Kirsner didn't explicitly mention this, but notice here that it wasn't another VC that invested in the deal Battery passed up, but an angel. Angels are a lot bolder than VCs.
The big difference between Silicon Valley and Boston in my experience is that the valley has more and much bolder angels. The VCs in the two places are similar. Boston VCs have a bit less testosterone than valley VCs, but it's not a huge difference. The real difference is the angels. And unfortunately for Boston, angels are the deciding factor in how big a tech hub a city becomes.
Which brings me to a question I have always wanted to ask... If a startup already has Angel funding, is there any additional advantage to be derived from moving out west?
Advantages: more hackers, more angels(you can always get more funding, right?), more partnership opportunities, warmer weather, not everyone wheres a Red Sox hat, Arnold will be your governor.
Disadvantages: more expensive, have to build a new network, expensive to move(both time and money), Arnold will be your governor.
Yes. For one thing, it's probably not the last funding you'll ever raise. Plus there are other advantages to being in a startup hub, and SV in particular, besides the investors.
If nothing else, it's an amazing distribution opportunity. People are building simple little apps and getting millions of users practically overnight (and making a surprising amount of money!).
How much money are we talking? I was under the impression that writing facebook apps is not really a way to make money. After all it's not a simple task to incorporate adverts.
People on google are looking for stuff. They'll click on ads if it looks like they'll find the stuff.
On facebook people aren't looking for stuff. They're looking for interactions..... with other humans.... not with adverts.
Sure, if you can build a big app and then sell it to a company that just wants to 'brand' it and get some exposure that's cool, but I'm pretty skeptical you can make a 'surprising amount of money'. Care to share some examples?
I think I probably would've passed on giving The Facebook money at a $15 million valuation during that first year. The article notes that the user base was in the small thousands, so not so much evidence that it had any traction. And there were certainly competitors as well (some of whom actually had a better feature set). Not to mention the whole uncertainty of deriving revenue from the site, an issue Facebook's still dealing with today.
edit: I missed the latter part of the article. It indicates that Thiel chipped in in half of Zuckerberg's "minimum," for well short of his proposed valuation to Battery.
1000-2000 users and a $15 million valuation? That seems pretty overpriced to me: even if you could see a positive future, FB's success outside the Ivy league crowd was no means guaranteed.
It's worth noting that Peter Thiel later put in $500,000 for 10% of the company, which would value FB at around $5 million, and that was a few months later.
I found the article disappointing; the headline and lead promised a story about why, in general, the Valley is attracting startups away from Boston, but the article was a story about Facebook in particular.
I suspect even had Facebook gotten early funding from someone in Boston, they would've moved out to the Valley (or at least the west coast) for the same reasons many YC companies do. This is mostly a story about Battery losing a potentially good payoff, not a story about Boston losing its one chance to have a young software startup stick around.
It would depend on how much they raised. YC companies are unusually mobile. Most haven't raised enough to hire anyone, and it's employees that tie you down. Few companies move after they have 20 people, unless they get bought. So if FB had raised enough to hire that many people in Boston, odds are they'd still be here.
The big difference between Silicon Valley and Boston in my experience is that the valley has more and much bolder angels. The VCs in the two places are similar. Boston VCs have a bit less testosterone than valley VCs, but it's not a huge difference. The real difference is the angels. And unfortunately for Boston, angels are the deciding factor in how big a tech hub a city becomes.