companies,” Heesen said.
With this trend in mind, AOL founder and Startup America Partnership chairman Steve Case started a $200-million fund dedicated almost exclusively to investing in companies outside of the Bay Area in 2013. The fund, called Revolution Ventures, complements Case’s more traditional venture fund, the $450 million Revolution Growth that he started in 2011, by casting a wider net in hopes of snagging promising companies that other venture capitalists aren’t seeing.
“This isn’t negative on Silicon Valley. We think Silicon Valley is awesome,” Case said at the launch. “But there are also a lot of great entrepreneurs in other parts of the country, and there is not as much capital focused on them. Not all great companies are in Silicon Valley, so we’d like to shine a spotlight on some people and ideas and companies in some off-the-beaten-path places.”
Of course, there are limitations to this approach. These emerging startup ecosystems are often much smaller than what exists in Silicon Valley, limiting the number of opportunities that they can offer, and can be difficult places to find significant local funding. And that’s not to mention the challenges of finding talent outside of the Bay Area or generating publicity for your new app when you don’t have a large core of nearby users to test-market your product. The challenges are different, but they’re challenges nonetheless.
This is all to say that, in terms of new tech companies, the Bay Area is far from fading away. In fact, it’s still growing. According to the MoneyTree™ Report, produced quarterly by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), Silicon Valley accounted for nearly 46 percent of all venture capital deals in the third quarter of 2013, with 305 deals accounting for more than $2.6 billion in funding, which is on pace for a five-year annual high. Since 2012, the region has accounted for 52 percent of all the largest startup exits via initial public offering (IPO) or acquisition, while New York, Massachusetts, Southern California, and Illinois combined accounted for just 28 percent of such exits in the same time period. The region has seen some $31.5 billion in venture capital investments across more than 3,000 deals since 2009.
And that’s not all. The city of San Francisco is now growing at a faster rate than New York, up 1.5 percent from 2011–2012, while Gotham’s population remained roughly flat during that time. Technology companies, both in San Francisco and in the Valley, are clearly driving this growth. According to the 2013 Silicon Valley Index report, about 46 percent of the 92,000 new jobs added in the Bay Area in 2012 were in Silicon Valley, where “innovation and specialized services” was the fastest-growing segment with 8.7 percent job growth for the year. Software employment in the area increased by 9.8 percent in that time.
“It’s pretty actively moving, I would say,” explains San Francisco– based entrepreneur and startup mentor Tristan Kromer, of the Bay Area startup scene since 2013. “There are a lot of early-stage startups and there’s a tremendous amount of incubators. And, as you can imagine, pretty much everybody from every other ecosystem kind of tries to migrate here to get their Series A. So yeah, even if there wasn’t anything happening locally there would still be everybody else from the rest of the world—Estonian, Ukrainian, Mexican startups are coming over. It’s pretty crazy right now.”
It’s active, he explains, but the day-to-day of startup life in the Bay Area is still roughly the same as it was before the dot-com bust. There are still plenty of dreamers. There are still those people wandering between meetups, trying to get a developer to build their product for them. There is still a shortage of technical cofounders. There are still plenty of hackathons, people exchanging ideas, and talented employees jumping from one startup to another in hopes of landing on their golden ticket. But, according to Kromer, it’s getting more realistic than it was in the nineties.
“There is a lot less focus on promoting the big dream on a piece of paper and getting $20 million for it. It’s so saturated with startups now that people sort of expect results from their $50,000 investment, so if you can’t show something for that, you don’t get much further.”
It’s a numbers game now, Kromer says. Sure, you’ll still find apps that can tell you which pair of jeans make your butt look best or if a couch will fit up the stairs to your apartment, but the fact that there is so much happening in the local startup space these days simply means that there is a little of everything.
“I don’t think it’s fundamentally different than what I’ve seen in other cities,” Kromer says. “In many ways it seems to be more amplified. I’ve gone to accelerators in the Ukraine; Helsinki, Finland; Lincoln, Nebraska; New York; Boston; and all of those places are really very, very similar. You have people who are, you know, saying ‘maybe in a few years we’ll go to Hollywood.’ That’s very much what Silicon Valley represents for a lot of people. Their long-term goal is to move to Silicon Valley from wherever they are now. And there are very valid reasons to do that, but there are also very valid reasons to stay where they are.”
The truth is, there’s an ecosystem in place in Silicon Valley that’s all but impossible to replicate anywhere else. Stanford University, one of the best engineering schools in the world, provides the local ecosystem with a steady stream of young development talent. The local venture capital community, founded when the primary products coming out of Silicon Valley were actual silicon-based processing chips, is well versed in the technology space and has the deep pockets needed to backstop and nurture high-risk, high-reward Web 2.0 startups like Twitter, Dropbox, and Facebook. And with more than fifty years of exits in its win column to date, the region is also home to many of the tech world’s most successful entrepreneurs—founders who have made fortunes in software and services and are available to help the next generation of CEOs find their way in the industry. It’s a like-minded community with a nonstop stream of technical events—including meetups focused on everything from Python programming, to data trend analysis, to Android app development, and to literally dozens of other topics, every night of the week—and a culture of innovation that supports and rewards risk-taking. For technology, it is still the center of it all.
“You know, I’ve been around in Silicon Valley for more than twenty-five years,” says Darius Dunlap, longtime Bay Area entrepreneur and member of the board of advisors at the Silicon Valley Innovation Institute, “and I think the biggest thing about the area now is that a lot of people are more convinced than ever that they can do it. You know? There’s that attitude of ‘I can start a startup.’
“The downside of that, I think, is you have a lot of people with really half-baked ideas who are just sort of going on the romance. They really have no idea what they’re in for or how they’re going to do it. It’s just this sort of ‘let’s do it, we’ll get rich’ thing, sort of a forty-niner kind of trend. There were a lot of serious miners that came to California for the Gold Rush, but there were also a lot of people who had fantasies of getting rich quickly as well. And I think there’s a bit of that, particularly in Silicon Valley. You see a lot of people coming to Silicon Valley because that’s where it is, that’s where things are happening, but with very little idea as to what they’re going to do when they get here.”
But, he admits, that probably isn’t going to change anytime soon. According to Dunlap, out-of-town tech companies are increasingly sending their executives to the Bay Area to take advantage of what the Valley has to offer—the events, the conferences, the access, the kind of tech community that they may not have back home. It’s Valley mystique by osmosis, and it allows entrepreneurs to stay in touch with the industry at large even if they don’t live there. The simple fact that this is happening, Dunlap explains, is proof that the Bay Area remains at the center of gravity for the entire high-tech industry.
“It’s kind of like, take the music industry or the acting profession,” he says. “It’s always been that if you wanted to be an actor you have to go to New York or LA. Yeah, there’s a lot of work for actors elsewhere,
