I'm anticipating that some people will misunderstand Brin's advice which is caused by 2 factors:
(1) Page and Brin started Google Inc successfully in SV so it seems contradictory to advise others not to start a company there
(2) the meaning of the word "start" as Brin is using it
As for (1), Larry and Sergey had the luxury of building Google (the product -- not the formalized "incorporated" Google Inc) inside of Stanford and therefore using the university's computers and bandwidth for free. Piggybacking on Stanford's resources to create an "mvp" was like getting "AWS" for free. A lot of startups don't have that situation. Therefore, a founder may be better off working out the parents' garage in Kansas to keep expenses low. The free room & board is money that would have been spent on a crappy apartment in SV. Instead take those savings and use it to pay for the AWS hosting costs, or a 2nd programmer.
For (2), I think Brin is talking about "start" as in start from zero with an idea on a paper napkin, before an MVP, and before traction from others (users and investors). Zuckerberg started Facebook in Boston and after Sean Parker got interested, he moved Facebook to the more expensive SV. Bill Gates started Microsoft in Albuquerque, New Mexico and made profits before he moved the company to the more expensive Seattle. In other words, you can have a "low profile startup" in your local town that's under the radar which lets you keep expenses very low. You can later have a "high profile startup" in Silicon Valley where the very high costs are worth it to hire from the talent pool and network with other entrepreneurs and investors. That delayed move to SV is what Brin called "that second step".
Brin's advice rings true to me. Silicon Valley has changed since Google started. It has become a tough place to bootstrap a company from scratch especially if you are focussed on getting to profitability at an early stage.
Expenses in Silicon Valley are high and show no sign of declining. Even more important it is hard to find qualified staff in SV who are interested in working on start-ups that don't have strong funding. Most companies therefore look for a somewhat lower cost place with qualified engineers and have done this for a while now. At some point you have to ask why not just put the whole company somewhere else.
I had a contract run out last fall and was surprised by the number of companies who have moved to Seattle and brought their tech stacks with them. It's got a broader reach than ever now, I think.
And your choice of neighborhood has relaxed a bit, if you hate commuting. Even the east side/west side split is breaking down (.Net downtown now, and Java in Bellevue)
Just out of curiosity is it easier in Seattle to meet the conditions I mentioned, namely keeping expenses reasonably low and getting qualified staff? Housing and technical employment currently look like seller's markets in Seattle.
For example, if you take numbers from comparison tools like www.numbeo.com cost of living in Seattle is not much less than SV locations like San Jose.
It's certainly getting worse. I get sticker shock in my own neighborhood now and I only bought 5 years ago.
But I do think it's possible to make half the salary in Seattle and still not spend 40+% of your income on housing. But I haven't rented in a while and I've heard it's getting harder.
The thing is that if you know how to live frugally, being in an expensive town for a while can work in your favor, as long as you promise yourself you'll take the money and run. If you meet Mr or Ms Right before you get out though you may well be in trouble.
when i moved back to seattle from LA a few years ago, rent in issaquah was on par with the nicer LA neighborhoods(brentwood, beverly hills, santa monica).
a nice apartment close to work in greater seattle area is 2.4 - 4k a month for a two bedroom.
buying will cost you $5k+ unless you are putting a big chunk down, and that just seems to keep going up without missing a beat.
i would say its not possible to take a 50% cut and come here, unless you want to spend a lot of time commuting or hearing lots of sirens at night.
I've always wondered how much of the money YC seeds to its founders eventually ends up in a landlord's pocket? $3000/month on a studio apartment. That's crazy burnout for a startup.
"So startups are just an inefficiency imposed on wealth transfer from VCs to landlords. What if someone disrupted the industry and connected VCs directly to landlords?"
Seems like VCs would do well to buy some housing. A few more years of rent hikes down the line, "far below-market housing" could be a seriously compelling employee benefit. Apartments big enough to raise a family in would do wonders for employee retention.
That doesn't make sense though. They could still provide the same benefit by renting the apartment and giving it to the employee. Unless you think VCs should be betting on real estate, because that's the only advantage - they get the upside if the property goes up in value.
Currently, VCs must fund salary increases to keep pace with rent hikes. Renting apartments for employees just shuffles the numbers around. VCs could buy their way out of exposure to this phenomenon by owning their employee's homes and not increasing the rent.
Yes, this is a bet on rising home prices in the Bay Area, but that seems basically equal to a bet on the Bay Area tech ecosystem, which is already their core business.
I dunno, maybe it makes sense, but there seems to me to be something incredibly demeaning about living in housing owned by your employer. Very....19th century. Is there a company store?
I've lived in 'man camps' on remote jobs where it was easier to just put up trailers for workers than put them all in hotels. Or sometimes there isn't any temporary housing options available so you get to stay in the man camp. Pretty sure programmers aren't going to fall into line for that option though.
This wouldn't be remote, though - there'd be a few dozen such company towns on overlapping geography. True, you'd need to move to change employers, but it could just be across the street.
> Seems like VCs would do well to buy some housing.
Incubators yes. But exchanging a place to stay for equity (as OP alluded to) is mostly in the realm of the show although it has happened a few times in real life as well...
The median rent on a 1-bedroom in SF has increased from $2500 in 2010 to $3600 in 2016.
I don't accumulate as much stuff as some do, but I'd say $12k/year in extra discretionary cash (not just throughput to a landlord) is more than adequate compensation for the risk of a cross-town move.
Sounds like company towns all over again. VCs could open their own stores and sell food and only accept their own currency. And they can pay you in their own currency so you don't have any exchange rate costs. Oh, until you want to get out.
Samuel Brannon established his tool monopoly by diverting church money and using thugs to keep out the competition. Once he made his money he lost it all in real estate speculation and a divorce.
A number of successful industries have owed a deal of their success to the fact that they slowly turned into real estate magnates. And not just their property but property around them.
Maybe that suggests that these incubators should be owning rather than renting. Your investment in property is generally going to be recoverable if you have to kick out a failed startup.
One of the richest people in Silicon Valley is John Arrillaga.[1] He bought farmland in Silicon Valley and began converting it to office space. About a square kilometer of building floor space.
Sorry, wasn't trying to bash Texas. Maybe I should have said "Dallas oil dynasty". I haven't seen, read or viewed anything from or with Marc after he left Netscape, so I can't comment on what he's doing these days. All I know is that he's part of a VC.
Yes, except the sale price will probably have a good portion of expected future rent increases "priced in". (I'm not saying you won't make any money at all)
I can't imagine a lot of it. At some point you make the conscious decision to quit your current job and work on your startup. If you've prepared financially for that joining YC shouldn't really change that. You're spending your own money on your own rent.
Granted, if you can't afford rent in SV you might want to reconsider joining a YC class. It's a tough decision for sure.
Brin built his company on a kind of ageism. Several kinds in fact.
So that he and his peers think that continuing to live like you did in college isn't that big of a logical leap when you consider that their interview process feels exactly like a final exam in college, despite the fact that you and I and indeed Google's own success stories know the difference between theory and practice.
Days when "ramen-profitable" meant you actually ate ramen are over. Now everyone jumped on the fitness bandwagon, and eating various types of salads & green stuff is hip. And also expensive - "natural"/organic food is a big business these days.
Well starting a business has traditionally involved personal risk and sacrificing lifestyle for future gains. Only recently and mostly in American tech has entrepreneurship been "give away control of your company as fast as possible so you can pay yourself a comfortable salary while you build a company for someone else."
I think that was targeted towards 20somethings that don't have a wife/kids yet. Obviously, a start-up with extra baggage is an entirely different ballgame.
The idea that you should make livestyle tradeoffs while making $140K+ a year is absurd. But the alternative, spending $4k a month on rent, is also absurd.
Not sure, I believe San Jose, but was talking with a guy last week who was looking into wireless service since he was in a broadband desert. He was shaking his head as I have Google, ATT, and CCI all competing for 1G/1G service in my area of KS.
People have taken your example and run with it, but as someone from Kansas, I implore you not to start a business in Kansas. The governor has run what little infrastructure existed into the ground. There is nothing for you there. I'd suggest somewhere like Austin, where taxes are sufficiently low, the city has a supply of tech workers, and the city has working infrastructure.
For now! I'm not a cheerleader for Phoenix (I've been once and had a pleasant visit), but I do think it's well-positioned given its anchor university's commitment to experimentation, weather, cost of living, and reasonably good access to outdoorsy activities.
Markets figure these things out. Not sure why people feel the need to convince markets / market participants, unless they somehow don't like the decisions that those have made.
Markets figure these things out in favor of what makes money. There is no guarantee that what does get figured out is of any benefit to the people living there.
I agree. Though, Kansas City, MO has a decent tech base (for the midwest) and you can still get much cheaper housing costs than anywhere in SV, or even Austin.
From a Machiavellian perspective, Google competes in hundreds of market niches with competitors constantly nipping at its heels. It certainly doesn't want more competition. Brin doesn't need a 5 man startup hurting Google, so he's politically motivated to give advice that benefits him best. That Kansas startup with zero dollars isn't a threat to Google, and makes for a cheap acquisition if they do develop something interesting or threatening. It certainly is a threat when its backed by SV money, can scale quickly, and isn't available to buy for peanuts.
I've always been skeptical of the whole "advice from billionaires" format. Brin isn't motivated to help startups the same way Warren Buffet isn't giving away hot stock tips or how Gates never gave the FOSS community an easy way to reverse-engineer the doc format. These people know how their bread gets buttered. Or simply have internalized protectionist attitudes and give away just enough to not be dangerous to themselves.
edit: I'm not necessarily projecting malice, but there are other reasons why "advice from billionares" is kinda a bullshit format. Brin may be out of touch or, if you read the source of the article, made an off-hand comment he probably doesn't worry about all night and is blown out of proportion by the 'give us the latest hot investing tip' crowd.
> I've always been skeptical of the whole "advice from billionaires" format.
Me too. But it's not like it's unfounded advice. The things you need to start a company (time, knowledge, morale) are all significantly more expensive, and therefor less accessible, in SV.
Clearly investors are biased to having someone nearby. Even HN forces you to temporarily move to SV. How do you overcome this bias in Kansas especially when your competitors are in SV and chatting up people and making connections?
The problem with "how I got successful" advice is, even when its honest, is fairly dependent on that one person's experience. Most success has more to do with getting lucky or being at the right place at the right time, than purely merit. That Kansas startup may have a lot of merit, but a less meritorious startup actively "working the room" in SV will have a strong advantage.
I suspect you'd learn more from the guy who had five failed startups in a row than the guy who hit a homerun on his first time to bat. Again, the "advice from billionaires" format is really a bizarre thing. Its the closest thing secular society has to the Delphi oracle and from what I can tell is usually borderline dishonest or just a lot of pleasantries/PR for said billionaire. It does get ad impressions though, so I imagine this is why we keep seeing this type of format over and over again.
Maybe Brin's advice made sense in the 90s but is questionable today. Or maybe he's woefully out of touch. Or maybe he's being dishonest. Or maybe its just a throwaway comment that he never really thought about too strongly and is being sold by the tech press as "The New Hot Tech Tip!" Unfortunately, its impossible to tell.
Could it be that now that Google is no longer able to retain staff through a no-poach collusion, its CEO is instead trying to discourage other businesses from setting up shop in a place where they might be able to hire developers away?
That's cynical, but I'd say we have the right to be somewhat cynical after reading those emails.
Excellent point. Another nail in the coffin for the "altruistic billionaire." Those poaching emails are one of the rare behind-the-scenes glimpses we get of the world that people like Jobs and Brin live in.
I would not be surprised if poaching concerns are foremost for the higher ups at these giant tech companies.
A five-man startup that competes with Google can be very simply mitigated by Google, though.
There is an advantage for a billionaire to help startups get better - someday they can acquire the talent, product, etc. Remember that acquisition is a form of recruitment, too.
You don't speak to this exactly, but Brin might as well just suggest to not start a company in California, which demands a lot of legal and tax paperwork to be done right from a business's beginning.
For tech companies that paperwork is really not that big a deal. First, you need to get tax and governance stuff right no matter where you start if you plan on taking funding later on. Second, basic company setup is kind of a wash between California and Delaware. (At least that's the advice I have gotten in the past.)
Complexity of basic company setup is low enough that it's basically a wash. Delaware has benefits later, due to legal environment and tax, but the main benefits of Delaware won't matter to you until you get big.
I'm sure free access to 1998 Stanford servers and bandwidth was nothing like getting AWS for free. And a lot of startups these days do actually get AWS for free -- or at least the first $100K.
>free access to 1998 Stanford servers and bandwidth was nothing like getting AWS for free.
I wasn't comparing 1998 Stanford technology to 2016 AWS as if it was apples to apples. The "AWS" was a modern analogy to give an idea of what they didn't have to spend money on compared to other startups. In 1997, if you didn't have a university to host your (potential business) website, what were the options? You could call up one of the IBM/HP/Origin managed data centers and have them rack some servers. But that costs money, and requires a contract, etc, etc.
When NCSA was bringing you the World Wide Web and the University of Illinois millions in NSF grants and industry partnerships, and accolades and thank you's from vice presidential candidate Al Gore, all the work was being done in the nearly windowless basement of the old Oil Chemistry Building.
The university charged NCSA for the privilege of occupying the tenth shittiest building on campus. And we joked about what other crappy building they'd gift us when they finally got around to giving us the space we had requested. Their definition of building us new space was to build a building for someone else and give us their hand me downs.
And of course they owned all the IP and charged a pretty big tax on all of the income. I'm fairly certain we brought in almost as much money as the football program (who got a stadium upgrade the same year class sizes were increased to save money).
I have no illusions of Stanford having a more generous program. All that free stuff isn't actually free.
You're not disagreeing with him. Thing is, even if you get AWS for free, you're better of minimizing your living expenses and spending that extra money on other aspects of your business to get it going.
(1) Page and Brin started Google Inc successfully in SV so it seems contradictory to advise others not to start a company there
(2) the meaning of the word "start" as Brin is using it
As for (1), Larry and Sergey had the luxury of building Google (the product -- not the formalized "incorporated" Google Inc) inside of Stanford and therefore using the university's computers and bandwidth for free. Piggybacking on Stanford's resources to create an "mvp" was like getting "AWS" for free. A lot of startups don't have that situation. Therefore, a founder may be better off working out the parents' garage in Kansas to keep expenses low. The free room & board is money that would have been spent on a crappy apartment in SV. Instead take those savings and use it to pay for the AWS hosting costs, or a 2nd programmer.
For (2), I think Brin is talking about "start" as in start from zero with an idea on a paper napkin, before an MVP, and before traction from others (users and investors). Zuckerberg started Facebook in Boston and after Sean Parker got interested, he moved Facebook to the more expensive SV. Bill Gates started Microsoft in Albuquerque, New Mexico and made profits before he moved the company to the more expensive Seattle. In other words, you can have a "low profile startup" in your local town that's under the radar which lets you keep expenses very low. You can later have a "high profile startup" in Silicon Valley where the very high costs are worth it to hire from the talent pool and network with other entrepreneurs and investors. That delayed move to SV is what Brin called "that second step".