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Starting Up Outside of Silicon Valley May Be Tough, But It Lays the Groundwork for Generations of Entrepreneurs

by Marshall Childs


Posted on Monday Jul 17, 2017 at 04:00AM in Finance


This post was orginally published on this blog

Editor’s Note: In the new podcast Masters of Scale, LinkedIn co-founder and Greylock partner Reid Hoffman explores his philosophy on how to scale a business -- and at Entrepreneur.com, entrepreneurs are responding with their own ideas and experiences on our hub. This week, we’re discussing Hoffman’s theory: Silicon Valley has an inimitable blend of talent. No other region can match its collective capacity or wisdom for scaling, except maybe China. Listen to this week's episode here. 

There’s absolutely some truth to the idea that Silicon Valley is the best place on the planet to build and scale a business right now. Doing it elsewhere is without a doubt a risk, but it’s not as if it’s not happening, and happening with frequency.

After all, there are quite a few success stories of massive growth coming from various corners of the world. Spotify. Snap. Wix. And ahem, Fiverr.

Related: China's Tech Scene is Poised to Explode. Here's What U.S. Startups Need to Understand.

It starts with understanding what makes Silicon Valley so damn attractive today, and ends with a recognition of why it’s so worthwhile to build businesses elsewhere.

There are a number of reasons for Silicon Valley’s dominance that are foundational ones. These are building blocks that, for the most part, can be recreated anywhere in the world.

However, there is one additional and substantial reason Silicon Valley continues to be number one in terms of scaling a business, and it’s something Reid Hoffman discusses in this week's episode. There are simply more people in positions of leadership who have done it before. The idea of crazy, hyper growth is second nature in Silicon Valley, and the “muscles” needed to generate such growth are already developed in the region through the personalities and leaders that do business there.

The “PayPal Mafia” is a group that many of us in the tech community revere, but what are we really talking about? We’re talking about a group of smart people who built a company that had explosive growth. Those people then went on to form other companies in Silicon Valley, spreading their knowledge and experience. Those companies created a new class of entrepreneur, seasoned with previous scale-driven success. What each of them has done is truly impressive, but what’s worth noting is that much of that success has remained within Silicon Valley. Not a ton of those pioneers have left the friendly confines of the Bay Area, and it’s this generational “passing down” of experienced and skilled hyper-growth builders that many other areas lack.

While Silicon Valley is the best bet today, I’m confident that the next wave of Silicon Valleys are growing before our very eyes, and for those of us building those communities, the payoffs extend far beyond our current ventures.

Avenues to access capital are quickly expanding. New resources like crowdfunding as well as the influx of institutional investors into places like Israel are already bearing this point out and increasing the flow of money to other regions. Talent -- a resource that’s always constrained due to the local supply -- is far more accessible through a variety of means, including digitally. Not to mention the opportunity many governments have to adopt new regulations to spur innovation-driven immigration to enable greater numbers of talented individuals to enter an ecosystem.

Israel is a good example of a place where one particular vertical has churned out successes in the form of cybersecurity. Supply of talent has been exceptionally strong, as has innovation. Successes like Checkpoint have fueled more businesses in that industry, and it’s created a pathway for others to find success. Success itself becomes cyclical, driving other variables like talent supply and funding. It is a self-fulfilling prophecy.

As businesses like Spotify, Snap, Wix and Fiverr have sustained success, they will create new, experienced “masters of scale” in their regions of the world, which will drive the same cyclical returns in those ecosystems. This process is already underway, and for those of us who are engaging in this transformation, we’re creating ecosystems that will fuel entrepreneurship for generations to come, creating buzz, experience and enthusiasm that sit within the culture of a region, just like Silicon Valley today.

Hoffman is right. It’s not impossible to start a successful company outside Silicon Valley, it’s just damn hard. Not only is that changing, but the reward for taking that risk is much larger than any individual success. It’s the actions of pioneers, and as successes pile up, it will only become easier and easier.

Micha Kaufman is chief executive officer and co-founder of Fiverr, launched in 2010. He is the visionary behind Fiverr's product and platform strategy, leading the company in its global mission to democratize lean entrepreneurship. Sinc...

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