In a breath-taking display of deja vu commentary (how many times were versions of this written in 1999-2000?) Randall Stross, a professor of business at San Jose State University, argues that the “20-minute rule” of tech venture funding still holds true: “if a start-up company seeking venture capital is not within a 20-minute drive of the venture firmâ€™s offices, it will not be funded.” His point: That’s why Silicon Valley is still the place to be if you want venture funding for your tech startup.
Does the Silicon Valley Chamber of Commerce make up this stuff?
Fred Wilson, a New York-based VC who invests in “web 2.0” deals, points out that 2/3rds of capital is being invested outside the Valley. Indeed, there is little statistical evidence in Stross’ commentary that supports his argument. However, it sure seems intuitive and easily backed up with quotes from Silicon Valley VCs and startups.
To me, this is just one more display of what I blogged about yesterday: homophily. That need we apparently have to hang out with others who believe and act and speak exactly as we do. And, apparently, to live near those same folks, as well. It’s a mythological, but comforting, belief to feel your chances of snagging easy VC money will increase if you move somewhere else. But the true research necessary to determine whether or not Stross’ premise is correct cannot be found in his essay. What are the actual odds of you receiving VC funding at all if your tech startup is in the Silicon Valley? Remote. Staggeringly so. However, what are your odds of getting Silicon Valley funding if your startup develops a a cult following but, oh-no, you’re based in, say, Chicago? Very high.
Fortunately, not every investment in the web is from VCs. Over the past couple of days I’ve been reading about the MacArthur Foundation funding a $50 million effort to study digital media over the next five years. One of the first “exploratory” grants went to a study that a team including Mimi Ito (Joi’s sister) is involved with to learn more about “digital natives” — those (like kids growing up today and old geeks who shall remain nameless) who have a more natural affinity with technology due to its ubiquity in their lives than those who have adapted technological tools but use them in ways they perceive as analogous to what they’ve learned in their analog world (I apologize for what I’m sure is a mischaracterization of their work, but I think I’m close).
I believe the best ROI on money being invested in the web will be by the MacArthur folks — rather than VCs throwing funds at companies they can reach in a 20-minute drive. (Talk about an analog world!) As much as I am a capitalist and business-focused, I find it more significant to seek an understanding of what’s taking place in our culture as we become more populated by digital natives, than to try to figure out how to make money from ajax-enhanced displays of user-generated-content, or whatever elevator pitch Michael Arrington will hear next week. Intellectuals like Ito will carry forward the foundational thoughts of others who have peered into the future and pondered where all of this is taking us: Marshall McLuhan, Teilhard de Chardin, etc.
As for me, I don’t know where all of us will lead us, but of this I am certain: Place is no longer defined by physical proximity. If someone chooses to limit ones reach to that which can only be driven to in 20 minutes, there is a world of opportunity and wonder outside his or her grasp.