Santa Barbara Is NOT The Next Silicon Valley, Here Is Why

A version of this article originally appeared in Forbes.

I recently had the pleasure of connecting with author, investor and serial entrepreneur Brad Feld. The forum was an LA dinner hosted by the good folks at Cross Campus and was attended by about a dozen of Southern California's most active institutional investors.

During our discussion of Brad's book, Startup Communities, the subject of Los Angeles becoming the next "Silicon Beach" was raised. Although the term was used tongue-in-cheek, Brad made it clear that no town should aspire to become the next "silicon" anything. Rather, he believes startup communities should focus on establishing a unique identity, based upon their endemic, "energy, activities and innovations."

 

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Techtopia

A couple years ago, CNBC dubbed Santa Barbara "Techtopia," short for "technological utopia." I am one of Santa Barbara's biggest fans, so I won't argue with the utopia sentiment. However, the term always struck me as cheesy. As Brad points out, startup communities should rely on results, not silly names, to achieve notoriety.

Santa Barbara has solid startup roots, hatching a number of world-class tech startups during the past 15 years, including: ValueClick, RingRevenue, lynda.com, Commission Junction, FindTheBest, Expertcity (creator of GoToMeeting), Sonos, Eucalyptus, Software.com, QAD and RightScale.

In my recent conversation with Mark Suster on This Week In VC, I discussed some of the historical reasons why the Santa Barbara startup community is so vibrant. If you care to watch/listen to my comments regarding what makes Santa Barbara's startup community unique, you can do so in the video below (from about 2:45 - 9:40).

In a nutshell, we benefit from: (i) an aerospace legacy which trained thousands of world-class engineers, (ii) UC Santa Barbara's engineering school, ranked #11 in 2013 among public institutions, and (iii) one of the world's best climates, which attracts and retains talented, successful and affluent people who could live anywhere in world.

Leaders And Feeders

Brad advises that startup communities are best shaped by entrepreneurs, which he appropriately labels "leaders." He categorizes everyone else as "feeders." As you review this list of feeders, consider the relative health of your startup community and what can be done to bolster the effectiveness of your local feeders.

State & Local Governments - They are often well intentioned, but politicians are typically driven by the next election cycle and are thus ill equipped to perform the long-term planning required to appropriately foster a startup community.

Universities - Students are the most important aspect of University feeders, with professors a distant second. Brad believes that much of the innovation that occurs within an academic setting occurs outside of the business school.

His theory is consistent with many of the points raised in Why Entrepreneurs Hate (Most) MBAs. All too often, business students passively wait for innovation to fall into their laps, rather than exploring labs and computer science departments in search of promising advancements.

Investors - This group too often forgets that the entrepreneurs are the heroes of any startup community. Although local, value-added capital is certainly a catalyst within a startup community, local investors are not the community's lifeblood. Great ideas coupled with competent entrepreneurs will attract sufficient capital, as exemplified by AngelList's ability to match investors with great opportunities, the world over.

Mentors and Advisors - Brad makes a distinction between these two groups, noting that "an advisor has an economic relationship with the company" she is helping, whereas mentors do not. Successful mentors "give before they get" - a theme which resonates throughout Startup Communities.

Service Providers - These folks are typically over-represented at startup events: lawyers, accountants and the dreaded consultants. Brad suggests that the formula for success for service providers is consistent with that of mentors - give of your time, attention and creativity freely and good things will follow, such as an equity slug in a hot startup.

Large Companies - Successful, established companies can contribute to a startup community by sponsoring and hosting entrepreneurial events and allowing their executives to mentor aspiring entrepreneurs. Such activities are not altogether altruistic, as allowing their employees to vicariously share in the excitement of startups will reduce the number who become bored and leave the big company to pursue an entrepreneurial venture.

Danger Will Robinson, Danger

Brad also highlights pitfalls he has seen repeated in the various startup communities he has visited. I found this list particularly instructive, as avoiding these common errors can jumpstart a nascent community, while running afoul of them may doom it. Some of the pitfalls I found particularly instructive include:

Patriarchs Ain't Your Daddy - Brad characterizes this challenge as the "old white-guy problem" in which a hierarchy of older, successful people is looked upon by the rest of the business community to "run the show."

Solution: Ignore the old guard and operate autonomous of any such hierarchies.

Newcomers Ain't Strangers - As the saying goes, "In a small town, you are no longer a stranger after 20 minutes, but you're still a newcomer after 20 years." Brad cautions against this mentality, encouraging leaders and feeders to reach out to new entrants to their startup communities.

Solution: In Santa Barbara, there is an unofficial "welcoming committee" of entrepreneurs who help newcomers become networked within our startup community. Step up and informally create such a welcoming committee in your hometown.

Incubating And Accelerating Success

Not surprisingly, Brad includes a chapter in Startup Communities regarding the appropriate roles of incubators and accelerators in a startup community. Brad and I discussed this lively topic when we chatted last year. You can hear Brad's thoughts in the following seven-minute excerpt from our discussion.

Brad elaborates on our discussion by encouraging startup communities to create accelerators and incubators that support all four tenets of the Boulder Thesis:

1. Entrepreneurs are the leaders

2. Leaders have a long-term view

3. Startup community is inclusive

4. Startup community consistently hosts activities that engage all members

Whether you are a real or an aspiring leader or feeder within your startup community, I strongly encourage you to use Startup Communities as your playbook.

Follow my startup-oriented Twitter feed here: @johngreathouse. I promise I will never tweet about "silicon anything" or that killer burrito I just ate.

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John Greathouse is a Partner at Rincon Venture Partners, a venture capital firm investing in early stage, web-based businesses. Previously, John co-founded RevUpNet, a performance-based online marketing agency sold to Coull. During the prior twenty years, he held senior executive positions with several successful startups, spearheading transactions that generated more than $350 million of shareholder value, including an IPO and a multi-hundred-million-dollar acquisition.

John is a CPA and holds an M.B.A. from the Wharton School. He is a member of the University of California at Santa Barbara's Faculty where he teaches several entrepreneurial courses.


Note: All of my advice in this blog is that of a layman. I am not a lawyer and I never played one on TV. You should always assess the veracity of any third-party advice that might have far-reaching implications (be it legal, accounting, personnel, tax or otherwise) with your trusted professional of choice.





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