How American are Startups?

05/17/2006

The second day of and the first day of the conference proper (yesterday being tutorials) starts with a keynote from Paul Graham (see his Wikipedia entry) talking about whether or not the success of Silicon Valley might be replicated elsewhere – more specifically How American are Startups?. Suw Charman’s done a pretty solid near-perfect transcript of his talk and Graham’s subsequently written up the piece in two parts (How to be Silicon Valley and Why Start-ups Condense in America) but fundamentally his argument breaks down (to me at least) to these points:

  • Silicon Valley is about an accumulation of people, not geography – get the right 10,000 people and you could recreate it
  • To create an environment which is conducive to start-ups you need two groups of people – rich people who are prepared to invest and lots of nerds
  • Government is not a good replacement for rich people / angel investors as they’re slow, invest inappropriately and don’t have the contacts or experience to support the right activity
  • For rich people and nerds to mix you need a location where lots of rich people who care about technology and lots of nerds want to be – New York has lots of rich people but no nerds, other places lots of nerds but no rich people
  • Places that attract nerds and rich people tend to be cosmopolitan, liberal, happy places like San Francisco where people walk around looking happy and with high levels of students going to high-class universities
  • Other features of good places potentially conducive to this kind of activity are: personality, good transport hubs and connections to the existing Silicon Valley, quietness, good weather, not about excitement

Anyway, it would probably be fair to say that the reaction to the session has been mixed, although it’s more to do with his thoughts about American success and European problems than the points above (I suspect). Here’s one particularly astringent comment from Jeremy Keith:

It‚Äôs essentially a Thatcherite screed about why businesses should be able to get away with doing anything they want and treat employees like slaves … He also thinks that it won‚Äôt be long before Europe is all speaking one language namely, his … What. A. Wanker.

I think Jeremy’s gone a bit over the top, but I can completely understand why he reacted the way that he did. Paul’s piece felt extraordinarily American, in a semi-utopian libertarian free-market kind of way, and I have to admit it felt alien and strange and fairly abrasive. But there was also some pretty solid insights and a hell of a well-presented argument. By the end of the piece I was wondering, was this a political screed supported by good argument? Or was this a position that had been reached through experience that just happened to coincide with a particular political ideology.

I’ve spent about an hour thinking around this now, and have come to the conclusion that it’s probably the second of the two – an argument borne from experience but still an argument that needs to be heavily contextualised and derives from the particular environment that he operated within. The approach that Californians take to governance clearly works pretty well (for some interpretations of good), but that doesn’t make it a natural fact of the universe. It could be much more contingent than we tend to recognise.

Let me put it this way – one point that Graham made was about the role of government – basically intimating that regulation and government intervention was almost uniformly and universally a bad thing. But no government and no enlightened citizenry will be prepared to mutely accept the facts of their destiny on the basis of their weather (one of the aspects that Graham spells out as making a place attractive to the right kind of people). And all governments will try hard to make their environments more conducive to certain kinds of activity, including the US government. For example, one concern that I note that Paul Graham did not mention at all during his piece were simple start-up costs. He talked about companies started in garages, but probably didn’t realise that even garage space is pretty limited for large groups of people in metropolitan areas in Europe. This is a factor that probably has no effect in California outside the big cities, but is of massive importance across Europe. Property prices and costs are so extreme in parts of Britain that it’s almost immediately impractical for two or three people to try and start a little company. This is not in defiance of Graham’s talk, it’s simply ignored by it. And he ignores cultural differences, food costs and increased risks that mean that people are simply less comfortable making these kinds of decisions. If you want to create a culture where this kind of thing is possible, then these things need to be fixed. And that means work that needs to be funded and that means government one way or another.

And there’s another aspect which I found worrying – clearly it’s good for business to be able to hire and fire as you choose. And it’s also clearly not problematic for technology workers to lose their jobs if they’re working around Silicon Valley – it’s not like there’s a shortage of other places to work for. But the laws don’t only apply to the people with lots of job mobility and freedom – they also apply to people at the bottom of the food chain. Many European countries have decided to try and protect those people at the cost of some of their business flexibility. I’m not saying one option is more right or more wrong – I’m actually quite keen on the free market, and my time at the BBC rammed home to me some of the problems of working in an organisation that’s unionised to the point that it’s unable to fire people or restructure itself effectively in response to changing circumstances. But I think it’s important to at least recognise that the things that may make a Silicon Valley possible might also be partially founded on immigrant labour, crippled unions and a lack of support for people at the bottom of the pile. What’s good for Startups may not be good for all, and occasionally I got the impression that much of Graham’s stuff was describing the environmental factors that make Start-ups work as a uniform and perfect good in the world. I don’t buy that so much.

Having said all that, I have to be honest, I pretty much agree with all of his major points, and his thoughts on the right places for start-up activity got me thinking about places in the UK that would be good seed beds for an ecosystem of small and larger companies to operate together effectively. I’m not convinced that London is a good place for this kind of stuff at all, even though unfortunately all the money and all the business ends up there.

I’ve done some exploring around and found information on the top ten Computer Science departments in the UK and they are: Imperial, York, Oxford, UCL, King’s College London, Edinburgh, St Andrews, Cambridge, Glasgow and Bristol. Applying Graham’s criteria to those places, I’m afraid Scotland is probably mostly out as an ideal transportation hub and a home for rich technologists. I suspect London is simply too expensive and cripplingly scary for anyone other than people wanting to work for big businesses and media companies (it’s the New York of the UK, not the San Francisco). Which leaves Oxford, Cambridge, York and Bristol. I don’t know much about York, but my sense is that it’s a bit too far off the transport grid to be ideal, even though it has a large student population and is a relaxed and outdoorsy place. Oxford and Cambridge are obvious candidates, but I’m actually most interested in Bristol (coincidentally where I went to University) which is an hour and a half from Paddington and the Heathrow Express, is surrounded by beautiful landscape and opportunities to explore and has a 20,000-strong student population across the University of Bristol and the University of the West of England. It’s also not unmanageably expensive.

The other place that interests me a lot is Brighton. I don’t know whether or not it has an enormous technology contingent, but I’m hearing a lot about start-ups based out of there. It’s an hour from Central London, is extremely cosmopolitan and seems to have a lot of the characteristics that a start-up culture would require. I’d be really interested to get people’s thoughts about where and how we could get a more technology-focused start-up scene going in the UK. So feel free to leave a comment.

Addendum: For those interested, he also summarised the advantages and disadvantages of the US in the start-up space, and I’ve cut back the advantages to these helpful headlines which should give you the gist of his argument:

  1. Allows immigration
  2. Isn’t a poor country
  3. Not a police state
  4. High quality universities
  5. You can fire people
  6. Attitudes that don’t associate ‘working’ with being employed
  7. Not anal about business regulations
  8. Huge domestic market
  9. High levels of funding
  10. People comfortable with career switching