Entrepreneur

Silicon Valley has evolved — it’s not about startups anymore

Image Credit: zimmytws/Shutterstock

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.

Welcome to the new Silicon Valley.

Armando Biondi is cofounder and COO of AdEspresso, a Saas Solution for Facebook Ads Optimization. He lived in Italy until 2012, and while he has now relocated to San Francisco, he still spends 2-3 months a year in Italy. He previously cofounded Pick1 and four other non-tech companies. He’s also an angel investor in Mattermark and 10 more companies, is proudly part of the 500 Startups network, and is also a former radio speaker.


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32 comments
mike ntto
mike ntto

"Monthly -->>ACTIVE<----- users"

Carl Foisy
Carl Foisy

SF is a peninsula. San Jose is the Capitol of Silicon Valley for a couple of good reasons. 1, it's in a valley. 2, the patent office.

Armando Biondi
Armando Biondi

that's exactly the point guys :) lots of new places are good enough (or great) to start something because of commoditized capital and new accelerators/ecosystems around the world. on the other side there is only one place that's great to scale something (which is the valley). As a downside, this means that the Valley is super expensive and ultracompetitive, which means that to become relevant there you need to have already some level of product/market fit and a compelling story to tell :) Hope useful!

Massimiliano Carli
Massimiliano Carli

ehm.. excuse me,


Mr Biondi, do you mean Silicon Valley has stopped its traditional and glorious innovation push, changing its contribution to the world wide tech/society evolution/transformation process just in second-step trading grow push? (expertize? banks attitude?)

or maybe it is more true that todays startups do not create real innovation, riding instead the innovation already made by big players? (and then yes, the Silicon Valley stopped to support startups?)


btw iphone has killed brains (see e.g. recent Microsoft OSs...).


I would compare your analysis to some native Silicon Valley-people voices/point of views if possible.


(I know, I sound arrogant, but at least in Europe people is becoming poorer.. see Italy Mr Boiondi, I hate bad analysis: a not well calculated analysis  does not help people to discuss correctly the point and the goals to improve the worldwide people life.. may be today everybody thinks to make money they call innovation, not innovation. it is a wrong approach for me) 


bill gates please help us, resuscitate! (resuscitete.. hope it is correct)


ps is it really so simple to find funds for you, mr Bioni? because to me it is so hard to find financial support, maybe due to the fact we point to push real 'urban' innovation worldwide (not only in on our wallet but in the real life of the society)... but this is another story.



ps grrr... need to get a new selfie to market


with my best regards.

mc


Christian O. Petersen
Christian O. Petersen

I agree that Kickstarter is a great alternative for seed financing if you do consumer facing hardware products, not much help for software startups though and I know a lot of startups that find it difficult to scale with local financing and local sales.

Janus Møller
Janus Møller

I think the guy has some valid points. The whole World has changed over last decade – including the Valley. The opportunities for startups (anywhere) have never been greater. And if VC is not available at your location, you can always make a Kickstarter campaign. But of course there's still a lot you can learn from Silicon Valley...

Christian O. Petersen
Christian O. Petersen

I completely disagree with the guy. It has always been about scale. If you are serious about doing tech startups Silicon Valley is the place to learn how to do it well and then do it yourself. If you do a local startup most other places, trying to get local investors interested, you run a high risk of waisting time that could be more productive in Silicon Valley.

Curtis Garland
Curtis Garland

a mm eok j n aobg 'luh my ii mm omlq io mm eo ok q.

Andrew Lipstein
Andrew Lipstein

You know what's cool? 2 billion users. That's impact.

Pavels Romanovskis
Pavels Romanovskis

Scale-ups is a good word to summarize this article. Silicon Valley, place where scale-ups have eaten startups. Thanks Lisa Crosby Clark.

Virgínia Rodrigues
Virgínia Rodrigues

Great article! Have just spent 4 months in the Valley and have also traveled around tech hubs in Europe (where you find talent, access to capital, good accelerators, creative entrepreneurs and better cost of living options). The feeling I had by "watching" all this hubs was translated by this article. The Valley is still great and it's an amazing place to learn, but yes, noise is high and becoming relevant is not something that will happen overnight. Congratulations Armando and thanks for sharing your thoughts with us.

Faler Kevin
Faler Kevin

Ha, I liked it! Caveat here it doesn't matter where, whether it be in your mind or in a barn ... just do it. I have several successful start ups and most generated out of my home in Riverside... So booya ✔✔✔

Ashley Rossi
Ashley Rossi

This really resonated with me today.  A space between exists being a start-up and scaling that is not often spoke of. Being a part of a start-up is cool - scaling is the hard part. I'm experiencing it now. Maybe you've coined a new term; instead of working for a start-up, I will start saying a work for a scale-up. I for one would like to see this topic expanded upon.

Benjamin Klafter
Benjamin Klafter

4/5 in and we come to the thesis: "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."

Cigar Smoker
Cigar Smoker

Silicon Valley also seems to have moved north to San Francisco according to picture of the map with the pin in it. Never was any silicon there, and its not a valley either.

Korak Mitra
Korak Mitra

People have been complaining about the high cost of living here since the late 1970s.  Too much competition, seriously? Most people here like having the competition, which provides the energy and incentive to do beat the competition.  It also provides the cross pollination that makes Silicon Valley special.  All in all, I think this guy is a complainer who doesn't get the valley.

Esther Modern
Esther Modern

Leave it to 500 startups to suggest people avoid the valley

Gina B
Gina B

This guy is a loud mouth complainer.  But I guess anyone can put "Founder" on their title.

Armando Biondi
Armando Biondi

@Massimiliano Carli not sure I'm following, sorry... but thanks for taking the time to write, let me try to address your points:


a) didn't say at all that Silicon Valley "stopped its traditional and glorious innovation push", it's actually quite the contrary: just look at what's happening with bitcoin, AI, drones, biotech, space, robots, etc. Didn't say either that "startups do not create real innovation". Innovation was not the point of the post, the point is that innovation (and entrepreneurship) can start everywhere nowadays, and this is already a reality: just look at how many cities have tech hubs and accelerators, worldwide. 


b) ref "Europe is becoming poorer": Europe has its issues, the first being that it's not adapting fast enough to the new global paradigms, and because of this is not growing fast enough (with some exceptions, see Germany). India is not an emerging country anymore, China as well. There are $1B chinese people and $1B indian people coming online, all speaking the same language (while in EU there are 60M italians, 80M germans, 16M dutch people, all speaking different languages).


c) ref "simple to find finds": not saying that it's 'simple' but it's definitely simpleR if you have a compelling story to tell. If not, it's hard because -well- you'll be competing with companies with a compelling story :) Just look at Skully, an example in the press today: raised $1M in 45h without giving away a single point of equity on IndieGogo. And there are lots of other examples around: angel.co and kickstarter being maybe the most known ones. 


Hope helpful! :)

Massimiliano Carli
Massimiliano Carli

yes, crowdfunding is a joke for software/service producers (e.g. like me, expecially for strong software-based innovation).
and yes, it is difficult to scale with financial sales (of course today, I tried in the past) and with local financial.


for these reasons (not only) I do not agree with the reply of Biondi to my comment - and I'm trying this type of [co-business] fund rising instead:

http://www.mc2labs.net/others/mc2labs/mc2labs-investment-proposal-v3.pdf

btw a virtual silicon valley online platform

Armando Biondi
Armando Biondi

@Ashley Rossi Thanks Ashley! Happy to have written something that resonated with you :) I didn't create the term tho, cannot really take credit for that :) But I do think that the shift is very real, and it's also comprehensible: If you had already some level of success you look for harder things more difficult to do. It's the human nature :) again: not bad, not good, just different :) :)

Armando Biondi
Armando Biondi

@Korak Mitra competition is definitely good because it forces you to fine-tune your story and keep growing... BTW on this note I didn't write about "too much competition", I wrote about "fierce competition" (which is a bit different). All in all I love the Valley and of course there is no such thing as perfection in this world, but I do also think that things are changing a lot and the post wanted to capture a few of those thoughts :) hope helpful! 

Armando Biondi
Armando Biondi

@Esther Modern not saying to avoid the Valley :) Saying to come to the Valley with a good story backed by hard numbers (if you want to be visible and relevant, of course)

Armando Biondi
Armando Biondi

@Gina B not really a complainer, just observing how things are changing around there. As I was writing, don't know if it's good or bad, probably just different :) Lots more opportunities as well, because not every company needs to raise tens of millions of dollars to succeed, on the contrary you can be VERY successful with less than a $1M in external funding, even $0 in external funding. Does that make it less interesting? not at all, it's just a different type of company :) hope useful! 

Massimiliano Carli
Massimiliano Carli

@Armando Biondi thank you for your reply. but yes, I'm considering another angle of the issue.


hope to read other comments on this same line of thought although I'm quite sure it will not happen!

biotech field aside, which is a parallel story, I don't see any other old-times-styled apple, hp, microsoft etc: these were companies which have changed - improving it - the way to work of people worldwide: of course I'm speaking of first-level innovation that others can re-use to produre more product/service innovation, not of innovated products that others can just use.


(or maybe I'm in wrong: SiliconValley -> innovation and its business  or SiliconValley -> business on innovation? or maybe innovation is a "side effect" of great business?)


thank you.

:)

Korak Mitra
Korak Mitra

@Armando Biondi @Korak Mitra The things that are not changing and make Silicon Valley special include 1) willingness to fail/attitude towards risk by financiers, entrepreneurs, and employees 2) belief in ability to and desire to change the world through technology 3) willingness to attack status quo and older ways to do things 4) ability to easily change employers without moving 5) high level of competition for good employees leading to great salaries and working conditions 6) ability to find deep levels of expertise 7) founders and employees who have been through several startups and know the drill.  These factors are very difficult to duplicate at scale, especially as a group.

Korak Mitra
Korak Mitra

@Armando Biondi @Gina B Yes, many things have changed to make it possible to start companies with far less capital.   Sometimes, though, the tradeoff is much slower growth rates without that capital and many companies using a low capital approach get stuck because of barriers in marketing/sales.  Companies targeting the consumer market can sometimes sneak through those barriers if the product is truly exceptional and the right social media viral strategies are implemented.

Kevin Moore
Kevin Moore

@Korak Mitra @Armando Biondi I don't think that your 1, 2, 3, or 5 are at all unique to SV. I do think that 4, 6 and 7 are key differentiators for SV that cannot be replicated elsewhere.  The ecosystem is deep and rich with experience, thereby continuing to attract the cream of the crop. I personally agree with the OP that there should not be a sense of urgency to move to SV to launch your startup. Experiment elsewhere, and consider moving when you have product-market fit and need to scale.  

Massimiliano Carli
Massimiliano Carli

(and opensource-based innovation is not always an answer, like people today think imho) ok ok, mr biondi was not speaking of innovation.