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Summary:

All tech startups need just a few ingredients to germinate: sophisticated money; first-rate technology universities; and a few template successes (a Google or a Facebook, and so on) to encourage founders to get off their duffs. Contrary to current wisdom, these ingredients exist in many communities outside of Silicon Valley –- in fact, they always have. Continue Reading.

All tech startups need just a few ingredients to germinate: sophisticated money; first-rate technology universities; and a few template successes (a Google or a Facebook, and so on) to encourage founders to get off their duffs. Contrary to current wisdom, these ingredients exist in many communities outside of Silicon Valley –- in fact, they always have.

When you add a large and economically accessible employee base to our first three criteria, you have the recipe for successful startups. Tel Aviv is a good non-U.S. example. Israel has more PhD’s per capita than any place on Earth, plus a military that turns out gobs of advanced technology. The result: There are now more VC’s in Israel than there are rabbis.

Similarly, after World War II, oil companies in Texas needed to find new sources of petroleum, and they turned to geological survey companies for help. One of them had a little subsidiary, Texas Instruments, where the computer on the chip was eventually built. Some years later, Michael Dell arrived at a much-enhanced engineering school on the campus of the University of Texas, and the rest, as they say, is history.

I am what you might call a startup gray-beard and I’ve seen it all. Founders can sometimes get too fixed to the idea that they must be in a certain incubating environment to succeed, when really, getting out of the startup fishbowl is sometimes the best thing they could do. I often encourage startups I invest in or founders I counsel to be contrarian and start their firms outside of the Valley, or failing that, to move East while they still can.

If you want to stay stateside, I’m partial to Boston, my home town, but there are plenty of other cities to consider, too. My top non-Silicon Valley cities are: Boston; Pittsburgh; Philadelphia; Austin; Research Triangle, N.C.; Minneapolis; Tallahassee; Toronto; and Basking Ridge, N.J. Here’s why:

1. The weather sucks in some of these towns (not Tallahassee) so your people will actually work instead of bugging out at 5:15 to train for a marathon, triathlon or Ultimate Frisbee.

2. You can recruit better outside the fishbowl. Every technology company hits the wall — some multiple times. In the Valley your employees will bail at the first sign of trouble and jump to a better job in the next parking lot. That means you will have to spike salaries to rebuild your team. Other places in the world aren’t quite so spoiled – or they come to you already cynical and stay through the rough times.

3. You won’t get lost in the startup maze. In the Valley, every VC has a portfolio company in each flavor – their own LP’s can’t tell them apart.

4. In my experience, other startup communities aren’t as pre-occupied with the “exit” as Da Valley. SV VC’s have attention spans measured in picoseconds and will sell/merge your company at the first sign of trouble. I can say that in Boston, at least, we are used to gutting out long “winters.”

5. Academics make great board members. Each of these cities has a rich educational environment and are great places to recruit sartorial advisors. And unlike at Stanford, you wont have to give up 1 percent of your equity just to put the provost’s name on your board!

Howard Anderson is a founder of The Yankee Group, a cofounder of Battery Ventures, and a professor of business at the MIT Sloan School of Management.

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  1. Tallahassee? Look at St. Louis – especially if you are working on a Biotech/Life Science startup.

  2. That comment about marathon training is totally inappropriate and not fair.

  3. What are your thoughts on NYC? We started here a few years ago and it’s always interesting to meet people visiting from SV.

  4. We’re doing it in Portland Maine for our mobile company.

    Close to Boston (2 hours). 40 minute flight to NYC on JetBlue.

    Cheap terrific space in the Old Port. Workers are cheaper.

  5. Techvibes|Blog|Calgary,Edmonton,Kitchener-Waterloo,Montréal,Ottawa,Portland,Seattle,Toronto,Vancouver,Victoria Wednesday, September 10, 2008

    [...] at GigaOM today, Howard Anderson gives us 5 reasons to move a startup out of Silicon Valley and names Toronto as one of his non-Silicon Valley [...]

  6. Also, in those second/third-tier areas, your employees won’t find anyone to have sex with, leaving them more focused on their jobs.

  7. Toronto…yes, but a better place is Waterloo Ontario, just west of Toronto and home to 2 Universities, RIM, OpenText and many more tech companies.

  8. Austin (aka the “Silicon Hills” as it was referred to in its glory days) is quickly becoming a hot bed of mobile and semantic technologies. Our Ruby on Rails community is also really strong.

    Some cool stuff’s happening around here. You should come check us out sometime (and not just in March during SXSW!).

  9. Uh, Paul, if your company has mostly straight men, Silicon Valley is the best then: there are a lot more single men than women, which is the opposite of most large metro areas (e.g. New York City).

  10. We’re loving Toronto as the home for our startup. Nearby Waterloo is a hot spot for successful tech companies like RIM, and a rich source of talent, while TO is a world-class city with enormous diversity- the world represented in one place, so to say.

    And contrary to popular belief, we do get to go out and shoot the frisbee around every now and then, just maybe not in January!

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