A discussion about creating startup hubs

Andrew Ross Sorkin and I talked about creating startup hubs yesterday at the New York Times’ Cities For Tomorrow conference. It’s about 20 mins.

#entrepreneurship#NYC#Uncategorized#VC & Technology

Comments (Archived):

  1. James Ferguson @kWIQly

    Your comments on infrastructure investment are right on the money.Look at any geographically bounded location and you see that trade put it there.New York – A HarbourLondon- A HarbourSF, Singapore , Hong Kong etc etcSo get people in and out and things can happen – simples 😉

    1. Dave Pinsen

      In New York’s case, I think it was the combination of the harbor and the Erie Canal upriver. Other cities in the Northeast had harbors too.Bedrock also came in handy for erecting tall buildings later.

      1. James Ferguson @kWIQly

        Ok that fits.

      2. JamesHRH

        Rail? NYC gets you to more of the heartland more directly via rail?

      3. LE

        Philly was limited by that Quaker shit that was oh so humble and not the “take it” and nicely piggish attitude of the immigrants in NYC. In Philly there was an “unwritten rule” [1] that said “no buildings higher than Billy Penn’s hat” which was finally broken by Willard Rouse.http://articles.philly.com/…For 90 years, a “gentleman’s agreement” said that nothing could be built taller than Billy Penn’s hat on top of City Hall – 548 feet. The result was a clump of nondescript office buildings around a quaint Victorian center. This pretty much described how Philadelphians, and others, saw their town: nondescript, unexciting.Then came Rouse’s heretical proposal to erect a building hundreds of feet higher than Penn’s hat. Not surprisingly, the ensuing controversy included moralistic declarations that the tradition represented 300 years of “self-discipline” and “restraint” and that breaking it would mean selling out the city’s “civic” center for a “commercial” one. Stuff like that.On the other side was ample pop psychology suggesting that Philadelphia resisted building higher because it was afraid to “stand tall.” And sociologist Digby Baltzell, who blamed the Quakers for most of Philadelphia’s ills, also blamed them for keeping the city too level to be interesting.[1] I don’t buy into anything like “gentlemans rule” at all. What it was most likely was the city power brokers who had control over zoning, law and everything else most likely could nix this. Or perhaps they owned some shorter buildings that they wanted at full occupancy. That seemed like the more likely explanation by my theory. By the time Rouse came around to challenge perhaps they had died off or were so old it didn’t matter anymore.

  2. Twain Twain

    Wrt the importance of angel investors and the lowdown on London, it’s worth watching this excellent interview by William with David Cohen. I’ve set it to relevant 3 or so minutes.* https://youtu.be/hFq0C7iiaL…For those who don’t have time to watch the video…David Cohen: “The investor community in London was thinking of seed investing like I was thinking of Series A investing. The traction that they wanted and the due diligence that they do is the sort of thing you expect of a $5 million Series A round when they’re investing a quarter of a million between five of them.They think they should be TORTURING STARTUPS, making them do business plans and not just investing in people — which is what we do at seed, right?In the US, we’ve learned high velocity seed investing. When you love the people and you think there’s a thing there, you can’t wait around. Like, I couldn’t say to Uber, “Hey, I need a business plan!I had about 10 minutes to write a check. And I did it because I believed in the market and I loved the people.We’re having to teach the London community to maybe think differently which will take, maybe, 10 to 20 years…”For an inventor like me who’s from a different cultural mindset, it makes a LOT MORE SENSE to get on a plane and base myself in SF for months on end rather than wait 10-20 years for London’s ecosystem to enable me to innovate in tech.And, funnily enough, I fit in with the energies of SV-SF!!! And am even ahead of its curve!!!For example, I had a mad idea to “tweet by gestures in thin air” and within a weekend I’d sourced a team (Chief Scientist with a PhD in AI, a senior Yahoo engineer and a Data Scientist) to build a prototype. Thereafter, everyone I spoke with loved the idea and wanted to work on it.Recently in London I pitched the same idea with a slight variation to a European PhD in AI. He told me all the ways it wasn’t possible — when we’d already got it working in SF!!!

    1. William Mougayar

      Good passage and plug re: London, and the nuances of seed stage investing across the world. Thanks for sharing this, Twain. If I gesture with a thumb up, it should add a Like on Disqus, no?

      1. Twain Twain

        Indeed.AND wiggling thumb = Yessssssssss!

      2. Daksh

        “within a weekend I’d sourced a team (Chief Scientist with a PhD in AI, a senior Yahoo engineer and a Data Scientist) to build a prototype”Would really like to know if this team comprised of people from THE specific area only – because if it does, it just proves that it is not that simple to create anything out of anywhere (also refer to the comment referring to the European PhD)

  3. William Mougayar

    I love the tree/seeds analogy, and if this was plotted on a map, the Silicon Valley forest would show its supremacy with the largest number, highest density, variety and biggest types of trees within a given area (and lots of different animals in it, but let’s not push that analogy too far).But when talking about the history and strength of Silicon Valley, you’ve got to mention Hewlett-Packard. They’ve had as much to do with it as Fairchild, and a handful of others. Actually, it’s worth remembering that Steve Jobs had a summer job at 13 at HP, and Bill Hewlett became his close mentor. Steve Jobs admired Hewlett and Packard, and that marked him for the rest of his career and what became Apple.

    1. James Ferguson @kWIQly

      To push your analogy – Sometimes a volcano pushes new land up out of the sea. (See Surtsey below – Once the Hawaiin Islands looked this way)Give it a couple of years and some tough trees will even start taking root from the limited nourishment there.My point is that if you really believe, you can make a start-up work anywhere (it may not be the easiest option – but it may be the ONLY option)

    2. Girish Mehta

      A remarkable example of how a large company moved into a new business without worrying about cannibalizing their existing business is how HP moved into the PC space starting 1994.At that point they were already a (1) 55 year old company, with (2) $25 billion in revenues and (3) 100,000 employees worldwide.They were ranked #17 in the PC Business in 1993 – way, way behind companies like Zeos, AST, Micron etc. They had existing business and orgs to protect by staying away from PCs.HP’s move from #17 in 1993 to #3 in 1997 in the PC business is a case study of a how a large, 55 year old company created a new multi-billion dollar revenue stream without worrying about cannibalisation (they didn’t try to protect HP UX vs NT; or PCs vs workstations. They were willing to outsource aggressively – they put Belluzo in charge, who had earlier driven the printer engine outsourcing from Canon in the 1980s).Of course, everybody knows what happened after that. But HP going from a PC non- player to a PC player in the mid-90s is a case study.

      1. William Mougayar

        Yup. I was there. Left in 1995 after 14 wonderful years (82-95). These were the HP golden years, til they started to break-up the company soon thereafter.

        1. Girish Mehta

          They always struggled with marketing in the earlier years William..HP were the Engineer’s engineers.There was an old Silicon Valley Joke which became legend – “If HP invented sushi, they’d call it cold, dead fish on seaweed” !

          1. William Mougayar

            Yes, we used to say that a lot- “if HP sold sushi, they’d call it cold dead fish.”HP’s marketing got better later in the 90’s. It was a very analytical type of marketing. They understood their target segments very well, and what customers wanted.

          2. Richard

            Notwithstanding this, the hp41c for engineerinf and hp 12c for finance were the apple handhelds of their times.

          3. William Mougayar

            yesss! and the HP95 was arguably the first functional smartphone- back in 1993 approx. it had apps, a decent screen, a keyboard and a telephone accessory.

    3. fredwilson

      You are right and I will work that into my schtick

      1. William Mougayar

        :)- I’m biased of course due to my HP tattoo

        1. awaldstein

          And I an Atari one.My first job. My first IPO. My first enthusiast community.

          1. William Mougayar

            It’s a mental tattoo, if there is such a thing.

          2. awaldstein

            So lucky I am.My first job was with Atari.Nine months in they sell to Tramiel Family (Commodore Computer) and go from 3800 employees to 20.I end up running marketing and channel marketing and they go public four years later.I owe so much to Jack and his sons.

    4. Ronnie Rendel

      Re: Seed/Trees – I literally mediate on this all the time. The leaf is a body doing “work”, taking “resource” and producing “value”. it can be a person or a team.The stalk is the communication layer, in a seedling (early startup) – there’s basically a leaf and tiny stalk “grounding” it. In a large enterprise there is a complex network of stalks, branches, and bark.The “resources” are coming from three places – the ground (potential, idea, skill, community, philosophy, desire), the sun (exposure, marketing), and water (money).Finally, it’s amazing to see the ecosystems. If you go for a stroll in the woods you can find entire ecosystems around a single big tree (Google), and sometimes you see a bunch of trees in different level of development sharing the same DNA. It’s an amazing thing to watch.

    5. LE

      I think any discussion of either HP or IBM (which just reported really bad results) has to include a discussion of how things have changed in the business world and in manufacturing from the “white shirts and horn rim glasses days” of the past.The world of Razor thin margins and stupid consumers who value price over almost all else.When I got started in business (after graduating from College) things moved slower and quality mattered and companies supported their products and didn’t “push shit out to the channel” before it was ready and could be supported by the company. So when IBM built a computer it was a quality computer but unfortunately the clones came along with their shitty quality and shitty software (remember the first version of Windows) and people ate all of that that they could. And the aggravation was shifted to the consumer of the product from the manufacturer. The book I won’t write will have a few chapters on this shift. And you know those early HP printers were built much better than the ones that you buy today from HP. Just compare the plastic forming and the parts. Nowhere near as robust. Not enough people want to pay for quality (other than Phil Sugar or myself perhaps) they want cheap cheap cheap and will take their chances on it breaking.Go ahead and add up the hours that you spend using a computer program or product that doesn’t work the way that it should. They make a phone call and deal with a total moron that can’t even solve your problem.Everything now is price driven (with the exception of the luxury and high end niche) in a society where things are so cheap many times it doesn’t pay to even complain or return.

      1. William Mougayar

        Alas, HP ain’t what it used to be, and that decline gradually started in 2000 approximately.

      2. Daksh

        “The world of Razor thin margins and stupid consumers who value price over almost all else.”I don’t think it is as simple as that. Take two examples -:1. Would a person having the same amount of money prefer to buy 1 shirt which lasts him 3 years than buy perhaps 6 shirts which last 6 months each2. The World’s largest company by Market Cap does not exactly sell low priced products!A lot of customers value “Value” (it could be value perceived by them) and not just Price. A lot of segments may not justify higher priced / better quality alternates sticking in the middle of the luxury–>low-priced spectrum as people are unable to differentiate the value they receive

    6. Rob K

      HP also helped define the Valley culture with “the HP way”. Also important to remember that Tom Perkins came from HP where he ran the computer division before starting KP.

      1. William Mougayar

        Exactly. So many good things about HP. The HP is tattooed on my mind.

  4. William Mougayar

    Fred, re: UBER, you said “less people are taking mass transit”. I think we need to figure out if those people taking UBER or uberPOOL (or other ride sharing services) from the suburbs are ones that are opting out of mass transit or opting out of driving their own car? That’s a big difference.From a cost point of view, UBER/Sidecar/Lyft will be more expensive than mass transit, but cheaper than your car+gas+parking+maintenance, so it appears logical that it would be taking market share from cars, not mass transit usage. But we need to see the real data on that.

    1. JLM

      .Much of Uber’s success is that it is generating incremental use of its services and not just cannibalizing the existing rider base. As an “on call” transportation service, it is different than a “scheduled” transportation service. Radically so.I see it constantly when I see how my two children use it.When Uber first advanced this notion, I was tempted to call bullshit on them. I have since become a believer.It is not just the ridership character that is changing. It is also the importance of parking at the other end. Even now when I go to downtown Austin, there is no parking and what is available is expensive — as expensive as an Uber.JLMwww.themusingsofthebigredca…

      1. Ana Milicevic

        What I find interesting in all Uber discussions is that we tend to generalize Uber as a whole; in reality, Uber in NYC has a different flavor than in Boston, than in Chicago, than in London, etc. It adapts to each location’s specific transportation needs ever so slightly (whether through requiring commercial licenses, car uniformity, or being more lax on those but having more carpool options for popular routes). That’s what makes it super sticky.

        1. JLM

          .In the delivery of the product many of the differences you catalog disappear — a strength in my view.It is smartphone deliverable in a consistent manner like a Big Mac is the same in all those same locations.Not that I would actually eat a Big Mac, mind you. Of, Hell, of course I would.JLMwww.themusingsofthebigredca…

          1. Ana Milicevic

            I like the analogy. From the perspective of the end user the ride experience is sufficiently similar, Big Mac style. However, the restaurant itself can have local flavors (like in Japan), special branding, etc. — just like each city has its idiosyncrasies.Uber also has many different audiences which again tend to be generalized as one in larger discussions. For example, in NYC hailing a taxi outside of Manhattan was near impossible for decades and a whole shadow industry of gypsy cabs arose. (Btw, for those of you not in the NYC area, Uber is doing a great job surfacing these use cases in ads it’s running against the mayor’s effort to cap the # of new cars allowed). Location aside, for business travelers just obviating the printed receipt is significant value add of Uber, not to mention better transport to/from airports. I could keep going but I think I’ll turn this into a blog post instead.

      2. LE

        I have since become a believer.Bitcoin and Obama love next?

        1. JLM

          .I am a Bitcoin skeptic. Waiting — not holding my breath — for the killer app that makes it work. I am very skeptical as to bitcoin, much less so as to the blockchain.As to the President, I am a huge fan of the reality of the first black President of the US. I fear, he will be last black President of the US also.He has so dramatically underwhelmed the opportunity given to him as to literally have set us back as a country for a decade and to have lit the fires of contentious debate so broadly as to, perhaps, make us more careful in electing someone competent next time.It is difficult to imagine a more feckless and less accomplished leader dwarfed only by the alternative reality in which he apparently resides.JLMwww.themusingsofthebigredca…

          1. LE

            I am a huge fan of the reality of the first black President of the US.I don’t know why that matters actually. I don’t really care whether a President is Jewish for example or comes from the area that I live in, or went to my school or anything like that. Woman, man whatever who cares. Nixon wasn’t Jewish but he was a great supporter of Israel. Probably a better supporter than a Jew in the White House could be. (As you know appearance of “arms length” and “no axe to grind” is sometimes a better way to pull off an agenda..)I remember when there was a time that there were no black mayors of major cities. Now there are many black mayors of major cities. Has anything changed for blacks in those cities as a result of that? Or Chiefs of Police (ex Chief in Baltimore as an example..).

          2. JLM

            .It matters because people want it to matter. It would be great if we were all so intellectually secure that we could just understand the notion of equality but we need proof, evidence.It is proof that there has been some change in our society. In that regard, it could be a very healthy development and potentially a big sigh of relief for our society.One can argue that, in this specific instance, it has not and that racial tension is at an all time high.By having a black President, we have defused that sticking point.A black friend of mine, who is not a fan of the President, always chides me that Pres Obama is only half black. Whenever he screws up, he blames it on the white half.I blame it on Geo Bush. Wait, did I really just type that?JLMwww.themusingsofthebigredca…

          3. sigmaalgebra

            > the alternative reality in which he apparently resides.Hint:http://www.youtube.com/v/hU…That alone should have immediately had us conclude “alternative”.And what alternative might that be? Why not just look at his background: He’s an angry guy from community organizing fighting the mainstream of the US in pursuit of social justice.He bows, yes, to the leaders of China, Japan, Saudi Arabia, and France. He likes Cuba and, now, apparently Iran.He insults Israel — he doesn’t like Israel. He returned the bust of Churchill to England — he doesn’t like England.He doesn’t like the drug laws so just issued pardons for 42 or so drug felons in jail.He wants to swamp US White voters so refuses to enforce the immigration laws and has an open southern border. Basically he hates the US Whites and wants to stick it to them — e.g., with immigration. He’s out to hurt the White-Jewish-male US as much as he can and still get away with it.Basically he’s being racist, but he knows that the politically correct parts of the US will never call him on it.An old theme in literature, opera, etc. is the trilogy of transgression, retribution, and redemption. People sort of expect this trilogy. Well, the US media did: The US Whites committed transgressions; Obama is a retribution; and the result will be redemption. Since enough people see this trilogy implicitly, it holds.Obama got away with that video clip. From that he had to know that he could stick it to the US over and over, sometimes he’d need an excuse, and get away with it. And he has.But, Ike deported a lot of illegals. Then next president can, too.It’s simple: It’s just crucial for the US to maintain the concept and meaning of US citizenship. Indeed, one of the best ways to shoot the US in the gut would be to destroy the concept and meaning of US citizenship. Simple. We have to restore the concept and meaning of US citizenship. Got to.A candidate for US President who refused to put his hand over his heart? You can trust his devotion and loyalty to the US? I can’t.From what I know about Ike, I could trust his loyalty to the US. Maybe for Trump.Obama was elected, fair and square. He gets to have his own beliefs and values. If enough people want him impeached, then they can do so. A lot of people, including one of Obama’s buddies, are pissed at the US — recall Wright’s “God DAMN America”.Blame the voters. There’s no law against being pissed at the US. We have a democracy; we elected him. Maybe we will look more closely next time.Harm? With his immigration policy, he has done a lot of harm. Releasing 42 drug felons — not such a biggie. England? They will forgive us. Bowing to those countries? They smiled or laughed. Cuba? Who much cares anymore? Iran? Of course no way should Congress let that treaty be signed. ObamaCare? I can’t believe that Obama — he never paid much attention to it at the beginning — ever expected it to last this long, and when sticker shock arrives the next president will block it, try to repeal it, and try to replace it. Israel? We’ve worked with them on Iron Dome; their support in the US is still solid; Israel will forgive the US. But AIPAC may be more careful about whom they support. Iraq? We spent too much blood, treasure, time, and effort there anyway. Hopefully the Shiites won’t succumb to Iran. Hopefully ISIS will calm down and give the Sunnis something they can like.A lot of our new weapons systems have continued to go forward; Obama has not killed all of those.Net, we are still getting by. Uh, our founding fathers knew that they were trying to build a good country with a good government of only real, i.e., imperfect. men. So, they gave us our strong Constitution with lots of checks and balances. Just with the Constitution, if we don’t like Obama, then we can get rid of him.If we’d needed a real President, then we could have been in trouble.

          4. JLM

            .Damn good analysis.JLMwww.themusingsofthebigredca…

      3. sigmaalgebra

        We really should be able to evaluatemarkets.> here is no parking and what is available is expensiveSounds like time for someone toput up a parking garage!

    2. fredwilson

      Maybe. From my experience in NYC and observing the experiences of my kids, their friends, my friends, my colleagues, etc, Uber usage is almost entirely replacing yellow cab usage.Clearly that’s not the case in LA where it has made an important and valuable difference in the urban living experienceThat’s because LA had a terrible cab system and NYC has a really good one

      1. William Mougayar

        Interesting to learn about these nuances. True, every city’s traffic dynamics are different, and Uber is exploiting this well.

      2. Brandon G. Donnelly

        For me, here in Toronto, UberX has 100% replaced incumbent taxis for me. It’s not that taxis here aren’t readily available; it’s why would I pay more and have someone complain about me trying to use a credit card?It’s also starting to cut into my transit ridership, albeit to a lesser degree. Transit in Toronto is $3 one way. If I’m with, say 2, friends, we can either pay $9 to ride transit or we can split the ride so that it’s roughly the same price. We are obviously going to choose UberX.Once UberPOOL takes hold here (I tried unsuccessfully a few times), I suspect it could further cut into my transit usage.

  5. WA

    The Oracle of Omaha has company. The Oracle of the Alley – but this community has always known that. Great interview.

    1. fredwilson

      Thanks

  6. Thyagi DeLanerolle

    Great video! Thx for sharing your insights!

  7. William Mougayar

    Talent , Capital , Cheerleading, Experience. – on what it takes for an ecosystem.I like this combo a lot, and the fact that the first 2 are tangible and measurable (quantitative), and the last 2 are more difficult to measure (qualitative), but you can measure their impact.

    1. Ana Milicevic

      I’ll add one more and that’s prior success as a catalyst (especially if it’s in a particular industry vertical). When we look at the NY tech ecosystem DoubleClick’s success and subsequent exit(s) greatly accelerated the lovely vibrant ad tech ecosystem we have today. Without it, talent, capital and experience would have been much slower to manifest.

      1. William Mougayar

        That’s captured under “experience”, no?

        1. Ana Milicevic

          Not necessarily. Experience in an industry is one thing and many cities have this (e.g. London in finance, Atlanta in media, CPG, travel, Detroit in auto). This doesn’t readily translate to catalyzing innovation in that sector (or others for that matter). A major exit event frees up talent and likely generates sufficient capital; your next gen of angels will likely stem from that major exit event and that can accelerate things greatly.

          1. Matt A. Myers

            Experience doesn’t have a conclusion of success, it does lead to learning (hopefully) though.

          2. Ana Milicevic

            Sure, but it in and of itself does not generate a vibrant local startup ecosystem.

          3. JamesHRH

            Agreed.A breakout success is the recruiting tool that draws talent & cheerleading.

          4. William Mougayar

            Ah, I read it as “people experience”, i.e. entrepreneurs with experience in starting-up companies and growing them; therefore being more effective at helping others do the same thing.

    2. Matt A. Myers

      How do you propose talent being measurable? You seem to be saying there are no qualitative factors involved. Maybe we’re thinking of different things when thinking about talent?

      1. William Mougayar

        I mean- you count the number of engineers that are graduating, and you count the number of people that have expertise and that you can hire for engineering, sales, marketing, etc..So, if I were to expand this, in my own interpretation:- Talent + Capital: You know exactly how many employable people there are, and you know exactly how much money is available and going into it.- Cheerleading + Experience: It could be subjective there, so you can only measure the impact as an output. Does the cheerleading move people to do stuff? Do experience people stay and help others succeed? things of that nature.

    3. Twain Twain

      Maybe the model’s missing … a quantum, multiplier factor … IMAGINATION.Also notice how Fred credits the Chinese with not doing copycats as people presume but creating real startups that are custom built according to CULTURAL specifications.The States has done a great job of exporting its culture long before SV and tech, by the way — see pop culture (music, movies, motors).We’ve been able to quantify the talent (# PhDs, MBAs etc. graduating from STEM courses, ranking of Stanford/Harvard/MIT/CalTech/CarnegieMellon etc) and the levels of capital ($ investment at each stage, N times exit, # “unicorns”).Cheerleading and experience we do have some quant proxies for: #likes, #retweets, # comments on a thread.Key question: “How do we measure imagination and cultural values?”Can I suggest it may be East+West minds that solve this?

      1. Richard

        What I find interesting.about creativity is that one would think that eastern philosophies would lead to a creative society, yet besides Japan in the 80s, and the Korea more recently, the creatives tend to be located in western nations.

        1. Twain Twain

          China’s history is rich with creativity. There are inventions the Chinese had which didn’t appear in Western cultures until 10,000+ years later.Funnily enough, I recently drafted some slides on “Types of Inventors” and the Chinese noodle vs Italian pasta was one of my examples.For why Modern China doesn’t seem to be as creative, this happened:* https://en.wikipedia.org/wi…It affected the bourgeoise, the creatives, the intellectuals, the merchant classes, the ideas of capitalism.My ancestors had left China, anticipating the Japanese invasion of WW2 so it didn’t affect them.

        2. Vasudev Ram

          >What I find interesting.about creativity is that one would think that eastern philosophies would lead to a creative society, yet besides Japan in the 80s, and the Korea more recently, the creatives tend to be located in western nations.Some possible reasons – too much of the following: – copy cat mentality – avoidance of risk taking – yesmanship / kowtowing – “the nail that sticks out gets hammered down” – wanting to move on quickly from tech to management role (“see how many people report to me” – actually heard people say that as though it’s a virtue in itself …, “I want to play leading rolls [sic]” – one of my team members in his appraisal when I worked for a bigco) – etc.It’s changing (for the better) some, nowadays, though, particularly in tech hubs like Bangalore and others, and due at least partly to younger people – though I see a lot of the above traits manifested in some of them too – even in the startup community here (in India.) – what to say of the enterprise tech community.

  8. JLM

    .The numbers on mass transit are, in fact, increasing not decreasing.A leading indicator is NYC subway ridership which had increased from a total of 1,579,866,600 riders in 2009 to 1,751,287,621 riders in 2014.While this is not a particularly high percentage increase, in absolute terms it is staggering — almost 200,000,000.You can see a bit more granularity here:http://web.mta.info/nyct/fa…Three interesting issues flow from that:1. What is the impact of full utilization — no more riders can be crammed on the subway system at certain times because of space limitations?2. What is the number of unique riders and are we being fooled by the number of rides per rider?3. What is the impact of cost on ridership in an environment of rising costs — how much more mass transit ridership would be available if the price were better?JLMwww.themusingsofthebigredca…

  9. JLM

    .There has been a phenomenon in the development of cities called “edge cities” which was in vogue some years ago as an attempt to describe what happens when a city spawns planets of development around its own sun.It takes a few decades to see it on a personal basis but it is as good a theory as any to explain this phenomenon. And, there is a lot of proof out there to probe and prod.In much the same way, the creating of planets around the “suns” of established entrepreneurial thinking can be similarly probed.The lessons learned are transferable and the cost structure is lower, at first.The notion of “critical mass” at which a new node begins to feed and care for itself is like any growth dynamic and you clearly articulate this notion.A good read and a thoughtful discussion.JLMwww.themusingsofthebigredca…

    1. LE

      Similar thing happened in Central Florida (Orlando area) as a result of Disney opening up there in the 70’s. The metro area now has about 2.3 million people. The seed was WDW with defense contracting prior to that.

      1. Richard

        Let’s not overlook how visionary this was. At the time Orlando was farmland and the I95 corridor , from the northeast, was not continuous and the south was a little less than inviting (my cousin vinny).

        1. JLM

          .Bentonville, Arkansas — old fashioned company town.A single strip airport which ALWAYS has a freakin’ cross wind. I landed there one afternoon with a 30+ knot cross wind component (test pilot territory) when a G-5 went around.It was the best crosswind landing of my entire flying career.JLMwww.themusingsofthebigredca…

  10. markslater

    in london its called silicon ditch (slough actually)

    1. Ana Milicevic

      Roundabout! The one around Old St tube.

      1. markslater

        the roundabout stole it from the ditch – the ditch was back in 99!

        1. Ana Milicevic

          For a nation that so appreciates puns why oh why could it not have just been Silicon Slough?

          1. markslater

            david brent showed up.

    2. Vasudev Ram

      Methinks it should be vale or glen or fen. Ye Olde English Words :)Also see my comment in a recent Fred post, about Chaucer.”The lyf so short, the craft so long to lerne.”

  11. JamesHRH

    On point here, as I have spent the past few months explaining to people that Calgary is ‘ a world class startup town……if you are in the energy sector. ‘I just describe the cycle to people: smart young person, technical, goes to world class university, gets a job at global leader in field, gains experience & rolodex, yearns to build something, starts-up in an environment with tons of startup experience / support.Energy here; tech in Valley, finance in NYC, media in LA, etc.The forest analogy is a good one, especially if you add in a strong base of Angel investors as the rich soil the seedlings fall upon.But it all starts with one tree growing where no tree has grown before.

  12. steve nson

    Hi Fred, Andrew forgot to mention Silicon Harlem (http://www.siliconharlem.net/) in NYC. They are doing a lot to promote entrepreneurship in Harlem as well as other parts of the Country. My startup AnySizeDeals.com has gotten a lot of support from them in the past and they actually have a tech conference on October 16th. If you are available on that day, you should stop by and get the opportunity to come see what’s cookin’ Uptown. Maybe even drop some knowledge as a panelist.

    1. fredwilson

      He ‘forgot’ many places. He was making fun of using the word Silicon to name your local tech sector, a practice that I absolutely hate

      1. steve nson

        Why do you hate it?

        1. William Mougayar

          See this discussion from April 2015, “Fun Friday: Coming Up With A Better Name For NYC’s Tech Community”http://avc.com/2015/04/fun-…I’m not sure we succeeded in finding a better name.

          1. steve nson

            Thanks William. I just read some of the posts and was cracking up. I get why calling yourself “Silicon” anything automatically means you are second best and a copy cat. I should hate it too because I don’t like when people want me to pitch my company as the “something” of x. I like being an original.In the case of Silicon Harlem it’s great for marketing and makes it easy for a non-tech person to associate it with tech and something cool. The two founders Clayton Banks and Bruce Lincoln set out to build an ecosystem that would emphasize the ingenuity, innovation and talents in the community and wanted people to associate Harlem with the future of innovation instead of negative stereotypes. The name might not be original but the overall effect is positive. When they started 3 years ago, nothing was happening Uptown, fast forward today, we have 6 co-working spaces, an accelerator, several startups located Uptown, monthly tech events that bring in Angel Investors like David Rose and tech centered celebrities like Ryan Leslie, and a host of political figures and government officials including the FCC Commissioner. They also have a summer youth program to teach high school students how to code and launch mobile apps. When NYC was promoting Digital.NYC and did their Five-Borough Tour, when they reached Harlem they were surprised to see 300 plus people in attendance for the event. It was by far the most successful event of the Digital.NYC Five-Borough Tour.I am not saying this all happened because of the name Silicon Harlem but it does help focus people’s attention on Tech in Harlem.

  13. awaldstein

    NiceAnother point and the reason I decided to work here.NY is the most dense market in the country and the ideal proof point for many of the networks being built today.You develop here cause this is the best sandbox for market and brand proofpoints there is.

  14. Matt Zagaja

    Important point about the angels and people with money putting it into bonds and clipping coupon books. I think it’s a large part of the phenomena in Connecticut where we have these Fairfield county hedge fund people that spend way more time engineering the tax code or the financial markets than they do hardware and software. Although even with the resources we have we’ve seen companies like Hadapt take off for Cambridge because the investors want them to be where the talent is.However it’s also been kind of crazy to watch Boston transform. A friend ran a startup cowering space incubator thing in the Seaport district and I went to a New Years Eve party he had at his office and the universal refrain I heard from the entrepreneurs at the event was that development in the area started pricing the more bootstrapped startups out of it. I’m told people living in the area have been seeing rents increase at a clip of 50% year over year. Perfectly ok if you’re salary is going up 50% year over year but otherwise it’s no wonder people are becoming “mercenaries” because they know if they don’t press their salary up it’s going to be swallowed by housing costs.

  15. Chimpwithcans

    Like the part where the Uber issue goes from taking a year, to a month, to a week to sort out 🙂

  16. JJ Donovan

    For the past 4 months I have been been living in Silicon Valley working in Palo Alto. The eco-system of the seedlings is incredible! I think one of the reasons why the seedlings remain here is also related to the weather. Very little Wind and no rain. Why start a company in a freezing cold climate! The campus’ that the companies build are incredible. Outdoor cafe’s, bike trails, outdoor dining and other amenities. While it is a wonderful area weather wise and the talent is here, I don’t believe it is sustainable. Although the construction of the myriad of office buildings and housing continue, the big issue that nobody is addressing is the impending lack of water. Sure, we talk about conservation, but there is only so much water left. I know that the economy of California is important to the USA, but unfortunately, the lack of water means we need to start to address the bigger incoming crisis. I do believe Silicon Valley will continue to be the leader, but when the next Entreprenuerial seedling drops, the smart Entrepreneurs should relocate and avoid the extra costs they will bear when the Water runs out. One of the things that I see here in Silicon Valley is also the youth. Many people I talk to don’t seem to reconcile with the fact that Silicon Valley goes through boom and bust cycles. I think if the youth that start these companies could see that they could save cash to ride out the storm by starting their company in another city, then the activity here would level off. I believe that if you consider the natural resources and the cyclical nature of Silicon Valley, you should take your seedling to another city for the long term prospects.

  17. greggdourgarian

    Formidable and entertaining talk. One city I didn’t hear mentioned was my own Minneapolis which enjoys unmatched access to tech talent, incubators, mass transit, affordable housing and a govt that works pretty much better than everywhere else I’ve lived.

  18. sigmaalgebra

    Where’s the next Silicon Valley?From what Fred said, my reading is, nowhere.He made it clear: Now for startups, the tech work is being done in Pittsburgh, Des Moines, etc. — in the US, basically anywhere.Why? Five reasons, all or nearly all from Fred’s talk:(1) There are bright people everywhere.(2) The Internet reaches well enough nearly everywhere in the US.(3) Cost of living is much lower outside the existing or would be hubs.(4) For what Bloomberg said about infrastructure, schools, transportation, parks, etc., the US flyover states often do great.(5) Investors, e.g., Fred, are willing to invest there.Does Silicon Valley have a big advantage now? Apparently not.Why?The Internet makes geographic locations much less important. E.g., can do the technical work in Des Moines and get funding from NYC, Silicon Valley, Boston, Chicago, etc.What’s next?So far, what’s been programmed is close to what we’ve known how to do at least in principle just manually. But we need to go for more. Computer science tries to do this with machine learning, etc. but is doing poorly, IMHO, due to lack of effective methodology. The required methodology exists — research from pure/applied math, especially with theorems and proofs.It likely is important to get universities helping, but there, in simple terms, the universities have to encourage profs and students to get involved. E.g., in university department seminars, in addition to presentations by profs and students with solutions looking for real world problems, have at least some presentations of real world problems looking for research solutions.Throughout math, physical science, and engineering, for US national defense and major parts of US industry, it’s standard to evaluate work just on paper. Then, with a good evaluation, the real world application is routine. E.g., an architect draws a radically new building, and some structural engineers confirm that the construction is solid. No doubt. The LHC? Planned and approved just on paper, built and operated as planned with the planned results. The NASA New Horizons spacecraft that, after traveling for nine years and 3 billion miles, is sending back pictures of Pluto, planned just on paper and then executed as planned.So far US venture capital will nearly never evaluate or fund technical solutions presented just on paper. This practice is enormously limiting and will be more so in the future.Yes, a suitable market is crucial, but we should also be able to evaluate that. Given a good market, the rest should be technology that can dominate the market and be presented and evaluated just on paper.NSF, NIH, DARPA, and major corporations, e.g., Intel, Boeing, Whiting-Turner, etc. know very well how to plan technology projects just on paper and then execute successfully according to the plans.Of course, traditional commercial banks, private equity firms, and venture capital limited partners don’t know about that world of accurate technology planning just on paper, and, thus, neither does US venture capital. Enormously limiting.So, we get just totally absurd, laughable remarks such as “Ideas are easy, plentiful, and worthless. Good execution is difficult, rare, and everything.” Nope: Good ideas are challenging, rare, and nearly everything, and, given a good idea, execution is routine and reliable.It’s no joke that fundamental research is a key. E.g., without quantum mechanics we would not have had transistors or Silicon Valley. People interested in the long term health of technology and the US economy need to emphasize to Congress the crucial importance of fundamental research.

  19. bfeld

    The comment about seed investing and rich people investing startups is a profound one that I’ve been using for a while (it got a standing ovation when I said it at Big Omaha a few months ago.)I extend it a little further than just taking money out of bonds. The rich people in every community contribute substantially – via philanthropic gifts – to the city ecosystem (arts, environment, education …)Investing in startups is an analogous effort. If you want to invest in your city long term, you need to invest in innovation, along with the arts, environment, and education. While it’s not “non-profit” it has similar tax characteristics (e.g. you get a tax deduction if the company fails) and you have the upside of success, which you can then keep recycling into your city.When I look at the angel communities in Boulder and Denver, over the last five years there has been a steady increase of this kind of investing and type of investor. I takes a long time to build the base, but the founders who have already made money by creating companies can lead the way by example.

    1. JLM

      .This is old wine in new bottles.Entrepreneurs have been raising money from the well heeled at country clubs for a century. Thirty years ago I used to host cocktail parties in the Rock Room at a local country club and lay out real estate deals until I got into the pension fund circuit.I never did use the line — “Hey, if I fail, you get a great tax deduction.”This generation (nor mine) did not invent sex or business.JLMwww.themusingsofthebigredca…

      1. bfeld

        Sometimes old wine tastes better in a new bottle.

        1. JLM

          .Hell, old wine ALWAYS tastes better in new bottles.There is nothing wrong with putting old wine in new bottles. In fact, it should be encouraged. It is useful if we recognize it for what it is.The conversion of old economy companies to new economy companies is one of the BIGGEST tech opportunities out there.http://themusingsofthebigre…It is huge.JLMwww.themusingsofthebigredca…

          1. awaldstein

            Actually the wine metaphor is belying logic of course.

    2. William Mougayar

      “further than just taking money out of bonds”. yup, and in Canada, to get money out of Mining and Oil which are still the largest private investments asset class segments.

  20. BillMcNeely

    @fredwilson I am going to be checking into this Chile grant of 40K and a 1 yr visa for VetBox

  21. JimHirshfield

    Couldn’t find caps lock key?

  22. fredwilson

    He’s so quotable!

  23. Jess Bachman

    He ate it years ago.

  24. JLM

    .Sage, last sentence saved me. I was wandering wondering where we were going. Don’t count on me getting stuff. I’m not that smart.JLMwww.themusingsofthebigredca…