Why Technology Startups Are Looking Beyond Silicon Valley

Silicon Valley has long been a Mecca for technological innovation and entrepreneurship. Before Google, Facebook and HBO sitcoms, the region gave birth to the microprocessor and served as an early hotbed for ham radio enthusiasts.

The Valley’s preeminence as the world’s technological proving ground has gone more or less unchallenged in the intervening years, but that’s starting to change.

From Silicon Alley in New York City, to Silicon Forest in Portland, to the Silicon Hills of Austin, Texas, entrepreneurs are increasingly looking beyond the Bay to set up shop. And they’re thriving.

“The reason Silicon Valley dominates is that it all started there historically and people just continued to flock there,” said Ben Fisher, co-founder and chief technology officer of CartHook, which is based in Portland. “It’s developed a culture as a place where people go to work on bold ideas and it has attracted that type of person. But you can create that environment anywhere.”

Ben Peterson, CEO of BambooHR, headquartered in Lindon, Utah, offered a starker appraisal of Silicon Valley, attributing its vaunted status to the “incorrect belief” that startups must be there to raise money.

“Burn [rate] is higher in Silicon Valley for multiple reasons,” Peterson said, “And, it likely isn’t the best place for most companies to begin.”

So where is? Perhaps the most honest answer is that location may not really matter anymore.

Fisher, who at one point spent six months living in San Francisco, now works from New York. His partner is based in Portland. Their lead developer lives in Slovenia and the company’s account manager hails from the Philippines.

Twenty years ago, Fisher admits managing a distributed team across three continents would have been impossible, but it’s relatively seamless today. Cloud computing, teleprescence and collaboration tools like Slack have made it possible to run a company from just about anywhere. And judging by the proliferation of newly minted “Silicon fill-in-the-blank” nicknames, a change of setting seems more than welcome in the entrepreneurial community at large.

Of course, companies still need to be headquartered somewhere. The old conventional wisdom was simple, if not arbitrary: just move to the Valley. But as that notion becomes increasingly dated, entrepreneurs are defining a new set of criteria for choosing a home city.

“Oftentimes, the best place to have your company is close to your customers,” Fisher said. “For example, the best place for a media startup might be in New York because many of their customers — TV networks, news agencies — are based there. If you’re launching a film-tech startup, L.A. might be the place because the film industry is there.”

Mike Karp, co-founder of New York-based DogStar, echoes that point.

“Fintech businesses have been doing extremely well here because New York has an amazing wealth of financial institutions, financial knowledge and financial talent right here in Manhattan,” said Karp, who earned his master’s in business administration from Cornell Tech in 2015.

Having grown up in Palo Alto — arguably the heart of Silicon Valley — Karp acknowledges the benefits of a well-established startup ecosystem, like greater access to capital and a larger talent pool. He even concedes that DogStar’s Tail Tracker, a wearable device for dogs, may have been easier to develop on the West Coast, where there’s a greater cache of hardware know-how.

Nevertheless, he’s quick to profess his love for New York, emphasizing that the same entrepreneurial spirit that shaped Silicon Valley over the course of decades is alive and well here. It just needs to be scaled up.

“We’re just at the beginning of this transformation to becoming Silicon Alley,” he said. “The ecosystem will continue to get larger and it will be easier to do something like DogStar.”

More than anything, that transformation will require committed leadership. For his part, Karp hopes to see his alma mater accomplish on the East Coast what Stanford has been able to accomplish on the West.

“Cornell Tech is just getting going. Once the campus is built on Roosevelt Island, that’ll be a game changer,” he said. “You’re going to start to see more people starting companies right out of the program. You’re going to see a lot more coming out of Cornell Tech.”