhelpfulness from the rest of the region. Palestians who have been living natively in Jordan have no citizenship rights, last I checked, even thought hey may have been living there for many generations. And I have pa contential lestinian friends here in the US, who are 2nd? 3rd? generation who have little to no connection, even from there point of veiw, a large amount of this is post Marxism trans-religious, trans-contential issue…historically.A lot of this is identity politic issues…So unless we want to discuss those….and trust me, that isn’t easy for anyone, and are also currently in an uproar on the Jewish side as well…
IMHO israel’s economic success is attributable largely in part to its alliance with US and UK; this provides the economic foundation to do high tech investments. unpopular as it may be, the truth is that global monetary policy is deeply connected to all international war. peace in the middle east, like peace everywhere else, is most easily attained through revision of global monetary policy, which IMHO is most easily attained through virtual currencies.
I have no Idea how you guys function out of small sections of the Merkaz and parts of Haifa… You got to other areas of the country, and it is really industrious and people are starting up stuff all the time, and intel may have that plant down the corner I think near Arad?, but it doens’t scream “startup culture.” You go to parts of J-town and it’s like the world has lost you. I lived there the year before disengagement. The two best things the country has going for it right now are the fact that the Army is willing to pay for a select number of people full on engineering degrees as places like Wietzmann and that they are trying to bring down the time to serve reserve to what, two weeks?But I would be terrified to go start something there after living there that year. How do you deal with everyone going crazy politically. How do you keep your offices neutral politically when your buses aren’t. And this is from someone who was offered a free bed to sleep on for some time in Ma’ale Adumim….I’m too scared to go because I found the craziness so crazy.How do you get through that on a day to day basis….
Being from europe, I totally agree 🙁
It is definitely starting in London and Saul is doing a great job, no doubt about it. The infrastructure is definitely getting there but actually what we need is more US venture capital firms in London. We have the entrepreneurial and technical talent without doubt but we need the money, the attitude, experience and contacts of US venture firms here in the UK.A classic example is Shazam a great UK tech company that has gone to Kleiner Perkins for money but more for their experience and contacts. The guys at Shazam wanted KP’s help in globalization (read penetrate the US) and monetizing their service. Shazam are extremely fortunate to have such a great partner but it’s highly unusual, it is KP’s first investment in a UK company.Kleiner Perkins were briefly in London in 2000 but pulled out pretty quickly, which is a real shame.Culture (geography) does have a role to play and something great will come out of asia, those cultures are naturally entrepreneurial.I really think USV need a UK office Fred, more to the point the European start up ecosystem needs you to have an office….
Great commentary on the state of the UK Richard. It’s easy to filter out what others have to go through to build a successful business. As an aside from culture/connections I heard some rumors from a friend that the UKs GDP is dominated by the governement. I fear the same trends here in the US. It just doesn’t compute in my mind.
Thanks Mark.I try hard not to think about the UK government and how they spend our money!However the one thing that I do agree with is our public health system, considering it provides cradle to the grave cover for the whole population, it is pretty good in my opinion from experience. I haven’t been following the debate in the US much so can’t comment on the Obama reforms and how it would work in the US. But I am believer in the right to health care for everyone.It’s interesting actually because my brother-in-law who lives in Dallas came back to the UK for the first time in 8 years for a visit this weekend. We were talking about the cost of living differential between the two countries, he was saying that whilst in many ways it is cheaper to live in the US, the cost of health insurance over there balances it out.
Accel, Amadeus, Index, there are some decent brands operating out of London. Seedcamp, profounders and other seed/early stage outfits too. Think the London fund scene is continuing to climb and Saul’s a great part of that. Well done Index/Accel on Playfish btw. So big exits and big fundraising can happen out of the UK.
Farhan here’s the numbers for internet and software investment 2008 according to the British Venture Capital Association.Total number number of early stage investments 213, which breaks down as follows:117 Early stage investment 96 expansion financeTotal amount invested £109mEarly Stage £45mExpansion £64mLike I said we have some great talent here and plenty of people wanting to take the risk but we do not have the capital pool. We need more smart money and the greatest pool of smart money is in the US….great news for Playfish let’s hope there are more that follow in their footsteps.
Great points Richard, gotta admit numbers don’t lie.I’d like to think that if the deals and companies keep getting bigger and better, and if we continue to get some big wins here we’ll see more capital put to work. Amen on the Playfish point, Lastfm, Lastminute, Bebo, Skype and future prospects like Spotify hopefully will keep GB moving in the right direction.
I think one of the precursors to establishing a genuine start up culture and ecosystem in the UK is the listing of a big, successful start up on the London Stock Exchange. One that the general public have heard of. One that would really make the financial community sit up and take notice. Yes, we’ve had Autonomy etc, but we’ve never had a Google, an Oracle, an Amazon, or even an SAP.
That would certainly help Kevin. Biotech benefited in the same way in the 90’s
Shazam also got IDG money way back when. you may want to check with them to see how that went. i also want to say that they got softbank money – but its been 9 years and how many re-starts?Shazam is one of my favorite stories.
…they also sold the rights to their technology Mark but they have done what they have needed to stay in the game. They were probably too early in reality but I think now is their time.They do need to firm up their revenue model and provide some more features to get people to use their app more once it’s been installed but I think that will probably happen.
dont get me wrong Richard – big fan. I remember standing in a pub next to Earls court in 2000 and being shown it. literally – SHAZAM. i actually use it now on the iphone and the ‘discovery to purchase’ paradigm has definitely been solved. They are now a legitimate music discovery onramp.
I’m a big fan of theirs too Mark. Great technology.
Fred thanks for the re-direct and the expansion on the theme. @Ouriel – I agree that Israel is a special case in the region, but actually the number of truly great companies in terms of sustainability and significant exits is small so far – hopefully this will change over the guys as entrepreneurs and investors become more ambitious to create enormous outcomes
The time cost of experience is precisely what makes it so valuable. I can’t buy knowledge. I can invest time, energy, and most of all tireless passion into revealing latent value.Not sure why, but I began singing “money can’t buy me love” while writing that. Neural misfire 🙂
Fred, a thoughtful post. Thanks. I agree for the most part as even today the differences in the infrastructure between SF and LA and SF and NY are tangible. But I do think the cycle is accelerating as components of businesses can become decentralized and the source of the inspiration moves from the enterprise and think tanks to the social web. There was era of innovation in the Bay Area that started with Xerox Parc and DRI that spanned out physically through the valley. Now it seems, that tie to location and tech source has shifted.
It hasn’t gotten the reputation among the average person, but I can feel something happening in and around New York, and it’s the main reason I’m not moving to the Valley for my start-up. Perversely, the economic conditions might be one of the main driving factors, as people who live in and around this area suddenly don’t have that lucrative job with a financial services firm to rely upon. As the shake-out continues, and New York continues to carve out a new identity (hopefully aided by entrepreneur Mayor Bloomberg), I expect the wave to increase into a tsunami very quickly.A few months ago, I heard someone say the biggest difference between New York and Silicon Valley is that you can still find the pieces to do a start-up here, but you would have them in 6 hours if you staked out a coffee shop in Palo Alto. I wonder if, in 5 years, staking out a coffee shop in Brooklyn will produce the same result…Also, Fred, to what extent (in your opinion) is university involvement a key to moving a startup ecosystem to the next level? I went to college in Boston, and higher education truly dominates the startup landscape (sometimes to Boston’s detriment – because the colleges still have infrastructures in place to incubate old-school tech firms more than web firms). Stanford, Berkeley, et al help the cause in the Valley, so would a full-scale commitment from NYU, Columbia, Fordham, et al be the next step toward truly announcing New York’s arrival?
Nick. After two decades of serial startups in SF and LA, I’ve moved my business back here for just the reasons you state. Plus there is a sense of ‘people’ and culture here that is just not there in a car culture of the coast. To move from a meeting of minds here on this blog to a cup of coffee face to face is natural here. In the Bay Area or LA it is a chore. Of course it happens but with difficulty.
Yes, but we have drinkable water and clean air.(tongue-in-cheek, of course…)
The web has gone distinctly Urban. As it weaves it way in to our social lives and habits – it finds a far more natural home within large urban climbs, as these are the social epicenters.
Mark, I agree. Most of the world’s population live in cities so seems logical and as it should be. And interestingly, it becomes more local and personal as it becomes more real time and social. That’s the equation that inspires me, drove me back home to NY and guides my choices of what to work on. Thnx.
totally agree – real-time and Social = Local and personal. there is a threshold density of participants that are required in order for this to validate. Ask Foursquare.
Well stated. I was instantly drawn to Foursquare as a proof point of this formula. The breadth of my networks no matter how large, don’t have in your words “threshold density” and not demonstrable as yet. I’ll bet on FourSquare though.
I’m right with you on that,too. I love Foursquare as a game, but I know it will get infinitely better as more of my friends (and more people I know in certain neighborhoods) begin to use it.
Nick, good perspective for sure. I’ve seen no shortage (especially right now) of really talented people around NYC to work with.The other thing worth noting when comparing NYC & SF (which I try not to do too often) is that startups in NYC get a lot more recognition and participation from the community. Successful NYC startups are looked up to as champions for their NY-based success. Not quite so easy to get noticed in SF!I’d love to know how to crack the University puzzle in NYC. There are just too many opportunities for great NY-based businesses sitting in those classrooms to be ignored, but I think this speaks to the long-term issue of ecosystems– the infrastructure to interface with those schools may just not be where it needs to be yet.
The NY Tech Meetup is starting the discussion with September’s event, which was all about technologies being developed at NYU and Columbia. Nate did a great job with it, but it’s the start of the discussion. I think all rungs of the ladder in the start-up/entrepreneur/VC community in New York should be taking a look at the schools and how they can grow the ecosystem.
Agreed, that event was a good incremental step. I just learned about theevent the Entrepreneurs Roundtable is holding in January, where students andfirst-time entrepreneurs will be doing their first pitch for a group ofvolunteer mentors. These are the sorts of things that Universities could beactively promoting to their students.(Link: http://groups.google.com/gr…
I think Nate is awesome, I think of what I saw for that meetu[, one of the difficult moments was and now…..It was very hard to see the technologies presented move out into the public realm. I showed some to friends, including to one engineer: Meshing Theory with practice got them in a bind when they saw the live stream afterward too, either they were overly impressed, or not impressed at all, because of practical implications….
I think it is very important. I think it holding Chicago back so far. Hyde Park has an Angel Fund. No one knows about it. This is the extend of my knowledge of the University of Chicago’s involvement in High tech and the Web from experience. I met one of them. I wanted to find out about the process of starting a company one day, and my hillel was holding an event about “finding your first job” and he was one of the people there. I had no idea what I wanted to start, I just knew I didn’t want to do art forever. we got into a discussion about smiley face name tags. So I met one of the people involved…Nice Guy…but you would not know this even on talking to him. It’s not part of the campus culture. I get shot down all the time for being kinda product kooky and always coming up with crazy ideas for new web things. The comp sci department is very theoretical and currently split in half- and it affects undergraduate classes. (Not that I am taking them, but I have friends in them, and apparently they get canceled literally days before they start because professors and teachers pull out to another institute across the quad which does less “theoretical” research) It’s really difficult to change that kind of culture too.I actually went and emailed Zynga about something related to my BA when they stopped by on Campus (Idealized versions of people on Facebook -how would you do portraitures of the average person on facebook of socially networked people?, They have that sort of data). They were looking for product managers straight out of college/b-school. I applied for the Job outside of the normal “in School interview process” Because I wanted to see how their job board thing works. It’s interesting, it’s socially networked in a limited way to both twitter and linkedin, but it deformats your resume, even if your resume is a pdf. (That’s bad, mine was 2 column, so now everything is out of order) . At least they admit to liking products enough to try something interesting like that. Or I’m sort of crazy that I had to try that. My school has yet to recognize that this is “normal” or “good” behavior or that I’m doing this for whatever my reasons. Universities have to know their own culture and then kind of fit around that. It’s doable, but difficult.The actual campus environment here isn’t say pushing for people to go do that. Products? Who cares? My thesis advisor thinks this is awesome -but he is the only person jointly appointed to two different things on campus (Argonne and the Art department, and I’m very lucky to have him) It means the campus has no one hanging around who is Identifying people and say -go this way young person. I was sent to the art department by a former dean of students, who’s probably in his 70s? 80s? now. You essentially need to have the professor body be much less scary to 18 year olds and do the same, and show how interdisciplinary the world is, including the liberal arts… Despite this, I know of the following Five? Six? Alumni who have entered these fields or in them currently.(One person hated it -former business analyst at Techchrunch now at the booth, went here undergrad., one person who is a SMORE who writes at various places currently doing media work for the Trib, one person who is an undergrad math major who writes for ARS, Mark Suster went to Booth,There is someone who went here undergraduate for physics a long time ago and ended up in Razorfish doing HCI work. and I hear rumors of people in Both facebook and Google…beyond that, nada, no push for sustainability – no push for finding students to start companies.You need people who study theory. Trust me. Theory helps you. You need to apply it. Theory helps you get where you need to go. I don’t have the best grades. But I learned a great deal, and I learned a great deal about how to learn because I studied a lot of theory. Applying it has gotten somewhat easier. You have much better vision. The problem is also putting in a system where you pump people out to apply those visions who do stuff. Doing is hard.
I couldn’t agree more if I tried. A very close friend/mentor who is still teaching at my alma mater is now trying to get a university-wide minor in entrepreneurship, and it’s flying in the face of the established order of things, because too many people are more concerned with their fiefdom than of serving students in the best way.When you get down to it, everything is a business, whether you’re in the business of selling a concept, art, or yourself, and universities should be trying to build and foster that in a sustainable way.This is another area in which the economy could make a difference. The days of half the graduating class bolting for high-flying finance jobs are gone, gone, gone, and many other graduates seem to be falling through the cracks. It’s a perfect opportunity to look at entrepreneurship as a sustainable goal for higher education.
Not that it is my business, buy I am wondering who Zynga interviewed from the undergraduate class and why they made the choices they did. I have my bets.I think I only see one relative startup, and that is the guys who run SwingTrades. Nothing out there. I see a lot of consultants, marketers, a lot of banks, a microsoft intership for hard core coding, umm and some writing…that’s it.
Also, That professor is awesome. Be nice to your students professors. You all are very scary….
Nick….I agree with you. On the flip side of the coin though, I can tell you that NYC is an extraordinarily tough sell for people outside of the city to move into. While most of us LOVE the city, there are valid reasons for the flight from NYC’s income and capital confiscation policies that are doubly impactful on those who are looking at stepping into the mess…
That’s all true andy and I speak from experience as one who has a lot of capital confiscated every year. But I love this city more than I love capital so it works for me
We can all agree on that. The nycers are slow boiled frogs in a verrrrry addictive and interesting pot. Its only shocking to those of us from flyover….and we embrace that with the same ferver as nycers jusifiably defend their turf 🙂
Depends on the category. In biotech and clean tech, absolutely. In web services, I doubt it
Nice summary about the ecosystem and the way it evolves. I can clearly see that in India and in Bangalore particular we are going through the first phase. Most of the ideas as such are copied from the west but definitely more and more people are willing to experiment. This must have started in around 2000. And now there are a lot of people who have done it twice and thrice. So I guess we are getting into the second decade now.You do need to give time for this ecosystem to evolve. You cannot just have silicon valley like culture from the word go. Totally agree with that.
I see that it is extremely important to be in the right spot when planning for a startup.
Good post, Fred. Thanks for the nod to Boston. We had it right for a while but were hammered by the dot com bust. We’re getting it right again across a range of clusters (tech, life sciences, clean energy) as I outline in http://bit.ly/905VV. One thing that has struck me about NY is that it doesn’t have a strong university ecosystem that fosters start-ups like Harvard/MIT and Stanford. It will be interesting to see how things evolve in 20-30 years when the digital media/advertising wave is played out and the city is looking for the next wave of innovation.
I think NY partially “steals” the university ecosystem from a lot of places; Philadelphia, New Jersey, Connecticut, have their graduates drawn to NY.Many professors make the trip into NY regularly and effectively connect universities in a 2 hr. radius to the city.
The universities need to work with the city to foster innovation in areas like biotech and cleantech. Its happening. But not like MIT/Harvard or Stanford/Berkeley. Your observation is spot on
I know Bussgang (and maybe Feld) will disagree with me, but I think Boston isn’t as mature in making the transition to web deals. It’s still mostly B2B and tech. Also mostly early exits, rather than big stand alone winners (Trip Advisor, U Promise, etc). Greylock’s move to SV says a lot.
I was wondering the same thing when you mentioned Boston (well put Rob K), Fred, what would be examples of Boston “getting there now”?Also, I briefly did some work with Marshall Van Alstyne at MIT modeling information sharing. His view on Boston vs Silicon Valley was that even though Boston had a head-start, the Boston businesses were guarded fortresses of ideas and IP that stagnated, while Silicon Valley had much more information sharing (e.g. open source software, sharing of ideas between employees) that allowed the companies to flourish and surpass Boston. Would you consider this an essential ingredient for the ecosystem or just part of the pie?
MrColes- I think “guarded fortress” is much too strong a critique of Boston. It’s more accurate to cite the inherent conservatism of Boston and the lack of focus (compared to SV or NY) on consumer web companies.
Good point, here’s the work that I was referring to, without my hyperbole 🙂 http://bit.ly/1L0MmdThe key part related to SV vs Boston:Saxenian [Saxenian, 1994] presents a socio-economic explanation of why the California region, starting from the same size industrial base in 1975, had three times the employment growth and twenty five times the growth in market capitalization observed by 1990. The primary differences were attributed to several factors all related to greater information spillovers. Lower vertical integration allowed information to diffuse to buyers and sellers; less defense contracting reduced secrecy, and job-hopping and culture engendered a greater willingness to share with competitors.
Fred, your forward thinking is really appreciated. If you take a macro view of startup hotbeds then, you can make the analogy that guys like yourself (and the USV team), Roger Ehrenberg, Howard Lindzon, and now the Founder’s Collective team are the founders of the region. You’ve identified a pain point (startups in NYC need capital), put your money where your mouth is (investing locally), and are working to build value. That value creation is great for every entrepreneur you fund, but the beauty of the butterfly effect is how the successful entrepreneurs will go on to fund the next great entrepreneurs and so on.Thanks for making it happen.
Great Post – Start-up eco-systems take time and more than enough sweat! How can we accelerate the long cycles?
Well then … I’m glad to be in New York.Part of the issue is peer pressure. It has always swung against startups/entrepreneurship in New York – and towards other industries such as finance, real estate, law, and management consulting. Now this is quickly changing.
Fred,Nice post. Yes, the key ingredients are sources of capital, entrepreneurs, and infrastructure (service providers). I would add educational institutions and geographic concentration are key components as well.
Any advice on what are the key building blocks to start the process on the right foot? I’ve moved back to Italy after 10 years in the UK and US and I am seeing some very first encouraging signals here. Not a community yet, but a few entrepreneurs giving it a try and risking it, venture capital style. I do know how start ups work having worked in two and co-founded 3, but if I could help acceelerate the development of an echosystem here, that would be great.
I absolutely agree with the ten-year cycle analysis. I spend a lot of time in Brazil with startups, entreps., investors and government. They are trying hard to expand from a raw materials/export to an ‘innovation’ economy. I believe they have just passed through their first startup ecosystem phase (1998-2008) and are moving into the second http://bit.ly/2cU3KSOne thing not addressed in this post or Saul Klein’s, however, is culture. Spend some time in Western Europe, Latin America and elsewhere and you will quickly see that America’s respect for entrepreneurialism, creative destruction and profit is unique in the world. These cultural attitudes are not 50 years old but 400, and it is still unclear whether they can be developed in places without a similar cultural history.
It’s notable how it’s developing in Asia, and I can speak a tiny bit about Vietnam– a very unique and exciting place.It depends on what you expect from the ecosystem– is it the whole dream of starting a company, adding capital, selling/ipo big time? Or would other benefits suffice that come from an interactive, participatory, social business community? Our development team in Saigon is insanely talented. They get that way from great local (and sometimes foreign) education, and from doing work for Twitter and other US firms. There are a few VC’s locally and a few more serving the area from Hong Kong. There is a free enterprise style brought on by Doi Moi, juxtaposed against a cultural pressure to work for a big company. Barcamp Saigon and Twitter meetups are prevalent and very well-run. The measure of success there might well be not by how many billion Dong companies sprout, but by growth in innovative thinking and skilled job creation.http://eastagile.com
I totally feel the pain here in Hong Kong. The startup ecosystem here is non-existed. HK is all about finance and real estate. A startup incubation facility could turn into an extremely profitable real estate project. And most technical talents would rather work for i-banks than startups. Even in China, the situation is not as promising as people think. Hopefully we are still in the first decade. In the next decade I hope I can help to change the status quo.
Not to put a damper on things. I agree with Fred’s sentiment here. But Silicon Valley history is closer to 100 years old.http://web.mit.edu/ipc/publ…
Interesting read – seems to strengthen the point.It looks like a number of these very early bay-area companies benefited from the “self selection” inherent in people who moved to/lived in California. I think there was/is an underlying culture of risk-taking in pursuit of the opportunity for a better life that is fertile ground for start-ups.I think New York also has this culture, albeit in a very different form, and that has expedited its growth as a start-up center.
This seems like another good point in your thesis of good capital, good companies, good investments and now “good cities” moving slowly (by today’s standards)
I’m wondering as well, if a statup ecosystem is on piece of a larger ecosystem… How much of is it a body within a larger group of bodies. This may be my perception as an art student, but I see this as a microecosystem, sort of like a small section of a rainforest. It cannot exist without the larger rainforest. It keeps dying off until the rainforest itself is established.If you walk around Silcon Alley, it isn’t just tech startups. It was a huge hit to the Bay community when Heller Erman and Thelen both failed in the same year.. They were large top teir law firms.Peets, Willaim Sonoma, and Well’s Fargo are also in the area.New York is similar. You can’t start something in a vacumn. The culture needs to be supported by willing people. Including:http://en.wikipedia.org/wik…
so true. experiencing this first-hand now in getting a new venture off the ground. talking to talented people in various parts of the US and Europe. completely different mindsets towards start-ups based on where people are located (not at country level, but at a city level).the most striking example is attitudes towards equity. the value of equity (potential upside) versus salary (cash in hand) is extremely location sensitive. part of it is explained by cultural attitudes towards ‘risk’ overall …..but i think the defining factor is first hand experiences in the your immediate environment. success stories create a belief in the possibility of success, which is a self-reinforcing loop (read: lots of bootstrapping). no success stories means….. cash only.there is a universal desire to start/join/fund/build the next google …but the ability to recognize and act on that opportunity is very local/individual 🙂
Interesting that no one has chimed in for/from Austin.
I had coffee today with JLM. He’s one of the local austin people in this community. And he’s as awesome in person as he is in text!
Fred,Would you say your investments are biased towards NYC startups because of your interest in growing the nyc hotbed? Or do you truly believe nyc is putting out the best of the best?Also, what’s your advice to someone starting a company for the first time, outside of a startup hotbed?
I do plenty of things out of altruism, but investing my LP’s capital is not one of them. We invest in NYC because we make money doing that. And right now, it appears that we are making a lot of money doing thatWe are also doing extremely well in SF (we don’t have any companies on the peninsula).We think NYC and SF are the two best web startup hotbeds right now. I’d put seattle, boston, and socal right after them. Boulder and Austin also are interesting. But we can’t be everywhere as much as we’d like to be. We are also testing the waters in europe, particulalry londonI don’t have a great answer to your last question. At a minumum, I’d visit one frequently and maybe put one or more employees in one
Fair enough! Thoughts on Chicago?
Good not great. The loss of dick costolo was a major blow
Two other areas I’m watching relatively intently that I keep hearing good things about are Austin, TX and Denver/Boulder, Colorado. Any speculation that either of these cities will emerge with respect to startup ecosystems and innovation as well?
So funny. I just mentioned them in my last column. Both are very attractive
I didn’t get around to seeing this in the FT until late in the day, but apropos of this post, this article claims that the lack of VC funding in the UK has stymied stem cell research there: A business locked in its cell.
Great post Fred…reminds me of Vaynerchuk and others…it takes time & hard work.Where do you think Boulder is at in this process / timeline?
Boulder has an older ecosystem than NYC. I’d say late second decade. Maybe third decade
Here’s my long-ish piece on how Boulder became a start-up hub: http://american.com/archive…
I can’t wait to read it. Going through the comments on the flight to denver/boulder coincidentally
Yes, it takes time because the foundational, cultural & structural elements take time to put in place or to be become engrained, but once they are in place things start to happen.In Canada, the Waterloo-Kitchener region has done an excellent job as it continues to strengthen its ecosystem with companies like Research in Motion, OpenText and recently Google as some of its marquis tenants. The U. of Waterloo keeps pumping out quality and quantity software engineers. Check out the Communitech website to follow what is going on there: http://www.communitech.ca
Do all networks lead to Silicon Valley?Ecosystems do take time, but as people (successful entrepreneurs) and firms (VC’s, lawyers, banks) move around the world to Europe, China or India, time-scales must be shrinking for new ecosystems to be set up.Further the Silicon Valley ecosystem does not exist in isolation – it sits as possibly the most important node in a larger global ecosystem.Having moved from London to India, my personal view on the ground is that we see some start-ups with the potential to be great, but that many of the better ones transfer location to be closer to key customer markets. More than ecosystems, its access to markets which drives the success of startups…
This thread reminds me of the point that Malcolm Gladwell makes in “Outliers,” i.e., citing research that says developing true expertise in any field requires 10,000 hours of focused practice, with coaching and feedback.Likewise, the ecosystems Fred refers to have gone through their 10k hrs. The various elements show up in sequence, e.g., the entrepreneurs beget the need for investors, who beget the need for advisors, etc. They all enable practice, coaching and feedback. It takes time.
London has just kicked off the Global Entrepreneurship Week and having listened to a lot of the panel yesterday, it is clear that it will take time to develop a startup ecosystem here. It is tempting to migrate to cities such as New York or Boston or head to Silicon Valley but I think London is an exciting place to be right now. I am meeting more and more Americans who are looking for a challenge and to create an ecosystem outside of the States. If government initiatives are actually introduced to support entrepreneurs and not are not just for show, the UK can become a place to nurture entrepreneurial talent. I think it was in a book called ‘Flight of the Buffalo’ that I remember reading about the Japanese making 100 year plans for companies. We have to plan this far ahead to make sure future generations benefit.
Seeing yourself contribuiting to a hugely successful business and knowing that you were there all along indeed makes it all. Check out great and objective startup reviews and observe what are the pluses and minuses here http://www.vcgate.com/Start…
This is a great post, Fred.And I read it at the right moment because we’re experiencing this kind of “birth” of a tech/web ecosystem here in Brazil, where we have lots of hubs of talents through the whole country, and there’s a clear movement of aggregation of resources lead by companies like Microsoft SOL, incubators and VCs, creating the road for the next decades for our market.
is this centered in Sao Paulo or are their pockets elsewhere in Brazil?
Yup, that is so true. BTW, congrats on the Kissmetrics work.
Your Welcome- Want in on my first BA crit next week? We could could throw off the department virtually *smirk*