Go West Young Man: Why the Valley Matters

Silicon Valley remains the capital of technology development and innovation. Paul Graham from Y Combinator, an early stage venture fund, makes a strong case from why startup hubs are important, and particularly why Silicon Valley comes near the top. He writes:

In fact, the quality of the investors may be the main advantage of startup hubs. Silicon Valley investors are noticeably more aggressive than Boston ones. Over and over, I’ve seen startups we’ve funded snatched by west coast investors out from under the noses of Boston investors who saw them first but acted too slowly.

I was talking recently to someone who works on search at Google. He knew a lot of people at Yahoo, so he was in a good position to compare the two companies. I asked him why Google was better at search. He said it wasn’t anything specific Google did, but simply that they understood search so much better.

And that’s why startups thrive in startup hubs like Silicon Valley. Startups are a very specialized business, as specialized as diamond cutting. And in startup hubs they understand it.

This has significance for the Mid East for a few reasons:

1. There are a tiny handful of investors in technology, and most couldn’t tell you the difference between web 1.0 or 2.0 and having learned the buzzwords of today (UGC in particular is a favorite one) they’re keen on participating. To put it simply, there are very few investors in tech., and most are not of high quality and couldn’t come in and give meaningful advice to a startup. Though, they’d love to take a board seat. And that’s the problem.
2. Startups are a “very specialized business” and most in the Middle East have no clue to that. That’s as true for entrepreneurs as it is for investors. In that sense, to some extent, it’s a case of the blind leading the blind.

Having said that, the region is changing quickly. We are now seeing more sophisticated entrepreneurs. Unfortunately, and, for obvious reasons, investors still lag behind in being as tech. savvy. In the Middle East, the closest thing to a tech. hub remains Amman, Jordan. It’s the only place where there is a tech. startup community, an incubator, an entrepreneurship center, and some investors.

The region is still far, far behind the Valley, and the gap will only be shortened when we see the alignment of clever entrepreneurs and investors that are willing to fund them.