Secondary Market Kung Fu

I’m going to catch a ton of shit for this, but here’s the truth: Seattle is a secondary market for software entrepreneurship.

But before all you PNW partisans jump all over me, let me qualify that statement:

Compared to Silicon Valley, *every* city in the world — including New York, Boston, Austin, Beijing and Bangalore — is a secondary market for software entrepreneurship.

There simply is no other place on the planet with a greater concentration of talent, money, tech incumbents (a.k.a., acquirers) and self-reinforcing media attention for early-stage innovation than the Bay Area.

Entrepreneurs who live anywhere other than Silicon Valley — which is most of the world’s entrepreneurs — have two choices: pick up and move, or learn a little secondary market Kung Fu.

First, let’s talk about what you *don’t* get if you choose to build your startup in a secondary market:

  • Credibility — As Mike Arrington will tell you, any entrepreneur worthy of the name will get his (or her) ass to the Valley and never look back. In this view, if you aren’t serious enough about your startup to bring it to the show, you don’t deserve to be called an entrepreneur.
  • AccessMost entrepreneurial exits are via acquisition, and most tech acquirers are in the Valley. Want to get bought by a tech bigco? You stand a much better chance of getting on the radar — both formally and informally — if you’re just down the street, not a plane flight away. The same goes for VCs, mentors, or any other scarce human resource — physical proximity + repeat interactions increase your odds of getting the help you need.
  • Coverage — Journalists thrive on access too, so it’s no surprise that the loudest media voices on tech and startups make their home in the Bay Area (unless they’re temporarily avoiding income taxes). Since journalists are people too, they apply the same heuristics to startups that investors and acquirers do: if you aren’t in the Valley, you must not be serious; and if you’re not serious, you’re not worth covering.

Now, since a Kung Fu master prizes his ability to use his opponent’s strengths against him, let’s talk about how Caine (photo above) would use those disadvantages to his advantage…

  • Credibility — Secondary-market companies actually *can* find success without the built-in support systems Bay Area folks take for granted — it’s harder to do, and all the more impressive for that. Chicago-based Groupon didn’t attract investor and media attention because it was in the Valley. It attracted attention by generating “$1 billion in sales faster than any company, ever“.

    In my experience, smart investors and journalists actually *like* to learn about companies operating outside the bubble — there’s less competition for the story (or deal), and the excitement of finding a “hidden gem” (or “undervalued asset”) is part of the appeal.

  • Access — This one is hard to hack — the advantages of regular, face-to-face interactions are real and powerful — but there are ways to tap the bubble without living in it, and most of them come down to two words: relationships + trust.

    If you want access to a Bay Area company, investor or journalist and you’re not a local, find a way to engage the people you *do* know who can help. If you’re an entrepreneur, seek angel investors or advisors who are well-connected within your target firms. If you’re an out-of-town investor (as I am), go out of your way to work with local syndication partners who can help your portfolio companies reach the right folks.

    (Neither of these strategies is a silver bullet, but both beat standing outside the store with your nose pressed against the glass…)

  • Coverage — If you think Silicon Valley is a competitive place to be an entrepreneur, try spending a little time with a tech blogger. Thanks to our industry’s ongoing disruption of the news business, it’s gotten insanely difficult to sustain an audience for high-quality reporting. The league tables are measured article by article, in the form of views, shares and Techmeme hits, and  journalists care as much as ever about scoops and exclusives.

    Seen through this lens, getting good coverage in the tech press is a lot like the Access point above: “outside the beltway” entrepreneurs can earn high impact coverage by investing in relationships with the journalists they respect the most.

    Where to begin? Try: 1) offering stories + hooks worth writing about; 2) being respectful of the journalist’s time and professional pressures; 3) helping out (e.g., with background interviews / story referrals) that have nothing to do with your own agenda; and 4) regularly “showing up” as a constructive commenter + social amplifier for the writers you follow.  

  • Talent — this story’s been told so I won’t belabor it here, but the “war for talent” in the Bay Area has a significant downside: recruiting is insanely hard, employee loyalty is low and the prevailing culture focuses more on quick flips and big paydays than teamwork and sustainability. You know things are bad when even Zuck gets in on the culture-bashing:

If I were starting now I would do things very differently. I didn’t know anything. In Silicon Valley, you get this feeling that you have to be out here. But it’s not the only place to be. If I were starting now, I would have stayed in Boston. [Silicon Valley] is a little short-term focused and that bothers me.”

Secondary markets may have fewer entrepreneurial devs, but they also tend to have less-intense cultural and competitive pressures to exacerbate the talent problem. There’s a good reason why Bay Area tech darlings like Zynga and Facebook look to cities like Seattle, New York and Boston for expansion offices (and it ain’t the weather…)

  • Serendipity — An ironic downside of the intense concentration of startup activity in the Bay Area is that  — despite the seeming diversity among startups, there is a kind of self-referential monoculture that has developed around the Bay Area tech ecosystem; as a recent article described it, “The Problem With Silicon Valley is Itself

    If — as Steven Johnson convincingly argues — good ideas come from the interplay among divergent fields of inquiry, cities with a less-dominant tech culture (or with equally strong intellectual alternatives) are actually better-positioned to generate truly breakthrough innovations than Silicon Valley (even if they’re not as well-equipped to productize, finance or wring value from those ideas)

So — given all of the above — why would any serious entrepreneur choose to live anywhere other than Silicon Valley?

The more time I spend with entrepreneurs (and between Founders Co-op and TechStars Seattle that’s pretty much all I do), the more convinced I am that founders are artists first and capitalists, opportunists and every other kind of -ist second, third, or (sometimes) not at all.

In my experience, artist-entrepreneurs value things like creative expression, personal autonomy and values-based relationships more than anything else. They resist systems that demand intellectual conformity and compliance, and deliberately (sometimes self-destructively) push against constraints that they perceive to be arbitrary or inconsistent with their creative vision — including the idea that they “have to be” somewhere else to pursue their dreams.

The world is full of entrepreneurial artists — empowered technology creatives that are absolutely inspired by Silicon Valley, but by no means in its thrall.  Thanks to our mobile, social, ubiquitous technology, these people are finding each other and forging their own communities right in their own cities. They may admire the Bay Area for its many strengths, but they are anything but paralyzed by their outsider status — it’s actually a source of contrarian pride and determination.

Silicon Valley will always be the first and the best, but — thanks to technology itself — there is no geographic monopoly on technology innovation, and many paths to get there…