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by • August 30, 2012 • FoundersComments (1)72

I don’t miss the silicon valley (and you shouldn’t either)

Entrepreneurs worldwide suspect the grass is greener in San Francisco. And so they uproot their companies, pay a king’s ransom to immigration lawyers, and generally allow it to distract them from building their company.

But check it. The valley only has about 4x more VC deals than London (although average valuations are admittedly 2x higher):

The valley is not 1000x better

The valley is not 1000x better

The truth is, good companies get funded. Everywhere. Bad companies usually don’t. You can probably get luckier & beat the odds in the valley, but that feels like fixing the wrong problem, like changing which slot machine you’re playing instead of leaving the casino.

At Habit, when we finished our YC term, we just weren’t yet investable. Nobody on our team had even heard about startups before YC mysteriously accepted us, and 3 months later we still knew pretty much zilch.

Still, we squandered 6 months in futile fundraising. After ~120 meetings everywhere from Boston & New Jersey to LA & Sand Hill Road, we gave up, dug in our heels, and got back to building our business. The next time we spoke to an investor, they immediately said yes.

We hadn’t been failing to raise because we were in the wrong city. We were failing to raise because our business wasn’t there yet. Funding can be a red herring.

The vast majority of VC rounds go to revenue generating companies

The vast majority of VC rounds go to revenue generating companies

When you look at the stats, 5% of rounds happen on an idea. 25% during product development. 60% are for revenue generating companies with a sellable product. 10% goes to profitable companies ready to grow (this data is for the US & UK; the same chart for China & India is skewed way to the right)

I suspect the frothy early funding rounds you hear about (“they raised how much on an idea?!”) are visible outliers in the same way as big exits like instagram. They are unusual & dramatic, so everyone talks & writes about them, and then we believe they occur a lot more than they do.

While playing poker, we bitch about one bad beat more than a thousand lucky breaks. Similarly, investors are liable to remember the one round they got priced out of and forget all the ones they still had the choice on.

As long as you’re in a big city, it’s not as bad where you are as you probably think. And it’s not as good in the valley as you probably think.

You may be able to make the trip, but it has a cost

You may be able to make the trip, but it has a cost

I’m way in the minority on this opinion, but I would suggest that if you’re starting out, you don’t worry about finding the “best” city. The infrastructure you need is in place all over the world. Just keep on building your business.

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One Response to I don’t miss the silicon valley (and you shouldn’t either)

  1. Fahad says:

    Just what I needed to hear. Great postRob. I think reading hacker news paints this picture that all the good stuff happens in the valley. I think the valley is great at promoting their startups which reinforces this. Maybe that’s what we need in London!

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