Can You Buy a Silicon Valley?  Maybe.

A lot of cities look at Silicon Valley and ask "How could we make something like that happen here?" The [organic](siliconvalley.html) way to do it is to establish a first-rate university in a place where rich people want to live. That's how Silicon Valley happened. But could you shortcut the process by funding startups?

Possibly. Let's consider what it would take.

The first thing to understand is that encouraging startups is a different problem from encouraging startups in a particular city. The latter is much more expensive.

People sometimes think they could improve the startup scene in their town by starting something like [Y Combinator](http://ycombinator.com) there, but in fact it will have near zero effect. I know because Y Combinator itself had near zero effect on Boston when we were based there half the year. The people we funded came from all over the country (indeed, the world) and afterward they went wherever they could get more funding—which generally meant Silicon Valley.

The seed funding business is not a regional business, because at that stage startups are mobile. They're just a couple founders with laptops. \[[1](#f1n)\]

If you want to encourage startups in a particular city, you have to fund startups that won't leave. There are two ways to do that: have rules preventing them from leaving, or fund them at the point in their life when they naturally take root. The first approach is a mistake, because it becomes a filter for selecting bad startups. If your terms force startups to do things they don't want to, only the desperate ones will take your money.

Good startups will move to another city as a condition of funding. What they won't do is agree not to move the next time they need funding. So the only way to get them to stay is to give them enough that they never need to leave.

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How much would that take? If you want to keep startups from leaving your town, you have to give them enough that they're not tempted by an offer from Silicon Valley VCs that requires them to move. A startup would be able to refuse such an offer if they had grown to the point where they were (a) rooted in your town and/or (b) so successful that VCs would fund them even if they didn't move.

How much would it cost to grow a startup to that point? A minimum of several hundred thousand dollars. [Wufoo](http://wufoo.com) seem to have rooted themselves in Tampa on $118k, but they're an extreme case. On average it would take at least half a million.

So if it seems too good to be true to think you could grow a local silicon valley by giving startups $15-20k each like Y Combinator, that's because it is. To make them stick around you'd have to give them at least 20 times that much.

However, even that is an interesting prospect. Suppose to be on the safe side it would cost a million dollars per startup. If you could get startups to stick to your town for a million apiece, then for a billion dollars you could bring in a thousand startups. That probably wouldn't push you past Silicon Valley itself, but it might get you second place.

For the price of a football stadium, any town that was decent to live in could make itself one of the biggest startup hubs in the world.

What's more, it wouldn't take very long. You could probably do it in five years. During the term of one mayor. And it would get easier over time, because the more startups you had in town, the less it would take to get new ones to move there. By the time you had a thousand startups in town, the VCs wouldn't be trying so hard to get them to move to Silicon Valley; instead they'd be opening local offices. Then you'd really be in good shape. You'd have started a self-sustaining chain reaction like the one that drives the Valley.

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But now comes the hard part. You have to pick the startups. How do you do that? Picking startups is a rare and valuable skill, and the handful of people who have it are not readily hireable. And this skill is so hard to measure that if a government did try to hire people with it, they'd almost certainly get the wrong ones.

For example, a city could give money to a VC fund to establish a local branch, and let them make the choices. But only a bad VC fund would take that deal. They wouldn't _seem_ bad to the city officials. They'd seem very impressive. But they'd be bad at picking startups. That's the characteristic failure mode of VCs. All VCs look impressive to limited partners. The difference between the good ones and the bad ones only becomes visible in the other half of their jobs: choosing and advising startups. \[[2](#f2n)\]

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