most of all, is blossoming in American cities and towns from coast to coast. In the last several years, technology has emerged as a major player in the New York City economy, helped reshape the long-term outlook for Detroit, changed how the core of Downtown Las Vegas views its prospects, and taken root everywhere from college towns to small cities to the off-the-beaten-path regions that many overlook.
And the entrepreneurs in these new tech hubs are starting to get some well-deserved attention.
“America’s always been a nation of doers,” President Obama said back in 2011. “We build things, we take risks, and we believe that if you have a good idea and are willing to work hard enough, you can turn that idea into a successful business. Today, entrepreneurs are everywhere. In labs and garages all across America, they’re working on new sources of clean energy, cures for life-threatening diseases, and innovations that will transform the ways we see the world.
“At a time when companies can set up shop anywhere there’s an Internet connection, we need to make sure that the next generation of mentors and innovators can thrive right here in America. So let’s celebrate these new ideas. Let’s help them grow. Let’s make sure America continues to be home to the best minds and most innovative businesses on Earth.”
They’re out there. You just have to go looking for them.
CHAPTER
1
“Silicon Valley is not a place, but a state of mind.”
—John Doerr, venture capitalist,Kleiner Perkins Caulfield & Byers
BLAME THE $4 TOAST.
And the corporate shuttle buses.
And the sky-high office rents.
And the borderline-insane local housing market.
Most importantly, blame the seemingly never-ending hustle to find, train, and retain top development talent, which forces technology company founders to go so far as to take out ads on the sides of city buses and all but throw money at Stanford’s engineering department in hopes of landing the top candidates they need. All in a kill-or-be-killed competitive environment that, for many small-time tech startups, can make it nearly impossible to get noticed, let alone funded.
For some tech entrepreneurs, it has all gotten to be a little too much.
This is life in California’s Silicon Valley, situated at the south end of the San Francisco Bay. It has long been the center of America’s innovation culture, considered the ideal breeding ground for tech startups. And for good reason. The area is overflowing with engineering and software development talent, thanks to nearby Stanford University and the University of California, in Berkeley; it is home to pretty much every major venture capital firm in the country, thanks to the long-established culture of tech funding and investing in the area; and it is an idea-rich environment that brings like-minded people together, creating more opportunities for outside-the-box thinking. In short, it’s where smart people go to do big things.
But the Bay Area is not perfect. And locating a new business in Silicon Valley is not always the answer for every tech entrepreneur. It’s crowded, it’s hypercompetitive, and it’s becoming staggeringly expensive. The city’s consumer price index—which measures how much everyday purchases cost—is now rising at a rate of 2.5 percent per year on average, and the rent for a one-bedroom apartment in San Francisco was up to an astonishing $2,800 a month as of 2013, according to Priceonomics. The city’s median rent, $3,250 per month, and median home price, $900,000, are both the highest in the country, and only 14 percent of homes in the city are considered affordable to the middle class.
“Every day in every way, from rising rents to rising prices at restaurants to its private buses, the tech world is becoming an object of scorn,” wrote former mayor Willie Brown in a November 2013 op-ed in the San Francisco Chronicle. “It’s only a matter of time before the techies’ youthful luster fades, and they’re seen as just another extension of Wall Street.”
This growing scorn is not entirely without cause, since the area has also lately developed something of a reputation for arrogance. “As the tech industry has shaken off the memories of the last dot-com bust, its luminaries have become increasingly confident about their capacity to shape the future. And now they seem to have lost all humility about their place in the world,” wrote former Wall Street Journal reporter Farhad Manjoo in a November 2013 story about the Bay Area tech scene’s growing superiority complex.
The examples are numerous. Stanford professor Balaji Srinivasan, the cofounder of genetic-testing company Counsyl, has suggested that Silicon Valley secede from the United States. PayPal cofounder Peter Thiel has floated plans to build a Waterworld-style artificial island off the coast of California where tech-minded residents can live outside the jurisdiction of US laws. And then, of course, there is former AngelHack CEO Greg Gopman, who created a controversy in late 2013 when he posted on Facebook that San Francisco’s homeless residents were “trash” who have no place in the nicer parts of town.
“It is becoming excruciatingly, obviously clear to everyone else that where value is created is no longer in New York. It’s no longer in Washington; it’s no longer in LA. It’s in San Francisco and the Bay Area,” venture capitalist Chamath Palihapitiya said on the tech industry podcast This Week In Startups in October 2013. “We [the tech industry] are becoming the eminent [vehicle] for change and influence, and capital structures that matter. If companies shut down, the stock market would collapse. If the government shuts down, nothing happens and we all move on, because it just doesn’t matter. Stasis in the government is actually good for all of us.”
Attitudes like these notwithstanding, the real issue for entrepreneurs these days is that Silicon Valley is simply getting very crowded. There are so many startups at work in the Bay Area that it can be hard for a small team to get attention and, by extension, get funded. Even if they do manage to get funding, it’s equally challenging to find technical talent to help get that product off the ground. It’s a big pond, and it is overflowing with both big and small fish. The odds are stacked against many of the new smalltime founders trying to break into business in the Bay Area.
But the fact is, the tech landscape isn’t just about California anymore. Entrepreneurs have plenty of other options these days, such as Austin, Texas; Raleigh-Durham; Las Vegas; Kansas City; and even New York. All of these cities, and more, have emerged as tech startup hubs in recent years, offering founders access to tight-knit entrepreneurial communities, solid engineering talent, and even some investment capital to get their ventures off the ground, all without the high pressure and added challenges that can come with a Silicon Valley address.
“There certainly are several jurisdictions that have been working hard to develop venture capital environments lately,” Mark Heesen, president of the National Venture Capital Association (NVCA), told me in late 2012. “It’s very long-term play, but it has been effective in certain areas.”
It’s true. In New York City, former mayor Michael Bloomberg put a new focus on entrepreneurship in the city during his term in office (his namesake company even created its own $75 million early-stage venture fund, Bloomberg Beta, in 2013) by rallying investors and supporting local entrepreneurs via a range of city-backed initiatives. Austin has been a destination for tech startups since the early days of Dell, bolstered by the nearby University of Texas. Chicago has shown that one company, in its case Groupon, can have a major impact on shaping the startup ecosystem in an entire metropolitan area.
“Cities
