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Comment by pm90 | Hacker News Reader

I think it’s important for anyone getting to this page to read his whole thread, which is more nuanced than suggested by the sensational title. The point he seems to be making is that it’s better for startups that aren’t looking at being unicorns to look at other locations where they might have a better chance of success.

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He sort of shows the bay area bias with the bit about how “$100M” startups will be created elsewhere. There have been some much larger startups outside of the Bay Area and I suspect that trend to continue. Unicorns aren’t just a bay area phenomenon anymore

The Bay Area has less than 1/30th the US population and yet the majority of US unicorns and decacorns have hailed from here. It's wildly disproportionate.

Is this attributable to the quality of the startups or the easy access to capital?

I’d say it’s the people — combination of mindset and talent. Self-selecting group traveling to a place where only the strong can survive and the exceptional can thrive.

Most of the people I work with day to day are not just brilliant, but extremely driven as well. That was never true in the other places I’ve lived. The were lots of brilliant lazy people, and lots of super driven, less naturally gifted people.

In the Bay Area you kinda have to be both and have your eye on some bigger future, or there’s no point in being here.

Easy access to capital, easy access to large numbers of potential employees (many of whom have prior experience working for tech startups), and access to early-adopter customers / users.

Whether you'd consider that "quality of startup" or not is up to you. When it comes to hyper growth success, there are multiple structural factors that really make it easier to scale in the Bay Area, despite the 2-3x multiplier in cost per employee.

In my experience, it is largely attributable to local culture. The intersection of high-quality engineering talent and ambition bordering on megalomania is quite rare, but you need it to build a strong tech-driven company. In the vast majority of places in the world, and even in much of the US, this is neither socially prevalent nor culturally accepted. You have this in the Bay Area and to a lesser extent Seattle, but not too many other places in my experience.

There are a number of cities around the world that have high-quality engineering talent in sufficient quantity, that part is easy to replicate. The complaint I consistently hear from startup founders across Europe (where I've worked) and in some parts of the US is that there is a broad and deep-seated lack of ambition or appetite to do very difficult engineering. The reasons for this are multi-faceted and complicated, so it isn't something that can be reduced to a soundbite or easily changed. The intensity of effort applied to technical problem solving that we take for granted on the west coast is very much not the default case most other places, and this is compounded by the relative lack of experience building high-performing engineering organizations.

I've seen the same thing at several places on Germany. Managers pulling people off a product that was growing rapidly and just needed a bit more time to gain industry credibility, to put them on contracting rolls to Tier 1 suppliers to the automotive industry. There were also silly things like hampering future growth through exclusive/paid feature development in order to make today's profits look better.

It was really short term thinking that didn't understand the industry requirements and ended up throwing the product under a bus to get a tiny bit of upfront guaranteed income.

This seems tautological. Do you have a source?

How is that tautological? It's clearly an empirical statement. My source is my own observations of decacorns as well as IPOs during the last year.

That said, feel free to skim through this (slightly outdated) list and note how a large fraction of the US-based companies are based in SF or SV: http://fortune.com/unicorns/

There are many billion dollar private companies that meet the strict definition but do not get included in lists of “unicorns”: https://www.forbes.com/largest-private-companies/list/

Skimming through that list they look like long-running businesses, not startups. They may have been startups once upon a time (same as any publicly-traded business for that matter), but they're completely irrelevant to a discussion of where modern day startups seeking to scale to billion dollar entities should be founded.

That wasn’t my point. The framing was clearly used like “lifestyle business” is used. There have and will be unicorns outside of the valley, but he doesn’t seem to want to recognize that, hence the “$100M” framing

I think you’re misinterpreting his point. He’s not saying there won’t be unicorns outside of the valley. He’s saying the cost/benefit of being in SV makes sense for unicorns but not for many 100m startups. As a result, you’ll still see a disproportionate number of unicorns in SV but more 100m startups will start moving away.

What's the point of being a startup not looking at being a unicorn? I genuinely do not understand how somebody can cap off their ambitions like so.

Working for yourself. You only need so much money to be happy. And statistically speaking, you’re not going to be a unicorn. You’re more likely to fail entirely. But if you make a nice business out of it that you can go to each day and be happy, you enjoy the work, and have your bills paid comfortably, that’s enough for a lot of people.

Hustle and grind in moderation.

Not everything is a billion dollar company

Sometimes building a solid successful business is preferable to playing the lottery and shooting for the moon.

Because not everything is dollars and cents in the end to everyone?

Some people value the autonomy a small business gives you along with the work life balance.

You don't take VC money if you want to build a lifestyle business.

Not prioritizing growth at all costs != lifestyle business

Nor does not taking VC money mean you're a lifestyle business

you’re responding to the converse of GP’s statement, which yes, is not true. but he said none of those things. you have projected a false dichotomy which wasn’t proposed.

Uh, okay. So in what way was GP responding to my post then?

Entrepreneurs are more likely to do better on an early exit than to try and build a unicorn. Less dilution and lower probability of failure.

Some friends created a startup a few years ago. It is now profitable and never took VC.

The two founders pull down $1,000,000 a year and they give staff $50,000+ annual bonuses from profit sharing.

They also work four day weeks and spent every night and weekend with their kids.

What's the upside of trying to make it into a unicorn?

what type of business/service, if you don't mind sharing?

I've always found "no VC" stories incredibly inspiring.

"no VC" is the majority of businesses in the US (and possibly the world)

They worked in a field for 10+ years, understood the underserved needs of customers in that field, and built a product that addressed those underserved needs for customers.

I think it's sometimes hard to understand how quickly marginal utility of money decreases. As someone who makes high seven figures, I have genuinely no idea how more money could possibly affect my happiness -- there's just no appreciable difference between making 5m and 500m to me.

sounds like you have a distinct lack of imagination. interesting that you could reach 7 figures with that mindset. every power of 10 TC is another level of liberating.

At 7 figures you can still go broke. that isn’t fuck you money. you can’t buy houses around the world (and staff them) in a whim. you can’t go to davos and mingle with the true global power brokers. you can affect social change but only on a small perhaps local scale.

at 500m you can put the people YOU want into government to affect the change you want.

>you can’t buy houses around the world (and staff them) in a whim. you can’t go to davos and mingle with the true global power brokers. you can affect social change but only on a small perhaps local scale.

I can't imagine any of these things increasing my happiness (or even be particularly interesting to me).

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