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Can You Buy a Silicon Valley? Maybe.
Want to start a startup? Apply for funding by March 18.
February 2009
A lot of cities look at Silicon Valley and ask "How could we make something like that happen here?" The organic way to do it is to establish a first-rate university in a place where rich people want to live. That's how Silicon Valley happened. But could you shortcut the process by funding startups?
Possibly. Let's consider what it would take.
The first thing to understand is that encouraging startups is a different problem from encouraging startups in a particular city. The latter is much more expensive.
People sometimes think they could improve the startup scene in their town by starting something like Y Combinator there, but in fact it will have near zero effect. I know because Y Combinator itself had near zero effect on Boston when we were based there half the year. The people we funded came from all over the country (indeed, the world) and afterward they went wherever they could get more funding—which generally meant Silicon Valley.
The seed funding business is not a regional business, because at that stage startups are mobile. They're just a couple founders with laptops. [1]
If you want to encourage startups in a particular city, you have to fund startups that won't leave. There are two ways to do that: have rules preventing them from leaving, or fund them at the point in their life when they naturally take root. The first approach is a mistake, because it becomes a filter for selecting bad startups. If your terms force startups to do things they don't want to, only the desperate ones will take your money.
Good startups will move to another city as a condition of funding. What they won't do is agree not to move the next time they need funding. So the only way to get them to stay is to give them enough that they never need to leave.