Can You Build a Startup Ecosystem Outside the Valley?

San Francisco is an incredible place for startups. There are so many positive factors to encourage entrepreneurs and help them along the way. It was an eye-opener.

More than anything, everyone’s openness, availability and participation makes the difference.

In order for startups to succeed, you need lots of different people:

  • New entrepreneurs
  • Veteran entrepreneurs
  • Angel investors
  • Venture capitalists
  • Supporting players (lawyers, accountants, marketing, PR, etc.)

Everyone needs to hop into the sandbox and play. And that’s exactly what you get in San Francisco and Silicon Valley. It’s a giant mashup of non-stop events and networking opportunities. Meeting top people and key players is easy. And generally, people seem willing to help.

The startup ecosystem in San Francisco is designed to help startups succeed. Doesn’t mean everyone succeeds, but having the ecosystem in place certainly helps.

So that begs the question: How can a startup ecosystem be built and promoted elsewhere?

It’s certainly possible. The folks at Outside the Valley recommend building a “nerd-haven” since most high-tech startups are run by nerds, and the people that fund them are also nerds. They offer two initial steps:

  1. Create a city with a tech creative-class culture.
  2. Create a city with a world-class university.

Montreal has both — although I question how effective our universities are at developing entrepreneurs. Still, there’s a lot going on in Montreal and elsewhere to help build out startup ecosystems. But more is needed.

  1. Successful entrepreneurs have to give back. Too many successful entrepreneurs don’t participate in the startup community. This leads to a lack of experienced mentors and advisers able to help and encourage new crops of entrepreneurs. And “giving back” doesn’t have to be solely altruistic; many successful entrepreneurs in San Francisco go on to become angel investors and VCs. It behooves experienced entrepreneurs to keep an ear to the ground – for their own investment opportunities and future projects.
  2. Angel investors need to raise their profiles. There are more angel investors out there than people realize, but they’re not very high profile. Angel and early seed financing is critical for most startups; but few of them know where to look. Once again, this comes down to being accessible and willing to participate in the community. In San Francisco, this isn’t a problem at all. Most angels find deals through referrals, and I can understand they don’t want to be pitched non-stop but some of the best opportunities are going to be tucked away in corners that angels and their networks just can’t reach without getting out there.

If more experienced entrepreneurs and angels stepped up and participated in the ecosystem it would also draw others into the mix. Startups need lots of help from lawyers, accountants, etc. But I’ve rarely met any “support people” at Montreal events.

Rob May nailed it when he wrote, It’s The Network, Not The Valley, That Causes Success. The Valley is a giant melting pot of people, not silos of investors, entrepreneurs, mentors, etc. working and meeting separately. Everyone’s mashed up together.

Of course, there’s more to a successful startup ecosystem than veteran entrepreneurs and angels.

  1. Governments should get out of the way. Make it as easy and painless to start a company as possible. Play favorites with scrappy startups trying to create jobs and wealth, but otherwise leave ‘em alone.
  2. Existing startups have to get involved. You can’t blame everyone else if no one knows you exist. Every week I discover a new startup in Montreal that no one has heard about, and that makes absolutely no sense. You should be blogging, participating at every event, and reaching out.
  3. More cheerleading. We need to brag more about the startups that are making a go of it. We need to promote them more. A little “back slapping” never hurt anyone, and a healthy ego is needed. And don’t worry if they fail, all they’ve done is prepared themselves for the next startup, and the one after that, and the one after that…
  4. More startups. We get into a bit of “chicken and egg” at this point, but ultimately no startup ecosystem works without more startups. People need to be starting more companies. Just look at what these guys are doing starting one micro-startup per week.

A startup ecosystem works when everyone needed for startups to succeed gets into a room and meets everyone else.

Everyone has to see the value in being open, accessible and participatory. The network breeds success, and this is what works so well in the Valley.

August 9, 2007 Posted in Startups by

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  • http://www.yashlabs.com/wp Josh Nursing

    I’ve been exploring the subject ever since I came to Montreal.

    It will all boil down to individual psychology too. In SV, there’s no such thing as a ‘failure’. People gather their lessons learned, stand back up and start again with the added experience. They aren’t castigated by their peers.

    In Canada, I gather this is different.

    It is not a coincidence that the traits that make SV what it is, are the same traits for successful people.

    Anna-Lee Saxenian is a worldwide expert on this and many of her written documents are online as well as an audio interview somewhere.

    http://www.ischool.berkeley.edu/~anno/

    In her audio interview though, she says that it’s impossible to duplicate SV.

    There is a strong foundation in regional networks, and my exploration of the phenomenon lead to building the Montreal Tech League.

    Here in Mtl, we also lack a certain critical mass, be it in the number of people or qualified people or clever people, you name it.

    And finally, in SV, immigrants are very entrepreneurial and welcome to contribute to the economy through working. Here, it is unfortunate that qualified immigrants are not welcome by companies.

    http://www.ailf.org/ipc/policy_reports_2002_secret.asp

    Best

  • http://www.yashlabs.com/wp Josh Nursing

    I've been exploring the subject ever since I came to Montreal.

    It will all boil down to individual psychology too. In SV, there's no such thing as a 'failure'. People gather their lessons learned, stand back up and start again with the added experience. They aren't castigated by their peers.

    In Canada, I gather this is different.

    It is not a coincidence that the traits that make SV what it is, are the same traits for successful people.

    Anna-Lee Saxenian is a worldwide expert on this and many of her written documents are online as well as an audio interview somewhere.

    http://www.ischool.berkeley.edu/~anno/

    In her audio interview though, she says that it's impossible to duplicate SV.

    There is a strong foundation in regional networks, and my exploration of the phenomenon lead to building the Montreal Tech League.

    Here in Mtl, we also lack a certain critical mass, be it in the number of people or qualified people or clever people, you name it.

    And finally, in SV, immigrants are very entrepreneurial and welcome to contribute to the economy through working. Here, it is unfortunate that qualified immigrants are not welcome by companies.

    http://www.ailf.org/ipc/policy_reports_2002_sec

    Best

  • http://johnhunter.com/ John Hunter

    Great post, I believe it can be done but it is not easy. Boston is making some progress in that direction. There are many important factors including capital but a huge factor is one or more world class science and engineering universities because that can help with so many factors. I discussed these ideas in the Future is Engineering including links to posts by Paul Graham and Guy Kawasaki on the topic.

  • http://johnhunter.com/ John Hunter

    Great post, I believe it can be done but it is not easy. Boston is making some progress in that direction. There are many important factors including capital but a huge factor is one or more world class science and engineering universities because that can help with so many factors. I discussed these ideas in the Future is Engineering including links to posts by Paul Graham and Guy Kawasaki on the topic.

  • http://www.smallbusinesstransitions.com Greg Balanko-Dickson

    I agree with what you have said except you did not talk about the entrepreneurs perspective and role.

    Start up entrepreneurs need to also make themselves accessible, be friendly, share their ideas withouy an NDA.

    When asked for help and you provide it and get zero feedback – that is just plain rude – want a mentor – be a good mentee. Say thank you!

    Show some damn manners!

  • http://www.smallbusinesstransitions.com Greg Balanko-Dickson

    I agree with what you have said except you did not talk about the entrepreneurs perspective and role.

    Start up entrepreneurs need to also make themselves accessible, be friendly, share their ideas withouy an NDA.

    When asked for help and you provide it and get zero feedback – that is just plain rude – want a mentor – be a good mentee. Say thank you!

    Show some damn manners!

  • http://www.instigatorblog.com Ben Yoskovitz

    John – Thank you for stopping by and commenting. I’m not sure you can build the same level and quality of environment you see in the Valley, but I do think you can aim for that and make progress in those directions.

    Greg – Sounds like you’re speaking from experience! Probably can’t and shouldn’t share that with us, but I agree as well – entrepreneurs need to make themselves accessible and do so in a respectful and polite way. Generally though, entrepreneurs are going to be the least experienced and savvy of all the people involved in the community, so they’re the ones that get the most slack cut.

  • http://www.yashlabs.com/wp Josh Nursing

    Coincidentally, today there are two related articles on Cyberpresse (they’re in French) which give an overview of some of the issues plaguing Mtl and Quebec:

    http://www.cyberpresse.ca/article/20070810/CPACTUALITES/708100448/-1/CPACTUALITES
    http://www.cyberpresse.ca/article/20070810/CPACTUALITES/708100449/0/CPACTUALITES

    John: I like the perspective of how engineering is crucial. To me, engineering is linked to a proven methodology which enables precise construction, robust scaling, and generally, quality work through documentation.

    During the past 11 years, I have seen countless software projects where the business suffers because at one point, somebody thought it was a brilliant idea to ‘save’ some money by hiring programmers instead of a software engineer. Well, in SEng., it is much more costly to update and maintain software than to build it initially. So, in fact, the proper business decision in this case is to invest early in an engineer.

    As for NDAs, I think they’re necessary. There are people whose ethical sensibilities are so inexistent that they would take your idea and use it without flinching.

  • http://www.instigatorblog.com Ben Yoskovitz

    John – Thank you for stopping by and commenting. I'm not sure you can build the same level and quality of environment you see in the Valley, but I do think you can aim for that and make progress in those directions.

    Greg – Sounds like you're speaking from experience! Probably can't and shouldn't share that with us, but I agree as well – entrepreneurs need to make themselves accessible and do so in a respectful and polite way. Generally though, entrepreneurs are going to be the least experienced and savvy of all the people involved in the community, so they're the ones that get the most slack cut.

  • http://www.yashlabs.com/wp Josh Nursing

    Coincidentally, today there are two related articles on Cyberpresse (they're in French) which give an overview of some of the issues plaguing Mtl and Quebec:

    http://www.cyberpresse.ca/article/20070810/CPAC
    http://www.cyberpresse.ca/article/20070810/CPAC

    John: I like the perspective of how engineering is crucial. To me, engineering is linked to a proven methodology which enables precise construction, robust scaling, and generally, quality work through documentation.

    During the past 11 years, I have seen countless software projects where the business suffers because at one point, somebody thought it was a brilliant idea to 'save' some money by hiring programmers instead of a software engineer. Well, in SEng., it is much more costly to update and maintain software than to build it initially. So, in fact, the proper business decision in this case is to invest early in an engineer.

    As for NDAs, I think they're necessary. There are people whose ethical sensibilities are so inexistent that they would take your idea and use it without flinching.

  • http://www.instigatorblog.com Ben Yoskovitz

    Josh – NDAs are never going to work with most investors (angels or investors.) If you think someone’s ethical sensibilities are so low, you shouldn’t be showing them your idea in the first place.

    Most investors won’t have the capacity to steal ideas anyway…so do away with the NDAs.

    And if they REALLY wanted to steal something, they could and would anyway, even with an NDA. You’re unlikely to catch them, and even if you did, you’re unlikely to have the means to chase them down legally.

  • http://www.yashlabs.com/wp Josh Nursing

    Thanks for the feedback, Ben. I do know that many investors refuse NDAs.

  • http://www.instigatorblog.com Ben Yoskovitz

    Josh – It’s just a fact of life when it comes to working with investors.

    My suggestion: Reference check investors. It’s not that hard to find out what they’ve invested in, talk to other people about them, etc. – especially in a smallish city like Montreal…

  • http://www.instigatorblog.com Ben Yoskovitz

    Josh – NDAs are never going to work with most investors (angels or investors.) If you think someone's ethical sensibilities are so low, you shouldn't be showing them your idea in the first place.

    Most investors won't have the capacity to steal ideas anyway…so do away with the NDAs.

    And if they REALLY wanted to steal something, they could and would anyway, even with an NDA. You're unlikely to catch them, and even if you did, you're unlikely to have the means to chase them down legally.

  • http://www.yashlabs.com/wp Josh Nursing

    Thanks for the feedback, Ben. I do know that many investors refuse NDAs.

  • http://www.instigatorblog.com Ben Yoskovitz

    Josh – It's just a fact of life when it comes to working with investors.

    My suggestion: Reference check investors. It's not that hard to find out what they've invested in, talk to other people about them, etc. – especially in a smallish city like Montreal…

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  • http://www.buzzboston.wordpress.com rem

    Now that Boston has been beaten over the head by so many bloggers regarding that “east vs. west” thing, we are starting to see some results.
    http://www.ycombinator.com/
    http://www.webinnovatorsgroup.com/
    http://www.techcocktail.com/blog/
    http://www.betahouse.org/
    http://www.warnerresearch.com/
    http://www.cambridgeincubator.com/
    OpenCoffee Boston and start up meetups are just a few of the efforts to get the web 2.0 momentum humming here in theHub. I think the entrepreneurs are doing their part, hopefully the angels and VC’s will follow suit.

  • http://www.buzzboston.wordpress.com rem

    Now that Boston has been beaten over the head by so many bloggers regarding that “east vs. west” thing, we are starting to see some results.
    http://www.ycombinator.com/
    http://www.webinnovatorsgroup.com/
    http://www.techcocktail.com/blog/
    http://www.betahouse.org/
    http://www.warnerresearch.com/
    http://www.cambridgeincubator.com/
    OpenCoffee Boston and start up meetups are just a few of the efforts to get the web 2.0 momentum humming here in theHub. I think the entrepreneurs are doing their part, hopefully the angels and VC's will follow suit.

  • http://www.instigatorblog.com Ben Yoskovitz

    @rem: Thank you for the links.

    OpenCoffee interests me. I started an “Entrepreneur Breakfast” in Montreal, but I’ve wanted to look at converting it to an OpenCoffee event for some time. I don’t think it would substantially change the event, but brand it a bit, and open Montreal up to the rest of the OpenCoffee community.

  • http://www.instigatorblog.com Ben Yoskovitz

    @rem: Thank you for the links.

    OpenCoffee interests me. I started an “Entrepreneur Breakfast” in Montreal, but I've wanted to look at converting it to an OpenCoffee event for some time. I don't think it would substantially change the event, but brand it a bit, and open Montreal up to the rest of the OpenCoffee community.

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  • http://www.afroginthevalley.com/ Sylvain Carle

    I agree with you Ben, we should use the OpenCoffee moniker in Montreal, but we might need the change the place for that… Laïka would seem to fit the bill as far as a place where you can more freely “come and go”… I just found out by looking at my archive that I was already reffering to our breakfast as opencoffee like a while ago – http://qurl.com/g2ns4

  • http://www.afroginthevalley.com/ Sylvain Carle

    I agree with you Ben, we should use the OpenCoffee moniker in Montreal, but we might need the change the place for that… Laïka would seem to fit the bill as far as a place where you can more freely “come and go”… I just found out by looking at my archive that I was already reffering to our breakfast as opencoffee like a while ago – http://qurl.com/g2ns4

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  • http://www.barketingmlog.com Jeff

    Awesome post. I see it’s been nearly a year since you wrote it, any thoughts on Montreal’s development since that time? Is the situation better or worse?

  • http://www.barketingmlog.com Jeff

    Awesome post. I see it's been nearly a year since you wrote it, any thoughts on Montreal's development since that time? Is the situation better or worse?

  • http://www.instigatorblog.com Ben Yoskovitz

    @Jeff: I think the situation in Montreal has certainly improved, but it’s still very early. Rome wasn’t built in a day. Neither was Silicon Valley for that matter.

    The positives are that we have more startups launching, and many of those are launching with considerable fanfare / buzz (which is good for the overall community.) We’ve seen an increase in events and participation – be it StartupCamps, DemoCamps, etc. And I’d say overall, there’s more activity.

    But, there’s still a long way to go. We still need more capital from angels and VCs. We still need a more tight knit community that doesn’t require specific events to allow for people to get together, brainstorm, mash up ideas and make things happen.

    So there’s definitely progress, and my gut tells me we’ll see a lot more in the next year.

    Thanks for stopping by and commenting.

  • http://www.instigatorblog.com Ben Yoskovitz

    @Jeff: I think the situation in Montreal has certainly improved, but it's still very early. Rome wasn't built in a day. Neither was Silicon Valley for that matter.

    The positives are that we have more startups launching, and many of those are launching with considerable fanfare / buzz (which is good for the overall community.) We've seen an increase in events and participation – be it StartupCamps, DemoCamps, etc. And I'd say overall, there's more activity.

    But, there's still a long way to go. We still need more capital from angels and VCs. We still need a more tight knit community that doesn't require specific events to allow for people to get together, brainstorm, mash up ideas and make things happen.

    So there's definitely progress, and my gut tells me we'll see a lot more in the next year.

    Thanks for stopping by and commenting.

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Ben Yoskovitz
I'm VP Product at GoInstant (acq. by Salesforce).

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it).

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