Why startups condense in America (Paul Graham article)

[warren_s]

Hi all.

Thought this might be interesting to think about in terms of the whole
Silicon Beach discussion on clusters of startups. It's a 2006 article
by Paul Graham, so I'm sure some of you have seen it already.

http://www.paulgraham.com/america.html

I don't always drink the PG kool-aid, I think he's too focussed these
days on quick flips than building real value in the long term, but
this article seems to cover a lot of the angles that have been raised
here in terms of how to create the right environment for startups.

If I was charitable, I'd score us at a 7/10 based on his 10
"advantages" of the US. Obviously we're missing the "been there, done
that" tech angels & VCs and the large domestic market - and I'm
scoring us half a point for our universities and "can fire people."

Feel free to disagree vehemently of course. For example, I wonder if
the "domestic market" argument is a red-herring, since we speak the
same language (mostly) and there's a fair degree of cultural alignment
with the US? Do our best local unis deserve more than half a point
when compared to MIT, Stanford, etc?

Cheers,

Warren

[Elias Bizannes]

The most valuable thing about university, are the people you meet that you wouldn't otherwise. If you can read, you can learn - you don't need uni for that. Arguably, education teaches you how to learn - like critical thinking. But someone with an inquisitive mind and people to mentor them, can develop those skills.  Universities become valuable to the economy at the post graduate level, with high research; from an undergraduate point of view, I don't think it makes much of a difference. Also, arn't most American startups undergrads? Rarely people at the post grad level.

 

Whilst the argument about top calibre universities is valid for research with no clear benefit that few business can do, (who are focused on returns), CSIRO is a fairly cutting edge institution which I think is something we shouldn't ignore. I know Mick Liubinskas was telling me of a government agency who has effectively done research of things worth up to 150k but how no one can use it. Mick was saying that effectively is the same cash why someone would raise angel funding - and yet, the Australian public doesn't utilise it.

 

I would argue it's the *culture* that matters most. And it's something I am hoping that we as we build this silicon beach community, can help change. One where knowledge is shared; failure de-vilanised; and where like minded people are discover each other.

 

--
Elias Bizannes
http://liako.biz

[Wayne Meissner]

2008/8/4 Elias Bizannes <elias.b...@gmail.com>:

> don't think it makes much of a difference. Also, arn't most American
> startups undergrads? Rarely people at the post grad level.

The vast majority are undergrads - a notable exception is google.

> I would argue it's the *culture* that matters most. And it's something I am
> hoping that we as we build this silicon beach community, can help change.
> One where knowledge is shared; failure de-vilanised; and where like minded
> people are discover each other.

Agreed. Especially the failure thing.

In a lot of previous posts people are listing a bunch of concrete
"shortages" - whether they be VC, management, developers, whatever -
tangible things people can point a finger at. What if those are
irrelevant, and the problem is mindset ?

[warren_s]

Elias Bizannes wrote:
> The most valuable thing about university, are the people you meet that you
> wouldn't otherwise.

That's essentially Graham's argument. Good unis throw together kids
from diverse backgrounds, with arguably very little to lose, and with
youthful naivete about what you can and can't do in business. But the
quality of universities reflects the calibre of student they attract.
I'd go as far as to say that you're going to get more potential
startups out of a uni which focuses on more "hard" CS, rather than
software engineering degree mills with a Microsoft or Java heavy
flavour. .Net or Java is a safe "career" choice, but if you're already
making safe choices at 19 or 20, maybe a startup isn't for you. ;-)

> Whilst the argument about top calibre universities is valid for research
> with no clear benefit that few business can do, (who are focused on
> returns), CSIRO is a fairly cutting edge institution which I think is
> something we shouldn't ignore.

Sure, the problem i see however is in the past the govt has been
fairly aggressive in terms of hoarding its IP and enforcing those
rights, just look at their wifi patent recently. That's great for the
nation, not so great for the startup that wants to leverage that
work.

Similarly, most universities (try to) sign their postgrads to fairly
onerous IP-share agreements that limit students' ability to come out
and develop a commercial product based on their PhD or Masters
research. If you're lucky, you'll do all the hard work for 3 years,
then get 50% of any commercial venture that spins off from your
research...

[charlieperry]

The argument that you need Jews to create great Universities and
therefore great startups is frankly a bit weird.

That aside I think Australia may even score an 8.

Charlie

[warren_s]

Yep. Correlation does not imply causation. I didn't guarantee that the
article would be 100% free from errors in logic, as I said, I don't
agree with everything Graham says, in fact some of his stuff is fairly
self-indulgent navel gazing.

I'm curious though, where are you getting the extra point from? I'd
say that if we score 8/10 and we don't have anything approaching the
valley, Israel, or Ireland in terms of startup clusters, then Graham's
truly full of crap.

So what's the tipping point here? Are we forever destined to be like
the Aussie film industry, knocking out products primarily for the
domestic audience and exporting all our stars (behind and in front of
the camera) to Hollywood?

[charlieperry]

I reckon Australia scores fairly high on 1-7 and I'll pay out on those
ones.

8. By population Australia is small but, as my boss always points out
to people who talk Australia down, the top five cities in Australia
would rank in the top 10 in the US. Australia has a relatively
condensed urban population albeit spread over an area almost the size
of the US. I'd give Australia a half point on this one. I couldn't
think of a better 20 million person economy to work with.

9. I'd have to defer to people who have better knowledge in this area
and the general concensus I hear is that Australia fails this one.
Having said that, there is a lot of capital in Australia. There's over
a trillion dollars in private super funds which needs to be invested.
A very significant fraction of that is probably earmarked for high
risk investments. It's a bit of a chicken and the egg situation but it
seems to me at the moment that the entrepreneurs and the investors
don't really have faith in eachother yet.

10. I'm not sure I agree with him on point 10 at least from a UK point
of view where arts degrees are very highly regarded and vocational
courses are slightly looked down upon (at least in my experience).
Vocational courses are very common in Australian universities and I
suspect there aren't as many people making career decisions "on the
fly" as in the US. Young Australians always strike me as far more
career focused and driven than their UK counterparts. Having said this
education is relatively affordable and accessible and the workforce
and the economy have been marked by fluidity for sometime. I'd score
Australia 50/50 on this one.

Total points: 7 + 0.5 + 0 +0.5 = 8

[Geoff McQueen]

One other thing I'd add in AU's favour is its time zone positioning.

Working with the West Coast of the US is pretty easy most of the year, which for our industry is key, but even more importantly going forward, we're pretty well sync'ed up with China and still pretty close with India; when it comes to actually doing business in large markets, I'd say these two emerging markets are pretty darn important and our placement puts us at an advantage over our US and European counterparts at least.

[Paul | WebEquity]

The creation of Silicon Valley was completely circumstantial IMHO. A
number of key factors (ideas, resources) aligned to set in motion a
series of events that created something very special there. If those
factors had aligned anywhere else (whether in the US or not), I think
the same result would have been generated, unless the fact that it's a
valley is ultimately what's important (it's a very catchy name).
Hollywood is an obvious comparison for the movie industry and confirms
that 'valley' isn't required in the name, though a boulevard is
handy ;)
Everyone knows what happened in SV next. More startups and more
success stories (and more failures, no doubt, but you don't hear about
those). Suddenly, SV is the world's startup 'Mecca' (as described
above). It's reached the tipping point and has enough credibility (my
favourite word) to start drawing people from the world over to join
the party. The fact that the US allowed those people into the country
(Graham's point #1) is important, but it wasn't what created the
environment, it just sustained it.
More people from more diverse backgrounds develop more and more ideas.
Companies start spitting out gazillionaires and you now have a new
environment. One where potentially financially un-savvy people have
heaps of money, a deep-rooted interest in technology, and they
naturally to want to fund new startups. Easy come, easy go, as they
say. More people travel to SV with their idea and so the cycle
perpetuates.
I think Australia's strength (strange as it may seem) is that this
phenomenom hasn't happened here, yet. The resources, skills and ideas
are ripe for the picking. All it would take is for someone high within
the SV hierarchy to point a finger this way and say "Wow...those guys
in Australia are creating some amazing stuff!". That's because it's
not about money, it's about credibility. The reason that VCs do or
don't support an idea is as much about credibility as the idea
itself...think 'Segway'. It's not "if I build it, they'll come" any
more, it's "if I build it and [insert SV success story here] mentions
it...they'll come"
Quite by chance I had lunch with friends of the family today who are
from Silicon Valley. They told me some things that put a smile on my
face, but that's another topic. One thing they did mention is that 1
in 10 Silicon Valley startups gets somewhere, the rest fail. Is the
success rate in Australia any lower?
--
Paul
www.webequity.com.au

[Phil Wolff]

As someone who is living here in greater Silicon Valley, I'd like to
share the big secret:

f2f.

We meet face to face. Compulsively. Often. And not in "meetings".

Google "Bucks Woodside"

Parties and mixers

Foo Camp and other invitation only sleep overs

Bar Camps and other open unconferences

iPhoneDevCamp and other hackathons

Conferences (not trade shows)

Lunch 2.0 (really! google it)

there is a constant rubbing of elbows

driven through mailing lists, craigslist, upcoming.yahoo.com, evite,
blogs,

it's nearly all free/cheap, subsidized by the ecosystem that depends
on startups (PR firms, investment groups, infrastructure providers,
patent lawyers, media, expense accounts)

f2f is a medium for trust and awareness and learning.

it's where you learn how the other guy failed

how you find local talent

blow off steam after 72 hours of coding or design or horrible meetings

it's the social part that makes it a community, not just an industrial
zone

[Paul | WebEquity]

Phil, I think you've hit on something...

> it's nearly all free/cheap, subsidized by the ecosystem that depends
> on startups (PR firms, investment groups, infrastructure providers,
> patent lawyers, media, expense accounts)

In a recent post about WebEquity (web-biz dev community based on
revenue/equity share) on TechNation (http://tinyurl.com/69k9rj) I gave
an example of how I'd be chomping at the bit to register with the
community if I was an IP lawyer. Make yourself known within the
community and it wouldn't be long before you gained credibility as an
expert in the startup field. People will soon be knocking on your
door, and some will be VC-backed with money to burn.
Anyone with a commercial skill like those you've mentioned should by
keen to get involved because it's what ultimately fuels their economy,
too. I've not been on the scene long, but I get the impression that
this may be a missing piece of the puzzle.
--
Paul
www.webequity.com.au

[Geoff McQueen]

I've been chatting with a few people in these allied sectors - legal, marketing, pr, finance & investors themselves - the last few days since this list took off and they are all quite keen; having a community to point these people to and make them feel welcome is pretty important, and it seems like within 10 days, there's some pretty solid progress on that...

________________________________________
From: silicon-bea...@googlegroups.com [silicon-bea...@googlegroups.com] On Behalf Of Paul | WebEquity [goo...@boxed.com.au]
Sent: Tuesday, 5 August 2008 6:28 AM

To: Silicon Beach Australia
Subject: [SiliconBeach] Re: Why startups condense in America (Paul Graham article)

[Ash Angell]

Phil that's the best description of why SV works, that I have ever heard.

I would also like to point out something I posted earlier, about why a specific and localized spot is the only way SB could work.  Everything that makes the valley the valley is because everyone is in the same place.

We need to do the same.

Ash

[Mick Liubinskas]

I'm definitely of the opinion that we cannot have an 'All-Australian'
hub. If we want some traction within 5 years, it has to focus on a
city.

I'm biased, but I think the most activity is happening in Sydney.

As the Mobile Monday event showed last night, proximity makes a
difference.

[Paul | WebEquity]

Mike, I agree there does seem to be a lot happening in Sydney right
now...and maybe a good old inter-state tech war is what we need to
fuel the innovation? ;)

But, I know there's interesting stuff happening in Melbourne having
just read http://www.neverreadpassively.com/ and I do believe that the
city that starts to consistently produce results will create the
snowball effect I described above for SV. Results are what count, at
the end of the day.

[Elias Bizannes]

The first rule of SBA is - you do talk about Silicon Beach Australia. The second rule of SBA is - you DO talk about Silicon Beach Australia. Ok enough fight club. Here are some rules we need to understand.

 

Rule number 1: We are never going to replicate the Valley, we can only learn from them. If we forget that, we are kidding ourselves. We can't copy and paste - we will fail before we even begin.

Rule number 2: You can't force a location on people. Too many things beyond our control. Not even the governments can do it, why do a few maverick's in the industry think they can do better?

Rule number 3: It's about the people, stupid. The "location" is simply a means of socially lubricating newer, stronger relationships. The location is but a factor, not *the* reason. People, people, people are the reason. Not limestone VC's overlooking the harbour or poison ivy league university's churning out academics who create research to justify their existance. PEOPLE!

 

My suggestion? We, as a silicon beach Australian community, incubate hubs in every city. And if it's true, that you need one location - let the market determine that, not us. If one hubs just happens to have better opportunities, it will draw people to that centre of gravity.

 

There is a client of my firm, which I can't disclose what they do due to the risk you can identify them, but their FY08 revenue figures is a good insight into the 'hubs' of the local economy with a product that I would argue is directly correlated with the local economy. Of all the proposed "valleys" people are advocating, the reality is worth bearing in mind

 

Sydney generates 31% of their revenue

Melbourne 21%
Perth 9%

Adelaide 7%

Brisbane 7%

Gold Coast 7%

(other locations make up the rest)
 

Of course this doesn't take into account other factors, like Sydney's large but fragmented community; Perth's super tight community, which although small, it exactly what we need to be inspired by; Brisbane's weak community...and they are places I have direct observations of. Can't speak the others other than what other people have told me. But something more interesting: most of the cities are fairly equal.

 

Y'know what I reckon? Competition is a good thing. Let's so who can get their shit together better. And while we are fanning in vanity of being the biggest tech hub in Australia, the petty rivalry is actually creating behaviour that is making our net sum bigger.

[Sriram Panyam]

one thing brought back something i wanted to ask for a while.. why DONT we have hackathons here?  or rather why NOT start em here?

On Tue, Aug 5, 2008 at 12:22 AM, Phil Wolff <pwo...@gmail.com> wrote:

--
Blog: http://panyam.wordpress.com
URL: http://www.geocities.com/spany_1

[Elias Bizannes]

Sri - try Jelly.

 

I remember at the first ever Official Friday silicon beach drinks drinks in Sydney, Lachlan Hardy mentioned Jelly and I said I had never heard of it. He was shaking his head at how the hell could people still not know about Jelly.

 

http://wiki.workatjelly.com/JellyInSydney

 

As I said before - Sydney has a massive, but fragmented community. If we can just get the different Sydney communities better in sync, we will already have made a dfference.

[Sriram Panyam]

what the.. oh man my life has been in vein!!

thanks for the liako..

[Suhit Anantula]

Silicon Valley is good but as Elias has been pointing out...lets not try to emulate it.

From where I see, we need to work on the strengths of Australia and not worry about the weakness a lot. There are somethings you cannot change (and I am not being negative, more pragmatic).

I like the idea of SBA Hubs in each city here. Let a million flowers bloom!

We should also think seriously of our closeness to Asia, after all we are more part of Asia than anywhere else. Asia has the two large economies of India and China (just to remind people). There is a great market out there.

I think Australia can be a great domestic market for many ideas and then that can be taken global. Also, in web2.0 terms, what is a domestic/global market anyway?

--

Suhit Anantula

www.worldisgreen.com
Yahoo/MSN/Skype ID : suhit_a
http://www.linkedin.com/in/worldisgreen

[Pat Allan]

Jelly is awesome - fantastic way to meet like-minded people. It's so great to hear Melbourne's finally started one.

On the topic of communities, I'd say Melbourne's is fragmented like Sydney's - perhaps a bit more so?

Although as a comparison - and this is because it's the area I'm heavily involved in - the Ruby community in Australia is reasonably strong. There's local groups in most capital cities (Melb, Syd, Adelaide, Brisbane, Canberra, Perth), as well as regular Rails Camps, which move from city to city and get people from all over the country attending. These Rails Camps in particular (as well as the shared email list and IRC channel) have helped build stronger community bonds between cities.

-- 

Pat

[Pieter]

The one visit I made to the Sydney Jelly was great. Good people and
atmosphere and will hopefully will get back up an running.
Melbourne's (https://jellynyc.pbwiki.com/JellyInMelbourne) has just
started and had a good first turnout (thanks to @rosshill 's
tweets).
Given that it was the first it Jelly it turned out to be more of a
meet and greet but should turn into a more productive work environment
over time.

Don't forget about The Hive, Melbourne's monthly entrepreneurs face to
face, http://thehive.org.au with a good selection of guest speakers so
far.

Also in Melbourne - http://entrepreneur.meetup.com/146/ has organised
good breakfast meetings where business plans are pitched and talked
about as well as some more educational sessions.

And Tequp http://tequp.com/

Let me know what I've missed.

[Sriram Panyam]

Actually I just contacted Jelly.  Seems there are on a temporary "break" given demand and space issues...  hope they come back up soon.. but as i was saying earlier, it doesnt even have to be that formal... i dont mind crashing at my place (say upto 10-15 people) and getting on some jam sessions!!!  and we can probbaly rotate the venues!!

[dekrazee1]

I ain't no coder, but I'll offer my place if that's all is needed for
a session

On Aug 5, 11:06 pm, "Sriram Panyam" <sri.pan...@gmail.com> wrote:
> Actually I just contacted Jelly.  Seems there are on a temporary "break"
> given demand and space issues...  hope they come back up soon.. but as i was
> saying earlier, it doesnt even have to be that formal... i dont mind
> crashing at my place (say upto 10-15 people) and getting on some jam
> sessions!!!  and we can probbaly rotate the venues!!

_1

[Pat Allan]

I visited a few Jellys when I was in New York - it seems there's several venues, used on an occasional basis. So if there isn't an 'official' one happening, definitely don't hold back on using the jelly wiki to host one at your place - and hopefully there's a location-specific mailing list to announce it on.

-- 

Pat

[Sriram Panyam]

that sounds great...  ive got a fairly nice adsl2 connection.. so internet shouldnt be a problem... ok il organise a time.. itl have to be in september though... :( off to india for 3 weeks before that...

[dekrazee1]

This is what I was emphasising at Friday drinks last week.

To me SB is about getting the community going, and to do that, meeting
people for real is essential. Groups like these are just the starting
point.

The good news is that we already have some regular events going (here
in Sydney, and from what I hear in the other cities too). Just gotta
start getting bodies into them.
The momentum is building, we just gotta keep growing it, keep
spreading the word, keep bringing people together.