Finding the right home for your startup isn’t a straightforward process. Lots of seemingly great places have failed to support their startup communities, leading to attrition or stagnation.
Silicon Valley is the lauded example of a place that’s done right by its startups. Lots of funding, a great community of founders, good schools, and local governments that bend over backward to support tech startups.
When Capterra was founded, we were faced with a choice. We could stay in the Washington, D.C. area or we could move to one of the burgeoning tech hubs that were popping up in 1999.
We chose to stay. Needless to say, we’ve been happy with the decision.
Today, we’ll look at what makes Silicon Valley the place that it is, what cities might be the next home of tech, and why Capterra is happy to be right here in D.C.
What makes Silicon Valley special?
Silicon Valley doesn’t have a singular value that makes it special. It’s a series of interconnected values that combine to make something new and special.
If you read other authors writing on the Valley, they use terms such as ecosystem and network effects. These indicate the way an interplay of factors make the area what it is. As with many such network effects, there’s a virtuous cycle that develops over time.
Silicon Valley’s opening credits
The more investment that goes into the area, the more jobs appear. That increases demand for workers, which affects the nature of local universities. Those universities then attract more talented kids, who then go on to work at the businesses. They generate more money, and suddenly there’s more money to invest.
Let’s take a closer look at two of these spokes in the wheel—money and education.
Investment firms in Silicon Valley
At the end of 2016, California-based venture capital firms managed over 50% of America’s total VC money. That amounts to $181 billion, according to the National Venture Capital Association. Compare that to somewhere like Texas—home of toast—which manages just over $3 billion.
On top of that, nine of the ten biggest VC funds by assets under management are in California, with one in Massachusetts.
Silicon Valley—and the Bay Area—is the home of VC in the U.S. right now. While managers aren’t going to limit themselves to local startups, having a strong local network of cash isn’t going to hurt a startup’s chances.
Education around Silicon Valley
That brings young, talented minds to the area even when times aren’t so good for business. As researchers at Google and Facebook retire, you can bet they’re going to take up plush academic roles, too. That tightens the network, drawing businesses, investors, and students closer together and making the Valley even stronger.
Finding the next Silicon Valley
If Silicon Valley is based on this virtuous cycle, the best place to look for similar results is areas with similar cycles in place—or with the potential for those cycles to form.
Boston is a natural choice. MIT with its number one computer science and computer engineering programs, Harvard with its ivy, and about 700 other colleges are all packed into the Boston metro area. Four hours of driving will get you to New York City along with all its cash and human capital.
There are three more Ivy League schools within a few hours drive—Yale, Brown, and Dartmouth—and four of the Seven Sisters—Mount Holyoke, Wellesley, Smith, and Radcliffe.
The Boston skyline
Boston was actually in the running to be the first Silicon Valley, if Silicon Valley hadn’t won out. In the late 1970s and early 80s, Boston’s Route 128 was all the rage. Deemed America’s Technology Highway, Rolling Stone said in a 1983 article, “Route 128 is the high-tech future, already thriving in the suburbs.”
Though there are more VC funds in New York, Massachusetts is still second for VC cash raised, according to the NVCA. If you’re looking for Silicon Valley on the East Coast, Boston might be your best bet.
Austin has made a name for itself in the tech world over the last decade, as home to Dell and dozens of other tech businesses—including Software Advice—as well as the South by Southwest conference. Its population has exploded, with estimates putting the metro area’s population over 2 million.
Austin from across the river
While Austin doesn’t have the density of universities found in the Northeast, 46% of the population has a bachelor’s degree or higher, making it the seventh most educated city in the U.S.
While Austin isn’t smack dab in the middle of it all like Boston or Silicon Valley, it pulls in people from all over. Natives and transplants come together to make it a thriving, educated, BBQ-loving city with no end of potential.
Seattle—and its surrounds, which is to say, Bellevue—is already the home of Microsoft, Moz, T-Mobile, and Valve. If you’re looking for a place with existing winners, Seattle is a great place to begin your search.
It also plays host to the University of Washington and a handful of smaller colleges and universities. Again, not the same educational density as Boston, but there is some draw.
Seattle in all its natural glory
While the state of Washington doesn’t bring in anything like the capital raised in California—which drew over $27 billion in 2016—it still pulled in the sixth most capital in 2016, according to the NVCA. $600 million isn’t nothing, and it puts the state well ahead of Florida and Texas.
Seattle’s best asset is its existing density of businesses. As they grow, they draw in new talent, but they also lose talented people due to boredom, job dissatisfaction, downsizing, or natural attrition. Those folks—if they stick around—spin up new businesses, which could be the seeds of the next Microsoft.
Why Capterra loves D.C.
When the company was founded, we had three employees—if you can call three guys not getting paid to build their own business “employees.” Three guys aren’t really hard to move, so we could have been located anywhere in the U.S.
This was 1999, when Silicon Valley was ramping into crazy, “Let’s all make money because nothing ever goes wrong” mode. A year later, that flying carpet would come crashing down, but we didn’t know that.
D.C. became home because we saw in it some of what we saw in California, but with a sprinkling of restraint. While D.C. raised the seventh most capital for VCs in 2016, it is still notoriously stingy with its investments.
Despite its reputation, things do get done here
D.C. is also a great hub for education and movement. For universities, we’ve got Georgetown, George Washington, American, Howard, and Catholic all in the city. In the surrounds, there’s the University of Maryland, University of Virginia, William and Mary, and James Madison.
Pulling from other universities up and down I-81 and I-95 gives DC an incredibly educated base. 52.4% of the population holds a bachelor’s degree or better, with an insane 12.3% holding advanced degrees, according to Statistical Atlas.
Apart from the museums, easy access to nature, public parks, water, proximity to the Northeast Corridor, and all the other lifestyle perks DC offers, there’s a lot for a business to love about being in the nation’s capital.
Finding a home for your startup
At the end of it all, businesses are still about people. The people who found the business, the people who work there, the people who put money into it, and the people the business is designed to serve.
Whether you find the next Silicon Valley or not won’t determine how well your startup does. If you have the right people in the right places, you’re going to do great things. Facebook was founded in a Boston dorm room. Jeff Bezos used his garage to run Amazon for a while.
While these businesses were eventually drawn out to new places, they didn’t rely on those ecosystems to build their initial products.
I’d love to hear about where you’re building your startup empire. Raleigh? Tallahassee? Dallas? Detroit? Portland? What’s awesome about your community? Shoot me an email or drop a line in the comments to let me know.
If you’re worried that there’s not enough VC in your area, take heart. You can bootstrap your way to success. To read about how Mike Ortner founded Capterra on the back of a credit card, a dream, and a supportive group, check out his article on “Why Raising Venture Capital Would Likely Have Killed Capterra.”
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