Tech Startups Don’t Need the Valley Unless They Need VC

This is a topic I'm spending a lot of time looking at these days: Do startups really need Silicon Valley? While the concepts of innovation continue to expand into new places every day, the startup infrastructure to support that innovation isn't really in place outside of Silicon Valley. Be sure to click through to the article for the interview with Mike Maples Sr.

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http://gigaom.com/2009/03/15/tech-startups-dont-need-the-valley-unless-they-need-vc/

Tech Startups Don’t Need the Valley Unless They Need VC
By Stacey Higginbotham Mar. 15, 2009, 7:00pm PDT

At South by Southwest Interactive today, panelists from the Bay Area; Madison, Wisc.; Beijing; and Austin, Texas, debated the value of building your startup in the Valley, and the corrupting influence of venture capital on technology startups. The panel came to the conclusion that, if you want to build big and build fast, then you need to go to the Valley. However, few companies need to build big and fast.

The panel didn’t break any new ground with its discussion on the Bay Area’s proximity to capital, abundant talent and reverence of startup culture. However, cracks are beginning to show, as startups need less venture capital, California’s economy worsens and as the reverence of a startup culture that celebrates the go-big-or-go-home way of creating a startup fades.

The Bay Area startup ethos that calls for millions in venture funding and a giant business built in three to five years may be on the wane as the venture world faces its own tectonic shifts (see video below). “The model of tech getting used to VCs throwing crazy amounts of money at them is just crazy,” says Mike Maples, Sr., an angel investor who formerly worked at Microsoft and has funded several businesses.

Panelist Penelope Trunk, founder of the Brazen Careerist, who started her company in Madison, Wisc., called the VC model shallow and limiting for an entrepreneur. She pointed out that the traditional startup culture embraced by Silicon Valley comes at a personal cost that makes it hard for women and those with families to become entrepreneurs, and she championed building a business that generates sales and grows organically.

Panelist Kaiser Kuo, a business consultant in China, echoed the call to bootstrap, saying, “VCs should be the funding source of last resort.”

I walked away thinking the big debate for entrepreneurs is less about where you start a company, than an effort to reclaim the word “startup” for entrepreneurs who bootstrap their technology business — in or outside of the Valley. Many of these companies get less PR (they can’t always afford it), but they will likely become increasingly relevant as the downturn forces a realignment of the venture industry and forces entrepreneurs to build a startup that can make it as a business from day one.


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10 Things MBA Schools Won't Teach You as a Startup

Some amusing words of wisdon from Dharmesh (who can teach you alot - check out his blog! As someone who's involved in teaching MBA Entrepreneurship at UC Berkeley, I can tell you this is only the beginning!

Startups: 10 Things MBA Schools Won't Teach You

1. No amount of strategic planning will ever substitute for managing your cash flow. Financial statements are great. The most important one is your bank account statement.

2. There are always more things to do than there is time to do them. Startups are a continuous exercise in deciding what not to do. You can sometimes win by just not doing things faster than your competition.

3. Sleep is that time you’re working on startup problems with your eyes closed.

4. It helps not to call people “human resources”. They’re people. And, as it turns out, people like to be treated like people. Go figure.

5. No amount of academic theories on efficient pricing will prepare you completely for what people will actually do. Finding the “optimal” price is really hard. In the meantime, remember that a sub-optimal price is a lot better than no price at all.

6. Price discrimination (in an economic sense) is a wonderful thing. Except that it often ignores the real costs in terms of organizational complexity. Every time you add a new product or product option a small part of your company dies.

7. There are an infinite number of ways to spend money on marketing. You have no idea what’s actually going to work. The idea is to experiment broadly and learn lessons cheaply. On a related note, no amount of MBA marketing classes will prepare you for the day that you have to produce leads in order to close sales. As it turns out, marketing is about more than product feature matrices and the right shade of blue for your logo.

8. To recruit the best people, fair compensation and equity are only a start. Company culture and a demonstrated passion for your vision is hugely important. (Oh, and your vision should be on the larger path to truth, justice and overall goodness). Your vision should not involve harming kittens. They’re adorable. [insert gratuitious kitten photo here]

9. There’s a lot of value to being likable. Good things happen when people like you. When people like you, bad things have less of a chance of being fatal. I advise being likable. That’s why I advise against being an investment banker after getting an MBA. (I also advise against being an investment banker before getting an MBA).

10. Advanced game theory is exceptionally useful. Basic game theory is dangerous — because it assumes that you’re dealing with a bunch of rational “players”. It’s like trying to design a real car that’s going to be driven on a theoretically frictionless surface, with no air resistance and no idiots on the road.

What are your top startup lessons learned that even the top MBA schools don't teach?