From Startup to Scaleup: How Silicon Valley Has Evolved

The argument has long been that you go to Silicon Valley to start a company because that is where the world's deepest concentration of talent and money can be found. The combination of skilled techies and knowledgeable investors means that if your idea is any good, it will find backing and the best people to make it a reality.

But there is an emerging corollary. Which is that the global distribution of skills, knowledge and many which has been fostered by the Valley's success means that you dont necessarily have to travel anymore in order to live that entrepreneurial dream. And in fact, given that the emphasis on substantial returns has only heightened, there is an even greater demand for lower costs in order to help jack those returns.

The problem, then, for anyone considering Silicon Valley, is that there are few less expensive places to start. From rents to equipment to salaries to the financial demands of investors, this may be the most daunting place on earth to make a go of it. The narrative is that you can always start elsewhere, build a record and then move if if you feel you must.

What people in the Valley are very good at, as the following article explains, is identifying those concepts that are scalable, which is to say capable of growing and successfully generating cash equivalents, and then assisting with that process of sustainable and profitable growth. The basic laws of economics dictate that enterprises seek to move up the value chain. And it may well be that Silicon Valley has now done so. JL

Armando Biondi comments in Venture Beat:

Silicon Valley is no longer the best place to start a company. Starting companies is not hard anymore and everybody can do it. You know what’s hard and exciting, instead? Scaling them. that’s what Silicon Valley does best
You may have heard some parts of this story already: the part about how starting up a company is easier than it’s ever been; the part that says capital nowadays is commoditized; and the part about costs being at an all time low. You’ve also probably already heard about how this macro-trend is resulting in the highest number of people ever leaving their corporate jobs, and that it’s fueling the birth of incubators and accelerators everywhere, with numerous cities positioning themselves as the “next” Silicon Valley.
At the same time, you may have heard people from Silicon Valley are saying that no place will ever be like the Valley, with its unique concentration of capital, talent, and exit opportunities. While you’ve heard others say that the Valley is a crazy expensive place, crowded with a fierce competition and more noise than everywhere else.
Now, the interesting thing is that all the stories you’ve heard are true. In fact, they’re all pieces of the same puzzle. But the story of what this actually means for you, so far, has been untold.
Because in a world were entrepreneurs are everywhere, and capital is cheap, and building things is easy, while lots of places have been trying to reposition themselves to become tech hubs, Silicon Valley has been quietly repositioning itself too. Think about it. It’s a basic market law: When the entry barrier is high, a few well positioned players command the market; when the entry barrier is lowered, lots of new players enter the field, and the incumbents reposition by specializing, very often leveraging their leadership’s allure to address the high end/high value customer base.
That’s exactly what’s happening with the entrepreneurs/capital/talent market (yes, this as well is a market on its own). In this regard, the Silicon Valley can be seen as its Ferrari or its Prada: high value but crazy expensive and ultra-competitive “products” in a more and more commoditized market. Human resources are crazy expensive, company valuations are crazy high, capital availability is mind-blowing, but only if you fall in certain buckets. Is this a bubble? To me, it’s just a consequence of this new global paradigm.
Because, you see, Silicon Valley is composed of people that made 1 million users in a day, that sold companies for $500M+, that made more than 750 investments, that manage billion-dollar funds. The Valley has always been excited about doing hard things, and if starting companies is not hard anymore and everybody can do it, it’s not exciting anymore. You know what’s hard and exciting, instead? Scaling them. Getting your monthly active users from 10k to 1M in 2 years; that’s hard. Or getting your revenue from $100k to $10M annualized, that’s hard.
Or getting teams from 10 to 1,000 people, that’s hard. And that’s what Silicon Valley does best and is most excited about. And, coincidentally, that’s also where most of the company value is generated. The consequence? Silicon Valley is no longer the best place to start a company (unless you’ve already been living there for a while now, of course) because everywhere else is. And “everywhere else” is the rest of the world — with cheaper talent, lower cost of living, and good access to initial capital as well — but also the rest of the U.S. outside of the tech hubs.
Whether that’s good or bad, I don’t know. But it’s something you need to be aware of. That has been my advice lately to a few people asking for perspective from a guy who comes from Europe but has spent the last few years in the Valley. It’s a wonderful place, but it’s a very challenging one also. So if you’re starting something today, DO NOT come to Silicon Valley right away. It’s less expensive, less risky, and probably easier to start somewhere else, due to less competition.
Get some level of product-market fit first, get some early traction; then — if you need it — raise some money where your network is stronger (again, guess where that is) and *only then* think about getting to the next level and moving to Silicon Valley. At that point, you’ll need a story: In Silicon Valley, you’re interesting if you’re relevant, and you’re relevant if your story is backed by hard numbers of user adoption and market traction. Because if everybody can start something, how do you decide who’s the real deal? You look (and ask) for more results than the average.