hubs.html
Why Startup Hubs Work



Want to start a startup?  Get funded by
Y Combinator.




October 2011If you look at a list of US cities sorted by population, the number
of successful startups per capita varies by orders of magnitude.
Somehow it's as if most places were sprayed with startupicide.I wondered about this for years.  I could see the average town was
like a roach motel for startup ambitions: smart, ambitious people
went in, but no startups came out.  But I was never able to figure
out exactly what happened inside the motel—exactly what was
killing all the potential startups.
[1]A couple weeks ago I finally figured it out. I was framing the
question wrong.  The problem is not that most towns kill startups.
It's that death is the default for startups,
and most towns don't save them.  Instead of thinking of most places
as being sprayed with startupicide, it's more accurate to think of
startups as all being poisoned, and a few places being sprayed with
the antidote.Startups in other places are just doing what startups naturally do:
fail.  The real question is, what's saving startups in places
like Silicon Valley?
[2]EnvironmentI think there are two components to the antidote: being in a place
where startups are the cool thing to do, and chance meetings with
people who can help you.  And what drives them both is the number
of startup people around you.The first component is particularly helpful in the first stage of
a startup's life, when you go from merely having an interest in
starting a company to actually doing it.  It's quite a leap to start
a startup.  It's an unusual thing to do. But in Silicon Valley it
seems normal.
[3]In most places, if you start a startup, people treat you as if
you're unemployed.  People in the Valley aren't automatically
impressed with you just because you're starting a company, but they
pay attention.  Anyone who's been here any amount of time knows not
to default to skepticism, no matter how inexperienced you seem or
how unpromising your idea sounds at first, because they've all seen
inexperienced founders with unpromising sounding ideas who a few
years later were billionaires.Having people around you care about what you're doing is an
extraordinarily powerful force.  Even the
most willful people are susceptible to it.  About a year after we
started Y Combinator I said something to a partner at a well known
VC firm that gave him the (mistaken) impression I was considering
starting another startup.  He responded so eagerly that for about
half a second I found myself considering doing it.In most other cities, the prospect of starting a startup just doesn't
seem real.  In the Valley it's not only real but fashionable.  That
no doubt causes a lot of people to start startups who shouldn't.
But I think that's ok.  Few people are suited to running a startup,
and it's very hard to predict beforehand which are (as I know all
too well from being in the business of trying to predict beforehand),
so lots of people starting startups who shouldn't is probably the
optimal state of affairs.  As long as you're at a point in your
life when you can bear the risk of failure, the best way to find
out if you're suited to running a startup is to try
it.ChanceThe second component of the antidote is chance meetings with people
who can help you.  This force works in both phases: both in the
transition from the desire to start a startup to starting one, and
the transition from starting a company to succeeding.  The power
of chance meetings is more variable than people around you caring
about startups, which is like a sort of background radiation that
affects everyone equally, but at its strongest it is far stronger.Chance meetings produce miracles to compensate for the disasters
that characteristically befall startups.  In the Valley, terrible
things happen to startups all the time, just like they do to startups
everywhere.  The reason startups are more likely to make it here
is that great things happen to them too.  In the Valley, lightning
has a sign bit.For example, you start a site for college students and you decide
to move to the Valley for the summer to work on it.  And then on a
random suburban street in Palo Alto you happen to run into Sean
Parker, who understands the domain really well because he started
a similar startup himself, and also knows all the investors.  And
moreover has advanced views, for 2004, on founders retaining control of their companies.You can't say precisely what the miracle will be, or even for sure
that one will happen.  The best one can say is: if you're in a
startup hub, unexpected good things will probably happen to you,
especially if you deserve them.I bet this is true even for startups we fund.  Even with us working
to make things happen for them on purpose rather than by accident,
the frequency of helpful chance meetings in the Valley is so high
that it's still a significant increment on what we can deliver.Chance meetings play a role like the role relaxation plays in having
ideas.  Most people have had the experience of working hard on some
problem, not being able to solve it, giving up and going to bed,
and then thinking of the answer in the shower in the morning.  What
makes the answer appear is letting your thoughts drift a bit—and thus drift off the wrong
path you'd been pursuing last night and onto the right one adjacent
to it.Chance meetings let your acquaintance drift in the same way taking
a shower lets your thoughts drift. The critical thing in both cases
is that they drift just the right amount.  The meeting between Larry
Page and <NAME> was a good example.  They let their acquaintance
drift, but only a little; they were both meeting someone they had
a lot in common with.For <NAME> the most important component of the antidote was
<NAME>, and vice versa.  The antidote is 
people.  It's not the
physical infrastructure of Silicon Valley that makes it work, or
the weather, or anything like that.  Those helped get it started,
but now that the reaction is self-sustaining what drives it is the
people.Many observers have noticed that one of the most distinctive things
about startup hubs is the degree to which people help one another
out, with no expectation of getting anything in return.  I'm not
sure why this is so.  Perhaps it's because startups are less of a
zero sum game than most types of business; they are rarely killed
by competitors.  Or perhaps it's because so many startup founders
have backgrounds in the sciences, where collaboration is encouraged.A large part of YC's function is to accelerate that process.  We're
a sort of Valley within the Valley, where the density of people
working on startups and their willingness to help one another are
both artificially amplified.NumbersBoth components of the antidote—an environment that encourages
startups, and chance meetings with people who help you—are
driven by the same underlying cause: the number of startup people
around you.  To make a startup hub, you need a lot of people
interested in startups.There are three reasons. The first, obviously, is that if you don't
have enough density, the chance meetings don't happen.
[4]
The second is that different startups need such different things, so
you need a lot of people to supply each startup with what they need
most.  <NAME> was exactly what Facebook needed in 2004.  Another
startup might have needed a database guy, or someone with connections
in the movie business.This is one of the reasons we fund such a large number of companies,
incidentally.  The bigger the community, the greater the chance it
will contain the person who has that one thing you need most.The third reason you need a lot of people to make a startup hub is
that once you have enough people interested in the same problem,
they start to set the social norms.  And it is a particularly
valuable thing when the atmosphere around you encourages you to do
something that would otherwise seem too ambitious.  In most places
the atmosphere pulls you back toward the mean.I flew into the Bay Area a few days ago.  I notice this every time
I fly over the Valley: somehow you can sense something is going on.  
Obviously you can sense prosperity in how well kept a
place looks.  But there are different kinds of prosperity.  Silicon
Valley doesn't look like Boston, or New York, or LA, or DC.  I tried
asking myself what word I'd use to describe the feeling the Valley
radiated, and the word that came to mind was optimism.Notes[1]
I'm not saying it's impossible to succeed in a city with few
other startups, just harder.  If you're sufficiently good at
generating your own morale, you can survive without external
encouragement.  Wufoo was based in Tampa and they succeeded.  But
the Wufoos are exceptionally disciplined.[2]
Incidentally, this phenomenon is not limited to startups.  Most
unusual ambitions fail, unless the person who has them manages to
find the right sort of community.[3]
Starting a company is common, but starting a startup is rare.
I've talked about the distinction between the two elsewhere, but
essentially a startup is a new business designed for scale.  Most
new businesses are service businesses and except in rare cases those
don't scale.[4]
As I was writing this, I had a demonstration of the density of
startup people in the Valley.  Jessica and I bicycled to University
Ave in Palo Alto to have lunch at the fabulous Oren's Hummus.  As
we walked in, we met <NAME> sitting near the door.  Selina
Tobaccowala stopped to say hello on her way out.  Then <NAME>
came in to pick up a take out order.  After lunch we went to get
frozen yogurt.  On the way we met <NAME>.  When we got to the
yogurt place, we found <NAME> there, and as we walked out we ran
into <NAME>ov.  We walked with him for a block or so and we ran
into Muzzammil Zaveri, and then a block later we met <NAME>.
This is everyday life in Palo Alto.  I wasn't trying to meet people;
I was just having lunch.  And I'm sure for every startup founder
or investor I saw that I knew, there were 5 more I didn't.  If Ron
Conway had been with us he would have met 30 people he knew.Thanks to <NAME>, <NAME>, <NAME>, and
<NAME> for reading drafts of this.
