The new worldwide startup

I’ve been traveling around the world studying how startups get formed. Yesterday I visited Bootup Labs in Vancouver. Last week I was at Startup Riot in Atlanta and while at the Olympics I’ve been hanging out with Saeed Amidi. He was recently profiled in Business Week and is CEO of Plug and Play, an incubator in Silicon Valley (he invests in, and rents to, more than 280 startups in Silicon Valley and now owns the building where Google and PayPal, among others, started up). I’ve been at YCombinator and Techstars events recently. I’ve visited London, and Paris in the last year to meet startups there. In April I’ll be visiting Israel again to study startups there in more detail.

There are some common trends.

1. Most everyone outside of the valley complains that they can’t get access to enough capital.
2. Most everyone outside of the valley complains that they can’t get access to enough PR.
3. Most everyone outside of the valley complains that their best startups get dragged to Silicon Valley once they get big and need more talent (Flickr, for instance, moved from Vancouver to Silicon Valley when it sold out to Yahoo — they sold in part because they needed help dealing with scaling issues, I’ve heard that story over and over from other companies and communities, too, like Atlassian who moved to the valley from Australia).
4. Most everyone outside of the valley complains that they don’t have the business infrastructure that they need to succeed. Mark Zuckerberg told me he moved Facebook to the Valley to have access to mentors, lawyers, PR people, and other people a fast-growing tech company needs.
5. Most everyone outside of the valley complains about lack of entrepreneurial culture. In Europe, for instance, failure is stigmatized. In other places there just isn’t the kind of culture that values wacky weird ideas. Go to a local coffee shop in your neighborhood, for instance, and ask people what Foursquare is. I guarantee you that in most Silicon Valley coffee shops you’ll find someone. Not so in most other places in the world.

But you already know these problems, among others. So, what’s changing? A lot.

1. The infrastructure needed to start up a tech company is now decentralized. You can use cloud servers from Rackspace, where I work, or Amazon or other companies. That infrastructure didn’t exist five years ago and before then if you wanted to start a web company you would need to build your own data center. Not every community has datacenters, but today everyone has access to the same cloud hosting services.
2. PR is being decentralized. Thanks to blogs, Skype, YouTube, Twitter and Facebook you can get onto TechCrunch no matter where in the world you are.
3. Costs are coming way down. Associated with first point. No longer do you need hundreds of thousands of dollars in servers to start up, you just need a few hundred bucks on a credit card to buy cloud servers.
4. A ton of startup accelerators/incubators have formed in past few years. I’ve listed a few on this post. They provide money, offices, mentoring, and other services you need like legal help.
5. Tech talent is growing around the world. Silicon Valley used to have a lock on geeks. That no longer is true as many universities around the world have educated tons of computer scientists and engineers.
6. Tax advantages. In Vancouver government officials told me this week that they are seeing a widening corporate tax rate gap. They expect that in 2012 their rate will be 25% while USA’s rate will be 40%. Other countries, like Ireland, have even lower rates. Plus, tons of countries want to help form tech zones. In Vancouver Bootup Labs officials told me they are working on getting some R&D subsidies from the Canadian government, (I’ve heard similar things from other countries, which can help even more businesses startup around the world).
7. Lower costs of living. In San Francisco it’s expensive to buy housing and health care needs to be purchased at sometimes great costs to families. Not so in many other communities around the world.

Even Silicon Valley folks are seeing these trends and are looking to capitalize on them. Saeed told me he’s looking to build Plug-and-play facilities in many communities in the world. I’m seeing other incubators/accelerators like YCombinator and TechStars do the same, spreading outside of their original communities to get deal flow from startups around the world.

I expect over the next few years these trends to speed up. I’m looking forward to it.

Are you noticing the same?

About Robert Scoble

As Startup Liaison for Rackspace, the Open Cloud Computing Company, I travel the world with Rocky Barbanica looking for what's happening on the bleeding edge of technology and report that here.

92 thoughts on “The new worldwide startup

  1. Robert – just wondering if you’d get the same feedback from Israeli startups (I’d be willing to bet that the answer would be no, and they have all the above issues plus some more to deal with, yet they don’t let any become “show stoppers”). BTW, reading “Start-Up Nation” now and highly recommend it – here are a couple of teaser articles that appeared on the National Post that prompted me to buy the book: http://bit.ly/a2TUus and http://bit.ly/bGRXNn Cheers, and a well written piece, RG

  2. I'm managing YourSports out of Plug and Play in Sunnyvale, moved down here from Seattle to do it. Fact is, America needs a new business model–new revenue streams, new ways of making money since old industries are dying–and it's entrepreneurship that will drive that.

    What Saeed & Co. have done at PnP is pretty damn exciting. We need ALOT more of PnP-like solutions. These incubators–whether its TechStars, PnP, TheFunded–are fricken awesome for entrepreneurs. Entrepreneurial camaraderie and a condensed personal supply-chain make the difficult job of “making something pop” easier. So much of entrepreneurship is getting out of bed every morning and just doing it. There's a lot of that going on at PnP. And we need more of it.

  3. Sadly Mike, London is slowly dying as a Techhub – OpenCoffee is now a redundant event. Most of the other events in London are drink related chat sessions with the same people meeting again and again. e.g DrinkTank, CozyTweetup

    As for SeedCamp (UK's YCombinator) has only produced one or two successful startups. Besides Zemanta who else? The majority have been quickly forgotten and the only reason mentors agree to attend is for personal publicity. How many mentors actually help the startups after.

    Worryingly some the “stars” of the UK “silicon roundabout” scene will probably soon be out of business and others will head to the Valley. e.g Huddle, Skimlinks, Tweetmeme

  4. Very fair points and something I've been preaching here in beautiful conservative St. Louis, Missouri.

    There are some amazing start ups here and there will be more as soon as our town starts to embrace innovation more.

    But the DIY tools, resources and ability to create a global phenomenon from anywhere are changing the game.

  5. This growing trend is the topic of my SXSW Panel: 'Seed Combinators – Incubators 2.0' http://my.sxsw.com/events/event/387

    I've been talking about and tracking this trend for quite a while now – here is a Google Map of the ones that I've discovered: http://bit.ly/Seedmap

    Houston has a vibrant startup community – though we are the first to admit we're no Silicon Valley. We have great entrepreneurs, some investment capital through both the http://www.houstonangelnetwork.org and local early stage VC, http://www.dfjmercury.com, institutions like the Houston Technology Center http://www.houstontech.org and BioHouston http://www.biohouston.com as well as strong university collaboration through Rice http://alliance.rice.edu and University of Houston http://www.bauer.uh.edu/centers/wce/, coworking sites http://www.carolinecollective.cc and http://www.katydock.com and a supportive local press, Dwight Silverman (@dsilverman) and Purva Patel (@purvap) from the Houston Chronicle and Michael Garfield (http://www.hightechtexan.com) and Russ Capper (http://www.thebusinessmakers.com) on the radio – along with a few blogs like Kurt Stoll's (@kurtstoll) http://www.startuphouston.com and newly launched http://www.culturemap.com – we even have a nationally recognized, social media savvy coffee shop that caters to the tech community http://www.coffeegroundz.net

    I was honored to be one of the investor/mentors at Austin-based http://www.capitalfactory.com where I got a firsthand look at how to start and sustain a startup community.

  6. From Zurich:

    I wholeheartedly agree with the article and just want to add 3 more factors.

    1. The local government here does a lot to promote entrepreneurship. Money, cheap rent, lots of competitions, subsidised bank investments, etc. In Zurich, there is a foundation that provides cheap office to young start-ups. Just yesterday we organised a little start-up/investor day in the Technopark building where there more then 150 (!) start-ups have an office.

    2. Thinking global. This week alone I attended the European travel summit hosted in the Google office here where all the attendants were making global strategies from the get go because local markets were too slow and don't offer enough space to scale.

    3. At least in Zurich, most of the start-ups tend to be more “real-tech-oriented” if you can call it that. You hear of start-ups like Doodle and Amazee but our office neighbours are building a new generation of radiation detectors that will never get Techcrunch coverage but might be more successful than all the cool tech start-ups over here.

  7. I hope you're right about the decentralization of these things and I'm a big believer that a startup in this day and age can succeed anywhere if they have the right ingredients.

    As a part of Shotput Ventures, an Atlanta startup accelerator in our second year, this is exactly what we're trying to achieve. There are great people all over the country, not just in a Silicon Valley, that need help getting their startup off the ground. http://www.shotputventures.com/

  8. As Editor of TechCrunch Europe this is something I've been writing about literally for years. Some of the best European startups just do this 'distributed startup' kind of thing completely naturally. CEO/Co-Founders from one city/country), financing from another (admittedly often London), developers in yet another. With everything less than 2 hours by plane in Europe, it's pretty easy to build a startup this way.

    In addition the eco-system is beginning to ripen. Alongside programmes like Seedcamp there are co-working spaces popping up all over. In fact (interest declared) I am an advisor to a brand new one launching in London shortly, TechHub.com. This will be aimed at Europeans and US people who want to access the London scene quickly and easily, and eachother. Check it out.

  9. Great post. As a guy building a web app business outside the valley (FreshBooks in Toronto), I think there is another side to all – the positive pieces of NOT being in the valley. Anyway…I've been to Bootup in Vancouver too and they are off to a great start…nice to hear about some other programs.

  10. I care too, but you're still right. It's interesting but boring. More fun vids please. I know Robert can do it; he's got this superpower of being everywhere all the time I'm sure

  11. You're very busy pumping out articles left and right, it makes sense that you probably don't do your fact checking very closely to make sure you know what you're actually talking about.

    When you compare taxation rates across countries, you can't be single-dimensional, examining only the “corporate income tax rates” from one country to another. You need to consider the overall, average effective tax rate, which would include things like VAt. Ireland, for example, certainly does have “low” corporate tax rates but it also has ridiculous VAT which applies to all the expenses a business may have.

    And the Foursquare reference? Puhleeze. It is still true that Silicon Valley is the heart of tech startups, the world over. It only makes sense that the typical SF/Bay Area coffee shop is going to have geek squadrons in there that will be familiar with the latest tech guru toys, like what the latest Twitter client is, or what the hell Foursquare is. It's mainly because there is still such a concentration of tech goofs in that area. If those same people were located somewhere else, then you'd find those same coffee shops with the same results. Your point about this really makes no difference, or sense, for that matter.

    Just do your damn homework before barfing this shit into a blog post.

  12. The problem is investors – money is always localized. If you manage to gain traction to become a Flickr, then money will follow you.
    But for a round 1 investment or seed money, it is orders of magnitude easier to work in the Bay Area or the Seattle area than anywhere else in the world.. especially Asia.

  13. I would say that Chicago is starting to get their act together. Excelerate, a YC-style incubator, is opening up for the summer with great mentors like David Cohen (TechStars) and Chuck Templeton (OpenTable). There is also lightbank, a new venture fund started by the Groupon guys and focused on consumer web tech.

    This video from Chicago Business is a great recap: http://www.chicagobusiness.com/cgi-bin/multiMed

  14. Jojo Flores of Plug and Play swung by Manila a few weeks ago to run an elevator pitch competition. Two of my friends made it to the top 3 startups going to San Francisco later in the year to stay at their accelerator facilities.

    Plug and play has been busy bringing European startups to the valley but are now keen on spotting tech startup talent in Asia.

  15. From Australia…

    We've seen a building of momentum and increase in depth in the startup community here over the past two years. In that time we've established community tools, events and seen a significant increase in investment into early stage ventures.

    We are still a few years off being as strong as Tel Aviv, London, Singapore or Barcelona, but they are the cities we look to as well as San Francisco for inspiration, and we certainly don't look at them with envy or fear.

    Sydney is an amazing city to live in with reasonable costs and an increasingly impressive calibre of talent. The fact that a company like Pollenizer can thrive in a slumped market is testament to the strength.

    Would we like more capital – yes, sure. But we're not holding our breath waiting for it.

  16. US computer science graduate departments have been shrinking for over a decade now. We are NOT graduating CS folks all around the country, we're graduating fewer and fewer of them and the relative concentration in California is only increasing.

  17. Great read Robert enjoyed the post. If you find yourself in Ottawa, Canada please feel free to drop by.

    I expect with the low cost of starting a software start-up the trend will accelerarte as you indicated. There will likely be all sorts of variants and flavours of incubators. Very interesting space to watch.

  18. Great post. Here in San Antonio, where Rackspace happens to be headquartered, we have an amazing community that it growing and prospering. And hey, we're not even in Austin, let alone Silicon Valley. Sure, there are advantage to being in the Valley, but as Scoble points out, decentralized infrastructure and being able to do some elements of strategic marcom is more in the hands of the companies who are willing to have a great message and the will to populate great content that can be found.

  19. Robert,

    I met Saeed last year in when he was invited to establish incubator operations in Singapore. The points you have mentioned in the article are quite spot-on regarding how the cloud is changing the cost structures of creating startups, marketing & PR is starting to be decentralized. My company Socialwok (http://socialwok.com/tour) is a good example of this; our business social networking service for Google Apps is built on Google AppEngine and we leverage different social media, blogs to market ourselves (http://socialwok.com/media)

    Nevertheless, the valley still has a lot of pull and I believe international startups will have to leverage on a 2 location model; operations in the origin country as well as business development presence in the valley in order to be successful.

    Ming
    CEO of Socialwok

  20. Not sure I was clear…I wasn't making a comparison to the IPO market. I'm
    also not making a literal comparison, but the world of high finance,
    investment banking, and fund management in the United States, at least, is
    centered around Wall Street. I spent the last five years managing money, so
    I understand the London/NY debate, but either way, there's a metaphor to be
    had.

  21. The biggest problem outside the valley is the mentality. People just don’t seem to “get it”. I advise a startup in Vancouver and it’s infuriating how backwards every thing they do is.

  22. I commented on this on buzz and twitter- its powerful to me that the stuff we have been doing the better part of a decade is now coming into mainstream consciousness I mean 7 years ago try telling your US clients that you are in Sydney, designer is in Manila and the development team is in Mauritius! now its typical- still we fight the weak minds, but those people are not our customers anyway. MMORPG have helped foster a generation that is used to late nights- teams of disperse skills coming together over chat to solve real world problems. THIS is the world i live in, love and work for.

  23. Robert, nice post, and one that will be an input into one of my future posts. Similarly, I'm currently writing a series of posts about digital entrepreneurship in the Arabic-speaking Middle East and North Africa (MENA) region. Within this region, the challenges you mentioned are clear and uncontested. In the oil-rich states, however, governments are supporting a lot of initiatives to spur entrepreneurship, but it's still a long-term goal that will require a challenging cultural shift.

    If interested, the most recent post is http://interactiveme.com/index.php/2010/02/sili…, from which you can access links to the earlier posts.

  24. Robert. Nice post. Who are some of the “A ton of startup accelerators/incubators have formed in past few years. ” that you mentioned?

  25. I'm pretty psyched about the potential for the decentralization of startups. I was really excited when I first read about how Matt Mullenweg and the WordPress team functioned.

  26. Robert, glad to see the increasing numbers of startup accelerator programs featured as one of the key trends in your post.

    There are actually over 70 accelerator programs that I've found worldwide so far – the list is located on my blog here: http://blog.shedd.us/321987608/

    Accelerator programs are critical – they connect startups to the entrepreneurial communities, which can be hard to find in cities outside of the valleys, provide lots of valuable mentoring, but also provide a “showcase” for entrepreneurial activity and make successes more visible. I think this last point is under-emphasized – especially with younger aspiring entrepreneurs, having some visible successes to point to and aspire to goes a long way towards making startups and entrepreneurship seem feasible where they are. I see a lot of potential for accelerator-facilitated entrepreneurship going forward.

  27. While there is movement, it just isn’t prolific enough at the moment. Here in Europe, you’ll find everything so scattered around the continent that no one area is really specializing in any one form of startupedness, i.e. the U.S.

    All the same, the “in Europe, for instance, failure is stigmatized.” is a huge inhibiting factor to fully actualize entrepreneurial activity on this continent. People are trying, but not trying hard enough, then there’s the access to capital issue.

    I’ve found that in many of the BA networks in the EU all hold their cards close, while most know what cards everyone’s holding. It’s ridiculous to say the least, there is a lack of proper deal flow, and when you have BA’s making one investment a year, because a) they are risk averse, b) there is no one sourcing nor teaching entreprenerus how to succeed and c) BA’s conduct 1 deal a year, yes 1 a year. What do you expect.

    We’re trying to change that, but it’s going to be a long and arduous road, and mind you this isn’t only in reference to tech startups, but startups in general in our lovely olde world. Sometimes makes me want to hop on a plane and move back home to NY.

  28. Robert, I really agree with you on this trend, esp. Europe being stigmatized or even paralyzed by the eco-system in which they exist. I work in tech PR (we recently met with you for Siri – Josh says hello!) and have learned that tech PR in Europe is a whole other game. French journalists, for instance, won't write about French startups because, in essence the French journo's don't feel confident vetting their own kind. Instead, they are saying “Go get U.S. tech writers to cover you”, i.e. get in Techcrunch and then we'll take you seriously. I mean it makes sense (the U.S. tech startup eco-system is way more mature than France's for instance). Regardless though, it only proves your point that Europe and other international locals are potential hot-beds for investment, PR, etc. Time to take those foreign language classes seriously?

  29. Thanks for the write up scobe, at ArabCrunch we have been doing the blogging PR for Arab startups for around 2 years, now we have added ArabCrunch.NET (in private beta) that empowers them with social tools such as mentorship, startups Q&A and help connect them with each others and with resources such as VCs incubators, Service providers and other support organizations.

  30. Hey Robert, remember me, we've a bunch of times now, in San Francisco, London, and Palo alto. Well,I just made the move from London to Palo alto, family in tow for all the reasons you speak of. Fact is this: in London there isa lot of tech activity, but, its nothing compared to here. Here you are surrounded not just with resources but witha buzz and attitude that is inspiring. Fair play to you for speaking it. Dave Ingram, Brownbook.

  31. As a Chicago transplant, I'd offer that our common city is lacking in this department. The coworking crowd is definitely moving in, but I don't see a lot of 'tech startup' support systems in place.

  32. Hey Robert, remember me, we've a bunch of times now, in San Francisco, London, and Palo Alto. Well, I just made the big move from London to Palo alto, family in tow, for all the reasons you speak of. Fact is this: in London there IS a lot of tech activity, but, its nothing compared to here. Here you are surrounded not just with resources but with a buzz and attitude that is inspiring. Fair play to you for speaking it. Dave Ingram, Brownbook.

  33. Hey Robert, remember me, we've a bunch of times now, in San Francisco, London, and Palo Alto. Well, I just made the big move from London to Palo alto, family in tow, for all the reasons you speak of. Fact is this: in London there IS a lot of tech activity, but, its nothing compared to here. Here you are surrounded not just with resources but with a buzz and attitude that is inspiring. Fair play to you for speaking it. Dave Ingram, Brownbook.

  34. Too true! In the UK the risk of trying is failure – and failure is seen as bad, as opposed to a learning experience, whereas the US (and the valley in particular) has a “those-who-dare-win” attitude that I can get on board with.
    Saying to people what I try and do by bootstrapping only has them looking on in confusement at my lack of ambition for a step on some “career-ladder” and working my way up a management structure for decades.

    Beginning to see something of a tech-community starting to form around Shoreditch, East London, but it's still far too expensive for a lot of small companies to get a place round there, and as such, companies are still spread all over the place so there's little cohesion.

    1. Steve in that case you might be interested then in the impending launch of TechHub in Shoreditch which is aimed specifically at tackling the high costs of London. It will be a hybrid co-working space with also affordable monthly deskspace, plus events, device testing room, and lots more. See TechHub dot com or follow @TechHub on Twitter. The founding membership drive has just been launched.

  35. I care and I'm sure many others do too. Scoble is one of the good guys who cares about the little guys, I have a lot of respect for that. I can't wait to finally see Robert at SXSW and personally thank him for everything he does (even if I don't agree with some views).

  36. While the cost of living in Vancouver is not much different than San Francisco, the benefit of government programs supporting tech companies, plus the corporate tax rate, and a little thing called healthcare makes us glad we joined Bootup Labs. Even for 3 Americans, it makes sense. And flights to the Valley are pretty easy.

  37. I can only share my experience here in Vancouver, but if I had to boil down the 'outsider' scenario at the moment I'd focus the emphasis on the access to funding, in the venture capital stages. I think to get any environment ready to really move young tech companies along you have to have a culture of early stage investing (like Bootup provides us at Foodtree), but in a lot of ways a big part of the near-stage future for all of us will be to effectively reach out to the Silicon Valley investment firms. The phenomenon is similar in some ways to the nature of investment banking in the traditional sense, and it's reliance on New York's Wall Street. It's not the only place to get funding but it's got the reputation, experience, and pure numbers to make it impossible to ignore.

    All the other stuff is quickly getting leveled as barriers for those of us not in Menlo Park. I went to Stanford, and while there's no question that the entrepreneurial culture is deep and wide there, I think many cities are now very, very friendly to the same mindsets, collaboration, and networking that such a culture demands. I don't know about Europe, but having experience in New York, Chicago, and now Vancouver, I'd say there's not a noticeable fall off in that sense. Especially in light of the financial crisis, which has redefined the thinking around 'work', traditional and otherwise.

    Anyway, good to meet you briefly, and we'll hope to catch you in your neighborhood soon.

  38. Robert, be careful on comparisons of corporate tax rates. The US headline figure is high-ish, but the effective rate is very competitive globally. See, for example, this analysis: http://mediamatters.org/research/200902030003.

    I agree, however, on your overall point about the globalization of innovation and entrepreneurship. The Bay Area retains some enormous advantages, which are not going away soon (despite high costs), but other areas are turning into valuable centers of innovation.

  39. This is absolutely right on. It's amazing how quickly regional startup ecosystems are forming. I'm watching a lot in the social enterprise space and Boulder, Austin, Seattle, even New Orleans and Atlanta all see incredible growth. A lot of these places are anchored by coworking spaces and incubator/accelerator programs. Some of them – like NOLA – are seeing big support from local municipalities and governments to help grow entrepreneurial ecosystems.

    As a transplant from Chicago to SF, there is still a major, major difference between the setup here and elsewhere, but I think it's better for the world that these new spaces are maturing.

  40. You are wasting your life Scoble.

    Just make some fun videos like you used to do at Microsoft and Podtech and stop flying all over the world talking to people and writing essays that change nothing.

    Please man. No one cares about your thoughts on startups struggling to get money. They want to see you demo cool shit like you used to.

    1. David – who died and appointed you spokesman for the world? There are a lot of people around the world – beyond the Llyod/ego-centric echo-chamber you apparently live in – that appreciate it when valley-folk choose to step out and spead the love. There are pleanty of other places where you can exercise your ADD rather than demanding the world bend to your preferences.

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