This seems like bad advice. The next-big-thing model is not in fact the default model in the Valley. And the kind of startups it works for, like Facebook and Twitter, it would work for outside the Valley.
It's certainly true that trying to force a startup into the next-big-thing model will generally destroy you. But the way it destroys you is by failing to get users, and that is not a function of your location.
My advice would be simply to use the right model for the kind of startup you have, regardless of where you are. Make something people want. If you manage to make something people want so much that it grows explosively, go for it. But don't assume you will.
'The next big thing' may not be the default model in the valley - in fact I was impressed by the thousands of startups building tools for the guy at the 'next bench.'
Unfortunately though, the 'Next Big Thing' is pop culture, and we here in Atlanta tend to draw the game plan that I oultined from what we THINK we know about the valley. Even when what we're pursuing isn't a 'next big thing' opportunity, and even when nobody here would ever fund such a thing - we have the reality on the ground in CA in our minds, and look forward to raising money instead of getting our first check from a customer. Our ideas are larger than our budget. Its there in most everyone, at a deep, deep level because the stories of the icons we look up to enforce it.
Therefore I would submit that my advice is good, because I've seen the pattern play itself out here a hundred times. We need customer driven development in Atlanta. Those are the kinds of opportunities we can pursue and do well at. But I don't presume to give advice to SV startups - I don't know anything about those. Obviously someone like you can pursue any idea he wants and make that work - you and your companies have a thousandfold more resources than we have available to us by virtue of your experience and location, and you have first-rate talent for building and picking startups.
The 'right model for the right kind of startup' is right - but most people mess that up terribly, so the advice is insufficient. My suggestion is that Customer Driven Development be the default that we hold in our heads - rather than the California State of Mind, which is ruinous to us.
Bad advice is espousing and embracing the Valley model (as we understand it) to the rest of us, because it does not apply. How many of your companies raise series A's right out of Y-Combinator? Do you have any idea how unlikely that sort of thing is here? A Y-Combinator startup has options other than customer-funding once they reach the stage of exiting Y-Combinator. An Atlanta startup usually does not, unless they leave. The sooner we accept that reality and deal with it, the sooner our rate of growth will increase.
> But the way it destroys you is by failing to get users, and that is not a function of your location.
Well, it is easier to meet Joe Influencer at the evening at build up some buzz if the flight to the 'party where this guy got an invitation to doesn't take too long.
As an aspiring (Atlanta) entrepreneur, I have given up on fundraising, and plan to go completely with bootstrapping off of revenue.
Does Atlanta have capital for investing? I have no clue. I've never met one VC or Angel, and wouldn't know the first thing about trying to. Once I finally realized that fact, it made the decision pretty easy. Stop going to local meetups looking for unicorns, and just stay home and get to work.
You really need to join the community and attend some events. While there isn't much early stage angel investment going on right now, there is a rich network available to support you in your endeavor. You can learn a lot from others, so please connect with the community. Its no replacement for hard work, but attending events can really help you benefit from the experience of others.
I've found that I don't really need "support" except in some very specific areas. And, while there are things I need to learn, there are a lot more things I need to "do". Time spent talking is time spent not working.
Note: I've attended several community events over the past few years, and even presented a couple times at BarCamp. I've just found that it really hasn't helped me grow my business. The people I need to spend more time with are my customers, not fellow hackers.
It's not only other hackers that are beneficial to meet. It's potential employees and potential customers. For example, there were many non-hackers at ProductCamp (which I was unfortunately too sick to attend.) Did you go to that?
BTW, what type of business are you running and how do you define your target customers?
I run 2 businesses at the moment, at opposite ends of the spectrum:
One is a campaign management website for Dungeons and Dragons and other tabletop roleplaying games. Think "Basecamp for D&D" It's at http://www.obsidianportal.com Customers here are tabletop RPG folks. I'm very active in that community and have made all sorts of connections. Again, my most valuable contacts are not other startup people, but in fact just members of the RPG community.
My second startup that I'm spinning up right now is an online marketplace where people can find and buy plants from specialty nurseries. This one is called DoLeaf, and we're currently in closed beta. We'll jump to public beta as soon as we can recruit some initial sellers. So, to that end, I need to network with small nursery owners. You can be guaranteed they're not coming to things like AWE or Barcamp.
Don't get me wrong: I like hanging out with fellow hackers and entrepreneurs. We understand each other and speak the same language. Talking with nursery owners is a very eye-opening experience at how little I actually know about their world. However, my fellow hackers aren't going to come to DoLeaf and sell plants, so the time I spend with them isn't the most productive in terms of furthering my business. Since I've only got a few hours of free time after my day job is done, I need to spend it as wisely as possible. It's a pretty simple calculation.
If you're well plugged in to your markets and interact with them constantly - its hard to argue with you about how to best spend your time :) Thats definitely a productive use of it.
Do you realize how unusual you are? Most people never talk to real customers in their development. You're way ahead of the average Atlanta startup.
I enjoy hanging with fellow hackers, but where I really benefit is from learning from people who have already bootstrapped businesses to success.
I also have found that when I'm into a new area - I often don't know what kind of help I need - how could I? Talking with other, more experienced entrepreneurs often creates breakthroughs I would not otherwise have had.
Seriously you've never meet a VC/Angel in Atlanta? I see them everywhere, at the Open Coffees, at the ATL Web Entrepreneurs meetings, Meet the VC events, Startup Riots, etc etc. They are readily available. You just need to get out there. ;-)
Having started a successful startup in NYC, and trying for 5+ years now in the valley, I think the situation is not so black/white.
A lot depends on business cycles, trends, timing, luck, who you know (which you can have some effect on of course) etc. There are many factors.
I think the real difference is partly one of social expectation. Out here, you're expected to quit your job every 2 or 3 years and try another startup. I suspect that in other places, that kind of behavior makes it hard to get jobs, and possibly even puts you in a strange group of social outcasts. Here, if you hold onto a job for 10 years and seem to have no appetite for risk, it's a bit weird. So yes, you feel supported by your friends and relatives, whereas elsewhere you might feel extreme pressure to conform.
But that doesn't make starting a successful company easier than falling off a log, as the OP seems to suggest. There are still at least 10 serious efforts for every success. And right now, the VC's are hurting. I haven't heard about anyone getting funded since October.
There have been a few multi-million-dollar VC deals in NYC - I'm working with 3 companies that have gotten funded since last fall. They're the exception, though, and I think the OP's point remains valid - whether it's the norm for your environment or the result of the economic downturn, most of us aren't in the Valley bubble and need to focus on short time-to-market and organic, revenue-driven growth.
I don't say its easy - I say that the Valley funds and supports exceptional individuals. If you're not exceptional, you're still screwed. By definition: most people are not exceptional, and yet most people believe they are.
I could not agree more, I've been prompted to move to the West Coast by several Angel friends, really considering it now. It will all depend on how the venture I'm in now goes. It's GreenTech and getting funding in the Atlanta area is like trying to find hen's teeth. We had to go to the west coast Angels and VCs to find it.
I didn't write this to encourage people to leave - but the fact is that if you are unable to change the type of startup you launch, or shrink the scope of your initial product vision to fit our landscape - you may have no choice but to leave if you want to succeed.
I would encourage you to take advantage of what our city has to offer, instead of leaving. Learn customer development. Build something our local economy wants to buy. I'll talk more about that in the next article. The fact is that the improvement in our startup business environment in the last four years has been overwhelming. Things have improved, they are improving, and they will continue to improve. Please, get connected with the community, and help us grow it to be even better.
That being said, if you do leave - come back! Atlanta is an overwhelmingly great place to start your second company, no matter what it does.
The only problem I have with one of the start-ups I'm working on is the fact that it's a complete first mover advantage play. We would have to go big fast to capture and hold the market before other "larger" market players get involved. I've been told two polar opposite things to do by two seasoned entrepreneurs, one says, bootstrap and go a year, the VC's will treat you very well after 50 contracts (should be very easy to get, I have two lined up with only concept and Accenture is interested). The other says, go west young man, the idea is a market changer and it will go big fast but will needed to be well funded to keep from hitting the cash wall. That's were I'm torn at the moment. PS: As you can guess by my previous tweet, I can't sleep tonight)
You're essentially saying that the market is too big to take on without big funding.
In the vein of what rjurney said, is it possible the niche you're filling isn't small enough? If you try and capture the whole market with big funding and the big guys come in and take your lunch, you still fail. If you learn how to meet the needs of a niche, even if the big guy comes in and chases the whole market, you'll still meet the needs of your niche better than anyone, and can grow into an adjacent niche.
And after the author's proclamation that we "drop the bullshit and deal with it" he moves on to arbitrary advice like "read Steve Blank" and "we need an open forum."
I'm all for measured comparisons of cities, particularly in the context of technology and startups. But profanity and superlatives aren't interesting or helpful. (I won't get into the childish concepts of "the jackpot handle" or "the theme park of startups.")
I suppose what rubs me the wrong way is the profound misunderstanding of how difficult it is to be successful in a startup context no matter where you are. California isn't the promised land - people there work hard to succeed, just like they do in Georgia.
I feel like you read a different article than I wrote.
For one, Atlanta has the highest rate of entrepreneurism in the nation - true. Unfortunately, almost all of those new businesses are not startups - they are under paid consultants and mom and pop shops. Anyone who has ever attended a Technology Association of Georgia event knows this to be indisputable fact. Corporate downsizing in our big-company town has driven this rate up. A former executive selling management consulting, or a former factory worker selling bait does not a startup make.
As I said, the number of early stage deals in new ventures this year is very close to zero. If you're connected with the angel community, you know this is true. I didn't simply make it up.
As to customer-driven development, what I am suggesting is that we embrace a model that involves customers at the stage where new entrepreneurs tend to look for investment capital. It is unfortunate that you didn't care for the article's tone, but I would encourage you to take a look into the customer development model - it has applicability in Atlanta, and elsewhere.
As to a profound misunderstanding - I'm not sure you read the article that I wrote. Nowhere did I say that entrepreneurism is easy anywhere. Its hard everywhere. What I said was that Silicon Valley does support exceptional individuals with resources in every area to aid them in their success. Think about the definition of exceptional: way, way above average. People work hard in California, and they follow the California game plan and if they are exceptional, it often works. That game plan simply does not work anywhere near as well in Georgia, because it is a fundamentally different business environment. If you drew your livelihood from a startup in this area, you would probably understand that.
No offense, sir, but you seem to have been rubbed the wrong way by someone else, and you are taking it out on me.
@wehriam: I'm with Russell on this. It doesn't sounds like you actually read the article. Russell's "read Steve Blank" is some of the best advice he could give. I'm constantly advising local startups to first go get customers instead of first chasing investment; so many of them see "getting funded" as a panacea. Focusing on customers instead of investors is what Steve Blank's book is all about and actually what business success is all about too.
I've said it before (and got moderated down). Silicon Valley now == Detroit 1975. The phrase "a theme park" pretty well sums it up. As in - this is the peak, and it will take 30 years of decline before you realize it.
Just a feeling, but I see a lot of weak companies being over-funded. The more often this happens, and the less often that VC's get their 4x return, the harder it will be to get funding. I remember a chart from a recent VC internal presentation showing the net return on industry investment from the last year going in the red.
Detroit was king, but in their success was greedy and stopped caring about the quality of the product. Other cultures sprang up that cared about the product, and the tides turned. People asked why their neighbors didn't "buy American" (instead of asking why Detroit didn't make good cars), but even grassroots protectionism won't save a rotten company.
Those who think the Valley is following detroit see that personal computing is tired and products are in a race to the bottom. I remember when a PC cost as much as a car, and people bought them as business capital. Now we complain if a laptop costs more than a car payment, and expect web content and software to be "ad based" (aka free to those of us who ignore ads). There are still opportunities here, but not at the VC magnitude (unless you believe Facebook's valuation).
The Valley needs to learn something new, maybe "green tech", pharmaceuticals, or robotics, if is going to continue its reign. It isn't guaranteed, and there are other cities that are familiar with these industries. The Internet currently has an English bias to give us a competitive advantage, but if Japan engineers better solar panels and makes them in China, it will be hard competition.
Robotics, mobile, and "green tech" are all pretty hot in the Valley. And I don't really see people who've stopped caring about the quality of the product and say "Buy Silicon Valley." So far, the Valley's proved itself fairly adept at reinventing itself with each wave of technology, much like Boston.
That doesn't mean it won't decline like Detroit - a lot of random events can happen in the future. I just don't see a reason to believe it'll go either way...
I'll add some more as they come to me, but in general, my impression is that the so-called "meritocracy" is really a preponderance of faux-intellectuals and figureheads.
What are the factors that will lead Silicon Valley down a long, uncompetitive decline like Detroit?
The big ones that got Detroit -- an entrenched oligopoly of giant organizations, adversarial and inflexible unionism, years of recourse to political favors rather than competitive adjustment -- don't seem to be in play in technology.
California and the bay region have some governance issues, but those come and go. There is international competition, but unlike Detroit we will import workers, outsource activity, and lower wages if necessary to adapt.
I think if you take a look, you'll find that the history of Silicon Valley goes back more than 100 years, and it has continued to boom despite short-term boom/bust cycles.
Bingo! I would peg the gold rush as the real beginning of "the California mentality". It's interesting to compare and contrast California with Oregon, where I'm from. Oregon was settled by boring farmer types who set about creating schools and churches and gave dull names to everything[1]. That mentality is still there... people lead good, and often quiet, happy, modest, productive, lives, but there is nothing like the "big bet" startup mentality in the bay area. Even Portland, which has lots of bright tech folks, and isn't that far away from the bay area (flights are plentiful and relatively short) doesn't strike me as having much of a startup scene. And where I'm from, in Eugene... it always seemed to me that no one did much of anything outside of protesting for the cause du jour, despite having a reasonably large, and reasonably good university. Perhaps not in terms of companies/startups, but people are far more "doers" here in Padova than there, to say nothing of the bay area.
[1] I would love to do research/find articles on surveys of place names. For instance, the Willamette valley is full of boring biblical/someone's daughter/back home names, but once you get to mining country in southern Oregon, you get more names like "Jumpoff Joe Creek" (look for it driving on I-5 north of Grants Pass). Even the geographical terms change: there are no 'gulches' around Eugene, but plenty in southern Oregon. I wonder about the significance of that.
There is a theme park aspect to Silicon Valley but the Detroit analogy isn't a very good one. Plus, wasn't Digg in The City? The SF startups have traditionally been sillier and more prone to the party and gossip scene than the ones in the South Bay.
When I say SV, I mean the entire Bay Area. I should probably clarify that in future articles. Thanks for the feedback.
As to the theme park comment - it really felt like Disney World to me. I don't mean that in a bad way - I love Disney, and would live at the Contemporary Hotel at Disney World Orlando if I could. In terms of a supportive environment for building startups, it really is like a theme park ride.
"We need an open forum where young founders can learn about problems that our large enterprises are facing"
=> Where do I pledge my support and sign up?
My personal response, not limited to the contents of the written piece:
It's a nice dream to be the next big thing, I convince myself that I will launch the next big thing just to motivate myself. I don't see how that has anything to do with geography.
I heard some where that if Atlanta were a country it would be of the highest carbon emitters per capita. Atlanta is completely suburbanized, tons and tons of trees with roads and homes in between but everything is very spread out without any real geographic barriers to induce compression. Perhaps that does some damage to the startup community.
I haven't personally entered the startup community, in fact I procrastinated this interest of mine by choosing Emory over GT. But I really like the city, despite its imperfections, and I do hope it can be a base for my own international business one day because if anything Atlanta is very good at being an international hub (UPS, Cocacola, etc.) And with all of these giant companies here in Atlanta, not that I have tried asking, but is it true that there is no cash flow? And why limit yourself to VCs in Atlanta, when I do get more practical about my radical ideas, I plan to email and call as many people as possible, despite their geography.
In Israel, where I am from, the local demographic is microscopic. In Israel, almost in exact opposite to the american tradition, successful business men and entrepreneurs are sometimes viewed as frauds/scammers. It's not a good thing to be a business man there like it is here but despite that, look at all the startups, the big tech innovations, the brilliant products that have their roots in Israel because in Israel people don't let their geography, the fact that they are surrounded by enemies limit them. They are driven by ideas for products and solutions to problems.
From my experience, there is plenty of cash flow. I've found Atlanta to be a superb base for my start up, but there is no doubt that the recent economic turmoil has made it more challenging to find investors. I also think that the Atlanta investment community is more receptive to businesses in established sectors, so you may want to see if your start up is aligned with those expectations.
I would be very interested in this forum too, but since there is none that I personally know of, would anyone be interested in working with me to get one going? I have some contacts that I could pull to get operating managers to CEOs involved. If your interested, send me an email at jason.erik.green@gmail.com.
I would love to hear about serious problems too. Sometimes I have even thought it might be a good idea to work for a backwards industry just to get access to problems that I could solve.
The general idea is that many entrepreneurs outside of the valley act as though they are in the valley, and the same strategies don't work. You have to dream big, but think small by having your eyes firmly connected to the first check from a real customer.
As Russell pointed out, we are about to launch something called EnterpriseLounge here in Atlanta. It will be an effort to bring hot startups to the table in front of Atlanta's Fortune 1000 buyers. We'll likely do it quarterly, like our CapitalLounge events.
We already have commitments from 4 of the largest companies in Atlanta, and we'll get that number up to a dozen or so in the next few weeks. My guess is that we'll do the first one this summer.
Any venture I start-up down the road will be customer driven. East coast VCs/investors want to see customers, revenue and growth. It's a much tougher environment then the west coast. There was a reason YC killed it's Boston location!
As someone who has even tangentially dealt with corporate lawyers (crosses himself and spits) I would be hesitant as a young entrepreneur to even think about working with them without my own legal nuclear device.
Imagine that I should develop something for them that was truly revolutionary, or even something for them that was somewhat related to something I subsequently developed that was truly revolutionary. I shudder sir. I shudder.
Of course... I'm not an entrepreneur. So what do I know?
I began my first two companies in Atlanta in the early 90s. Both began as contracts for Big Blue. I had no legal counsel of my own. It was not in my client's interest to hamstring me with complex paperwork that allowed them to own my IP. They had paying clients that needed my software solutions. Large companies know they can't fill every piece of a large solution to their customers. Most are happy to allow little guys to "fill the cracks".
My god sir, we NEED you. We need you to tell this story. We need to learn from you. Please contact me. I want you in front of a room full of people telling this story.
I don't really disagree with you. If you have a revolutionary idea in a city like Atlanta, and you are determined to build it without customer contact - you should probably move to Silicon Valley. As one VC I interviewed in my research, Mike Maples put it, "Silicon Valley is the place to create 'Thuderlizards,' but you can build a great company anywhere."
Most startups, however, have bad ideas, so keeping them secret doesn't help anyone. PG has talked about this repeatedly. Usually your 'Big Idea' turns out to either be total shite, is different enough from what customers want that they won't buy it in its initial form, or the market for your product is not the one you expected.
So as a non-attorney, I can't possibly disagree with you. As an entrepreneur, I know in my GUTS that the key to succeeding here is to get your 'Big Idea' from a customer asking for it. That doesn't mean you come into the conversation with a blank page - you still start with your initial product vision. You just iterate until someone is dying to pay you for it.
Do it any other way here, and you'll miss most opportunities when the market moves on or someone else with funding does it before you. The same applies for building a demo without customer contact to get early stage funding - your time is better spent.
This is not a place to pursue the kind of idea that you are talking about, unless you can break it down into a minimum viable product people will pay for very quickly. Fortunately many opportunities are not the kind you describe.
It's certainly true that trying to force a startup into the next-big-thing model will generally destroy you. But the way it destroys you is by failing to get users, and that is not a function of your location.
My advice would be simply to use the right model for the kind of startup you have, regardless of where you are. Make something people want. If you manage to make something people want so much that it grows explosively, go for it. But don't assume you will.