Thursday, June 5, 2008

Is Silicon Valley a Must for your Internet business?

It’s like making movies outside of Hollywood - lots of people do, but the culture is different and it’s harder.

Those are the words I came across recently in an online forum (on TechCrunch) describing what it’s like to run an Internet business outside of Silicon Valley.

This view was endorsed by a number of people on our recent travels around the US (all of whom were admittedly based in Silicon Valley). The view was simply that if we were serious about our new Internet business, then the only place to be was in Silicon Valley (Palo Alto and Mountain View being the most popular suggestions).

At one point we were considering San Diego as a very desirable location. Well known for its biotech activity, there is growing sentiment that the Internet start-up community in San Diego is gaining momentum.

One has to consider very carefully the reasons for being in Silicon Valley as opposed to San Diego, or any other place for that matter. For start-ups that require strong skills and resources in the Internet arena, combined with the need for possible VC funding, it seems hard to argue against Silicon Valley as being the place where they are most likely to succeed in meeting those objectives.

On the other hand, competition in the Bay area is intense, skills are in demand and therefore very expensive, and let's not forget the exorbitant property prices and high cost of living. According to Wikipedia, Palo Alto is the fifth most expensive US city in which to live, and is the most expensive University city in the US (being home to Stanford). A snapshot survey I recently did on Zillow.com shows that, broadly speaking, property in Palo Alto is approximately twice the cost of property in San Diego (on a square foot for square foot basis).

Still, a business address in Silicon Valley just seems to say, "we are serious about Internet technology and our business could potentially be the next big thing". There is nothing quite like taking a drive up Sand Hill Road, where major VC's headquarters line the streets like oak trees, or seeing the Googleplex outside your office window. You realise then that nothing is impossible, and that is why entrepreneurs keep flocking to Silicon Valley in droves. It is likely to be the preferred destination for Internet companies for a long time to come.

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