Silicon Valley: It’s Not the Garage, Stupid!
By: Carlos De La Lama-Noriega
Tags: Silicon Valley, Startups, VC, Coliving

The HP garage in Palo Alto

Silicon Valley: It’s Not the Garage, Stupid!

Many cities around the world have tried replicating Silicon Valley as an innovation hub. They find fancy names for their ecosystems: Málaga Valley, Silicon Beach, or Silicon Roundabout. None of these garages have led to tech giants of the same caliber we’ve seen in SV.

Countless words have been written, seeking to find the secret to Silicon Valley’s unique success, the most common being Stanford University and its brilliant students; Sandhill Road and its VCs lined up to pour massive capital into said students’ ideas; and garages, large innovative corporations like Intel, Cisco, and the like. All share a mindset of embracing failure as part of the learning process… While other systems replicated the mindset, all of them have failed consistently.

Something is missing in the formula, a secret sauce out of plain sight. I remember when I first thought about traveling to Silicon Valley. I had to a map just to see where it was located. Was it in Berkeley? How far away is San Francisco from San Jose? From all the cities in between, where should I stay? How much would my stay cost per week? Should I stay in Sunnyvale? (hint: Don’t).

What is Silicon Valley’s Secret?

But other than the boring logistics, which kept me reading for days, I vividly remember a dream of living with other driven people in a hacker house. I wanted to meet the famous garage-born Silicon Valley tech entrepreneurs. I naively assumed that there was a breed of native Bay Area entrepreneurs. I assumed people born and raised in the Bay Area knew so much more about startups, and I wanted to learn via association.

I can’t express my excitement when I thought about meeting these superhuman entrepreneurs; I would, at last, find my tribe. At the same time, I was pretty worried about rejection due to my obvious lack of experience.

Silicon Valley entrepreneurs?

Of course, what I learned was almost the opposite. There is no such thing as a “Silicon Valley native entrepreneur,” or at least, they are a minority. It’s the entrepreneurs from all around the globe that make up the Valley. They pack their stuff and move to the Bay Area as artists did five centuries ago when they moved to Florence for inspiration and camaraderie.

So, one day while thinking about what makes Silicon Valley unique and why it’s so difficult to replicate, it hit me: “it’s not the garage, stupid!”

The tip of the iceberg

When referring to the garages as a critical element of the Valley, it becomes romanticized and spread without much basis, in fact. HP indeed started in a garage, and you can still walk around Palo Alto and visit it from outside. And sometimes, if you’re lucky enough, it might be open for visits. My daily routine was to walk by, changing my route only slightly so I could feel inspired.

But, here’s the thing — the garages are a consequence of something not that obvious: entrepreneurs living together. To save housing costs, they are forced to maximize occupancy and share the rent. As the Valley is a global magnet, there is a tremendous amount of diversity, all of them hungry to change the world. But as packed as the houses are, oftentimes, the only space left to set an office is… you guessed it, the garage.

So, when talking about the HP garage as a key element to SV success, we’re just scratching the surface and overlooking the real reason why garages are essential — even today. Remember, these garages were soon-to-be companies that were formed organically because of resource-limited entrepreneurs. They had to scrape by and eke out existence where they could, and this meant sharing a tight space.

That’s why I started my own hacker house

I lived this situation myself when I moved to the Valley for my first startup: Yabo Inc. The cost of living was so high that my only option was to sublet the extra bedrooms we had in our rental house. Thankfully, I experienced this from my time living in the era’s best hacker house: Blackbox Mansion.

Blackbox Mansion in Silicon Valley

But I didn’t want just anyone to share our space with us; they had to be entrepreneurs. That’s how Startup Embassy was born. It was a matter of finding my tribe. This was seven years in the making, but at the time, it was still challenging to capture in words. If you need help explaining the drive for coliving to friends, have them watch the Silicon Valley HBO series where a group of entrepreneurs share a house in Palo Alto and start a company. The antics are funny, but I promise you, real life is often weirder than fiction.

The Coliving Secret in Action

Two thousand entrepreneurs from ninety countries have lived at Startup Embassy, sharing rooms (sometimes beds) with us. There are so many anecdotes I wouldn’t even know where to start. But I can say that the best part of every day was after 7 pm when people would gather around the kitchen to cook and have dinner. Long conversations went for hours, often until well past midnight. Strong friendships formed, and some of those entrepreneurs ended up being accepted into top startup accelerator programs like YCombinator, Techstars, 500 startups, Launch accelerator, and many others. Many were named Forbes 30 under 30.

Two thousand entrepreneurs from ninety countries have lived at Startup Embassy, sharing rooms (sometimes beds) with us. There are so many anecdotes, I wouldn’t even know where to start, but I can share with you my favorite part of the day. After 7 pm, people would gather around the kitchen to cook and have dinner. Long conversations went for hours, often until well past midnight. Strong friendships formed, and some of those entrepreneurs were accepted into top startup accelerator programs like YC, Techstars, 500 Startups, Launch Accelerator, and many others. Some were even named in Forbes 30 under 30.

Accolades like those are great, but I loved watching startups merge; when someone was so inspiring, they would draw a roommate into their plans. That happened with Mashgin Inc. and others. Honor guests (ambassadors we call them) are Matternet, Fellow AI, Shapescale, Mashgin, Spray Printer, and many, many others. Collectively they have raised more than $700M, and most arrived when they were at the idea stage.

Dinner at Startup Embassy

Not everyone loves hacker houses

You may be wondering if local landlords were okay with all of this — they weren’t.

I found that out myself when I first tried to rent a house for my team. The conversation with the realtor went something like this:

Realtor: “So…ahem, yeah, so you want to have your team working from the house, right?”

Me: [excited, this is Palo Alto, Silicon Valley!]: “Yes!”

Realtor: “Ok, so, how many of you will be there?”

Me:[ trying to look professional and hiding the fact that I was planning on bringing more people to lower my costs]: “Ehm, we’ll be a team of four.”

Realtor: “And how many cars will you have?”

Me, puzzled: “I don’t know, two?”

Realtor: “You see, this is a quiet neighborhood, and people don’t like to see an increase in traffic. I’ve watched Facebook’s movie, and I’ve seen what they did to the house…”

Me, thinking: “Fuck. No way I’m getting a house, and my team arrives next week!”

The Hacker House Dark Side

Spaces like these have been traditionally called hacker houses. They’ve been around forever, and like in nature, they have life cycles. As entrepreneurs seek financially friendly spaces to focus on their startup, hacker houses form. Then, as they inevitably succeed or fail, the houses die off as new companies emerge. The cycle continues.

Once the entrepreneurs raise capital and start hiring people, they move on to larger spaces that are better suited to run a company (and to live!). If they fail, they leave and close the space. Nobody wants to run these houses for the sake of running them. If they do, most become opportunistic businesses, and their tactics are predatory, often skirting legality.

To be blunt, these opportunistic coliving operators don’t give a damn about the people inside, don’t “get” the startup world, and are just there to profit off of people already struggling. They’re driven by money and just money; therefore, costs are minimized at the expense of their guests’ experiences, ending in horror stories. I’ve seen my fair share and will update you in future posts, so you know what to look for.

All amazing stories have a dark side; in this case, these self-centered businesses have unfortunately made the term “hacker house” quite negative. Fortunately, it’s been rebranded to coliving, and I have both a better term and support for my passion. So, let’s focus on the bright side: properties with authentic, helpful, and exclusively entrepreneurial communities.

My Proposal and Why It Was Successful

I want to raise awareness that the startup community should switch their focus to hacker houses, not garages, as they explain and replicate Silicon Valley.

What I’m proposing here is the use of these coliving spaces as high-performance centers for entrepreneurs. We’ve done the same thing for driven athletes with gyms, arenas, and other programs that connect good sportsmanship with a broader network. If the global startup ecosystem wants to democratize Silicon Valley, it needs these dedicated spaces.

Yes, to replicate SV, you need capital. You need business angels, VCs, incubators, and accelerators. We’ve seen all of these factors come together before, but there’s one thing missing that will bind it together.

Mama Carlos says

Go start an affordable coliving space for entrepreneurs in your city if you want to connect the ecosystems, increase diversity, or want real innovation, essentially, if you want the abundance of Silicon Valley.