Mark Gritter (markgritter) wrote,
Mark Gritter

It's the Ecosystem

Rob Weber (of W3i) contributed an essay to about why Minnesota isn't Silicon Valley. This was sparked by an earlier contributed essay entitled Dear Minnesota Angel Investor which claimed that Minnesota angels just weren't willing to take risks on potentially-huge opportunities. Rob emphasizes that it's not a cultural difference so much as an ecological one.

Silicon Valley has created a virtuous cycle which folks in Minnesota don’t talk about. A friend of mine whom graduated in 2009 with a Bachelors degree in Mathematics from Stanford and immediately created a $1 million plus a year two person business creating casual iPhone games summed it up well. People outside of Silicon Valley think all the college grads coming out of Stanford immediately create their own start-up like he did, he said. But it’s just not true.

Nearly all of the college grads get recruited into Facebook, Google, Apple, etc. and plan on putting in three or more years vesting their stock options, and developing deep expertise in high growth markets before launching their first business. When these young stars go to cash in their million dollar payday, they now have the cash to invest in their business, the relevant expertise to inspire confidence from angels, and possibly enough money left over to throw some money into other similar businesses.

This is just one example of the virtuous cycle which Silicon Valley enjoys, though I would point out that it's not just the huge successes that are the incubators for later companies. The Silicon Valley ecosystem also includes pools of investor money, a wide collection of technical talent, two top-tier research universities, and significant depth of high-tech companies as customers, acquirers, and employers.

This echoes some thoughts by Jeff Pester on the original thread:

The real problem is that there isn't a fully-functional ecosystem for the types of companies you're referring to. And without an ecosystem that can move startups with momentum to the next level, local angels have virtually no chance for exits. It really is that simple, and increasing angel funding while ignoring the rest of the ecosystem will not improve the situation.

To the extent that Silicon Valley *has* a recipe, it's not one that can be easily reproduced. I have argued before that MN entrepreneurship needs to be built around the areas where Minnesota has strength, not where it is competing with Silicon Valley.
Tags: startup
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