http://paulgraham.com/siliconvalley.html



How to Be Silicon Valley

May 2006

(This essay is derived from a keynote at Xtech.)

Could you reproduce Silicon Valley elsewhere, or is there something unique about it?

Observation bears this out: within the US, towns have become startup hubs if and only if they have both rich people and nerds. Few startups happen in Miami, for example, because although it's full of rich people, it has few nerds. It's not the kind of place nerds like.

Whereas Pittsburgh has the opposite problem: plenty of nerds, but no rich people.

Do you really need the rich people? Wouldn't it work to have the government invest in the nerds? No, it would not. Startup investors are a distinct type of rich people. They tend to have a lot of experience themselves in the technology business. This (a) helps them pick the right startups, and (b) means they can supply advice and connections as well as money. And the fact that they have a personal stake in the outcome makes them really pay attention.

Universities

The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley. And both groups are highly mobile. They'll go where life is good. So what makes a place good to them?

What nerds like is other nerds. Smart people will go wherever other smart people are. And in particular, to great universities.
So if you want to make a silicon valley, you not only need a university, but one of the top handful in the world. It has to be good enough to act as a magnet, drawing the best people from thousands of miles away. And that means it has to stand up to existing magnets like MIT and Stanford.

Personality

However, merely creating a new university would not be enough to start a silicon valley. The university is just the seed. It has to be planted in the right soil

The two like much the same things, because most startup investors are nerds themselves. So what do nerds look for in a town? Their tastes aren't completely different from other people's, because a lot of the towns they like most in the US are also big tourist destinations: San Francisco, Boston, Seattle. But their tastes can't be quite mainstream either, because they dislike other big tourist destinations, like New York, Los Angeles, and Las Vegas.

Youth

It's the young nerds who start startups, so it's those specifically the city has to appeal to. The startup hubs in the US are all young-feeling towns. This doesn't mean they have to be new. Cambridge has the oldest town plan in America, but it feels young because it's full of students.

http://paulgraham.com/america.html

Why Startups Condense in America

1. The US Allows Immigration.
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2. The US Is a Rich Country
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3. The US Is Not (Yet) a Police State.

Another country I could see wanting to have a silicon valley is China. But I doubt they could do it yet either. China still seems to be a police state, and although present rulers seem enlightened compared to the last, even enlightened despotism can probably only get you part way toward being a great economic power.

4. American Universities Are Better.

5. You Can Fire People in America.

I think one of the biggest obstacles to creating startups in Europe is the attitude toward employment. The famously rigid labor laws hurt every company, but startups especially, because startups have the least time to spare for bureaucratic hassles.

The difficulty of firing people is a particular problem for startups because they have no redundancy. Every person has to do their job well.
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European public opinion will apparently tolerate people being fired in industries where they really care about performance. Unfortunately the only industry they care enough about so far is soccer. But that is at least a precedent.