Industry Towns

When I first moved out here to the San Francisco / Bay Area, I knew that this was going to be my chance to build a real, living and breathing Silicon Valley-based technology startup.

Even though I knew that that wasn’t going to be the first thing that I did as my wife asked me to take a bit of a break, at first, it would eventually come to pass.

A year later, I quickly summarized the first 365 days like so:

It went by quick!

And then 3 years in I shared this:

I still believe that being physically here, in Silicon Valley, will always present some opportunities for distinct competitive advantage and as I get closer to completing my fourth year here in SF I believe this truth more ever – the “lift” you can experience here is unlike anything and there is a richness of knowledge and wisdom that you can’t buy or acquire anywhere else.

And you’d be foolish to discount that, among many other natural advantages that being here provides.

Simply put, there is so much amazing institutional knowledge here in The Bay Area on how to build companies, not just build software. This difference is massive, by the way.

It is simply because Silicon Valley is an “industry town” which provides and confers a number of historic competitive advantages that shouldn’t be overlooked:

1. Talent base. Great engineers, sales people, product people, etc. exist all over the world. However, the highest concentration of outstanding ones are concentrated in industry towns (just as the highest concentration of great actors in the USA live in Los Angeles).

Similarly, the people who know how to scale technology companies are concentrated in the tech epicenters in the graphs above. Many companies come to the SF Bay Area to fundraise post product-market fit to access this talent base and know-how.

2. Early customers. For some industries your customers are mainly elsewhere. For example, if you are selling optimization software for oil well extraction, you do not have many customers in Silicon Valley. However, if you are selling generally useful enterprise software or Saas, many early adopters for your product exist in the Bay Area.

Technology companies are more likely to early adopt new products than older companies for many categories of enterprise software. Similarly, many early consumer product influencers for technology products are based in the Bay Area. Often, the best place to find early adopters of technology products are in a technology cluster.

3. Unique insights and know-how. What new paid and unpaid channels exist for your business? What are new coding or design trends? Which VCs are funding the NoCode/Devsumer or RPA market? What are the current terms for an M&A offer for a 5-person machine learning team?

Industry towns tend to be where early adopters spread insights that an aggressive startup can take advantage of. While some online groups can create similar activity, running into people and serendipity in information spread, board meetings, angel/founder or founder/founder conversations cannot be over appreciated.

4. Smart investors. The best startups in NY, LA, DC, Boston, eventually come to Silicon Valley to fundraise. This is due to a concentration of knowledge, insight, and ambition, as well as dense networks for customers and talent bridged by the investor.

Similarly, the best investors in India cluster in Bengaluru and in China in Beijing.

5. Service providers. Legal know-how, banking, and real estate providers with flexible terms or unique outlooks cluster in industry towns. What terms is a specific investor willing to capitulate on? Your lawyer should know. In industry towns they often do.

6. Living and breathing a craft. Some people are obsessed with their craft. Quentin Tarantino worked as a clerk in a video rental shop and spent his free time watching movies and learning from old masters. The best biologists go to dinner with other biologists and spend all their time talking about biology.

Industry towns attract people who view their work and their craft and their hobbies as one thing. Hard work, ambition, and a singular focus are more likely to meet with success than taking it easy, a laissez fair attitude and wanting to do a little bit of everything.

While many of the most interesting founders in Silicon Valley are polymathic, they spend the brunt of their time early in their startup journey on their companies and discussing technology trends. Industry towns attract a lot of people self-obsessed with whatever it is they love to work on.

I really appreciate Elad Gil and his perspective because he really expresses these sentiments well – much better than I!

Of course, as he mentions in his post, this doesn’t mean that you can’t get things moving elsewhere (and be crazy-successful to boot!) – it just means that you’re giving up some of the natural and intrinsic competitive advantages available in “industry towns” and the like.

In fact, my previous venture (and my cofounder and CEO) made the jump to another town right after raising all of the venture capital that we needed to move things forward:

Yup. Done.

At the end of the day it’s a personal decision and one has to weigh the upsides, downsides, and everything in-between (or as best as you possibly can).

In the end, you’re going to be building a unique and exciting story either way – do it your way and you’ll be much happier.