In this week’s newsletter, I want to point to a couple of recent pieces in which Silicon Valley-based VCs have spoken about how the places they are investing in have changed.
First up is a piece from Hunter Walk, a partner at seed stage venture fund Homebrew, that goes through the different geographical “phases” of the firm’s investments. The firm invested primarily in the Bay Area and New York City from 2013-2014. From 2015-2017, Homebrew started investing in Los Angeles and San Diego. Since 2017, it has now invested in “two LA, one San Diego, one Salt Lake City, two Boston, and seven New York City” companies.
Walk writes that there’s no earth-shattering reason for the shift, Homebrew simply recognized it was “artificially constraining” itself by investing in only a few cities and that some startups “might actually be advantaged by a non-NorCal homebase.”
Mithril Capital Management, cofounded by Peter Thiel, also announced this week that it’s moving its entire headquarters from San Francisco to Austin, Texas. Mithril cofounder Ajay Royan spoke with TechCrunch about what worries him in modern Silicon Valley:
The cost of trying is what I’m worried about [here]. It’s that simple. That applies to people who are starting jobs in someone’s company, or trying to start a company themselves. If it’s expensive for the company to take risk, it’s going be expensive for you to take risk inside the company, which means your career will take a different path than otherwise.
After [I was an] undergrad at Yale, New York was a natural place to go, but I never worked there. It just felt like a place that was externally very pressurized. You had to conform to the external pressures that dictated your daily life. Your rent was $4,000 to $6,000 a month for craziness, for like a walk-up in Hell’s Kitchen. Social structures were fairly set, like you had to go to the Hamptons in the summer or something. There were these weird things that felt very dictated, and you had to fit and you had to climb the pyramid schemes that people had established for you. Otherwise, you were out.
What made [Silicon Valley] really attractive was it was one giant incubator as a society, with a lot of pay-it-forward culture and a low cost of trying. Now I’m worried about all three of those.
While it’s important to not draw too many parallels between two individual experiences, I think there are a few takeaways here, based on what I’ve also heard from other VCs I’ve spoken with.
First is that the biggest “winners” will be already popular coastal hubs — New York, San Diego, Los Angeles, as well as cities with more established secondary tech communities, like Austin. That doesn’t mean the Heartland won’t benefit from people leaving the Bay Area — it’s just that is not what is going to radically alter the local tech community. Successful homegrown startups will.
I am, however, pleased to see more VCs thinking of investing in other places as part of the strategic shift necessary to stay competitive. It’s a much different attitude than I’ve encountered with other VCs I’ve spoken with, who basically say, “I’ll make an exception for an amazing company.” A willingness to invest in companies outside of Silicon Valley should be the rule, not the exception, and it’s heartening to see any firm move in that direction.
Heartland Tech Reporter
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