Friday, September 23, 2011

Location Still Matters

This year's been interesting as I got invited to several startups either to talk or to give advice. Usually, I try to mix it with another visit if it's in the city, so I don't make the trip to San Francisco just for one thing.

One of the fascinating things is that San Francisco has a pretty active startup scene, but many of them are hurting for engineers. After talking to several startups with ambitions of growth but who can't seem to hire decent engineers no matter what, I'm coming to the conclusion that the more technically challenging your startup, the more important it is that you be in Silicon Valley, rather than being able to locate elsewhere.

Why is that? For technically challenging problems, you want people with a decent amount of experience doing the engineering. I'll take an example: Facebook managed to get Jeff Rothschild to lead its engineering team fairly early on. Jeff, by the way, doesn't get nearly enough credit for making Facebook as successful as it has been. It is doubtful that Facebook would have been able to recruit and retain Jeff if it was in San Francisco rather than Palo Alto. The same probably would have gone for Google's Jeff Dean and Sanjay Ghemewat. For whatever reason (people tell me it has a lot to do with schools), parents prefer living in the South Bay. I've lost count of the number of people I know who moved to the city when they were single and childless, and then moved back down south once they had a kid.

The result: if you want to grow past your first 50 engineers or so, you'll either have to settle for a less technically competent population, or you'd have to move south. What's surprising to me is how things I wouldn't have expected to be technically challenging turn out to be such. For instance, I would have guessed that Twitter wouldn't need Google-quality engineers, but that turns out not to be true.

This doesn't mean that San Francisco startups can't be successful and make lots of money. For instance, AirBnB and Zynga will be incredibly successful. Zynga has a famously low technical bar, and one of my friends came back from an interview saying that being the smartest person there wasn't enough even if it did make her rich. Obviously, being in Silicon Valley is also no guarantee that you'd be able to attract technically competent employees (Friendster was in Mountain View, for instance). But by and large, I've been amused to watch Cloudera move steadily south (from Burlingame to San Mateo and now Palo Alto). By the way, I don't think Zynga's wrong to have a low technical bar: there's no need to pay for top-end talent if your problems don't need top-end talent to solve it.

Many designers have argued to me that design talent is easier to get in San Francisco. I'm not a designer, so I don't really know, but let's say I give you that point. The problem is, to realize your design, you probably need only 1 designer for every 10-20 engineers. And of course, Apple is right in Silicon Valley, and whatever you might say about Apple, you can't argue that their design is inferior.

Ultimately, if you're a startup, think carefully about what your business is. If you never need more than about 50 engineers, I think San Francisco is fine. If you believe you're really in the media business, San Francisco's probably better (be very careful, though --- Yahoo! thought it was in the media business --- that turned out to be false!). But if your startup idea needs a sizable number of Google-quality engineers to succeed in the long term, you really should be in the valley.

Now the real puzzle to me is that there should be far more startups in the Berkeley area than they are. They've got Cal, which has a strong computer science department, so recruiting for engineers should be no problem. My guess is that the city of Berkeley does not view startups in a friendly fashion, and it would be very difficult to find cheap space in the area. Inktomi (founded by Cal professor Eric Brewer), for instance, famously moved out of Berkeley (to Foster City) as soon as it had to scale.
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