[protagonist_h]

Good explanation of benefits of being in a startup hub. However, are there advantages to being OUTSIDE a hub? I can think of at least two:

* Living and working outside a startup hub, you are more likely to encounter a problem nobody else has worked on before. In startup hubs, you have large number of startups working on small number of similar problems, while large chunk of profitable opportunities remain untapped. Why? Typical startup people don't encounter these problems. They are not talked about on startup blogs and you won't encounter that problem walking down University Ave in Palo Alto. In many cases, these opportunities are taken by old school, dinosaurs-like software firms who overcharge customers for their crappy software.

* Living outside a startup hub, you are exposed to users who are a good sample of the general population. This is not true for startup hubs, where users a lot more tech-savvy. While it seems at first that being surrounded by tech-savvy users is a good thing, this in fact may be a problem because building your startup based on feedback from these users may steer you in the wrong direction. You end up with couple of thousand "early adopters" who are enthusiastic about your product, but you are not able to expand further because your product just doesn't resonate with a true average user. On the other hand, if you can get a true average user to be your early adopter, the feedback you get from them will help you make a product which is attractive to a large number of users.

Of course, hubs are way overrepresented in the past success stories. However, more startups are started in the hubs, so it's not clear how actual success rates compare. I would love to see some stats for that.

[tptacek]

A third issue here is that talent is cheaper in (say) MSP than in SJC/SFO. Like, a lot. It's easier to hire and easier to retain. Because locales are sticky, the level of talent available to you is likely to be comparable or better than you'll get in the valley.

Your point about the "general population" is well taken too, especially if you're a company selling to other businesses. Most of the big companies in SFBA, and most of the companies you'll talk to period if you HQ out there, are software companies. Selling software to software companies is hard. Whereas if you HQ in Atlanta, you've Home Depot, UPS, Coca Cola, big banks, and so on.

There is clearly a kind of startup that benefits from being in SFBA so I don't want to sound like I'm saying there's nothing to this "startup hub" thing.

[protagonist_h]

Actually I disagree about your "cheap talent" remark. When you are building a scalable startup, looking for cheap labor is not a good idea since it's a part of "fixed cost" you have. Moreover, you don't need that many developers nowadays to build a startup. You only need a couple really good developers, and you want to either pay them really well or have them as your co-founders. (disclaimer: I'm a programmer myself).

[tptacek]

You're not following. Broadly speaking, better talent costs more money. The more money you have to spend on talent, the better the talent you retain will be. It's not about looking for "cheap labor"; it's about being able to find, recruit, and retain better people.

Think of it as a market inefficiency (albeit one that is difficult to "fix"): the stickiness of people's locales prevents them from maximizing their opportunities and decreases demand for their services in SFBA and increases their supply in (say) MSP.

[protagonist_h]

In other words, you want to hire in places where there's a large pool of good developers, but few employers competing for them. Am I following you now?:)

[tptacek]

Correct.