Why You Need to be in Silicon Valley

For years I didn’t believe this. I thought that you could take advantage of the benefits of Boston, Seattle, NY, Austin – cheaper talent, no echo chamber, local Universities, etc.. But I give up. I found myself telling an entrepreneur why he had to be in Silicon Valley if he wanted to succeed. Most of my points are about Consumer Internet businesses…

I won’t belabor the obvious reasons – the Investors are here, the best engineers and entrepreneurs self-select and come here, Stanford and Berkeley, yadda yadda.

Instead, here are some points that you may not have considered:

• Especially on the Consumer Internet, modern businesses are becoming winner-take-all (thanks to leverage and network effects). Therefore, if you’re 10% better than the competition, you win, likely the whole market. You need every possible edge…

• All of the companies that you need to partner with are out here. Business development doesn’t happen in formal meetings. It happens in informal coffees, parties, and relationships.

• If you are here, your network will be using all of the latest tools – Twitter, Foursquare, Quora, Nexus One, etc., before other networks in other cities will. These networks hit critical mass here earlier and are thus more valuable to the early adopters here. You’ll have a 3-month+ head start on people outside to see what’s coming next. Imagine trying to design next year’s clothing without firsthand immersion in this year’s fashion, in Milan or Paris.

Sure, it’s possible to build a great Consumer Internet business starting out somewhere else, but given that these are winner-take-all businesses, do you want to start out that far behind the curve?