Published in UT San Diego, October 28, 2013
Rule No. 326
A friend of mine has a nice, classic startup. He has raised a million dollars and built the platform, and now has customers and revenue. So he starts to look for some more dough in order to scale, and the first meeting is with some “tangential venture capitalists” in Silicon Valley.
A tangential VC is someone who has no money himself, but is “friends with, or has a cousin whose brother-in-law has an ex-wife who had lunch with or once stood in a line next to or near either Peter Thiel or Marc Andreessen” — and thus believes that he is fully qualified to point out the 129 weaknesses in my friend’s deck and business model as well as the fact that he is not wearing a proper hoodie.
And then the expert tells my friend, “You will never get a tech multiple with your company. You are not located in the Valley.”
In other words, San Diego is not only geographically undesirable, but merely by living in this burg, you are giving up hundreds of millions of value, which would be yours if you only lived closer to the heart of the “real technology world,” aka San Francisco.
This geocentric view of the world has never been better described than in the recent New Yorker article “Bay Watched,” by Nathan Heller. San Francisco is so hot and rife with “urban, tech, hippies” that my own personal fantasy is that in a couple of years, all the startups in the world will implode as there will be no one to do the work at the companies because everyone will be a “founder” or a “seed investor.”
San Francisco is awash with young people who seemingly have only a marginal grasp on personal economic reality — in other words, no one can figure out exactly what they do or how they make a living. They blog, they create salons, they drink coffee, they tweet, they sit on boards of their friends’ companies and their friends sit on other boards. They network and yes, the one thing they all do — they consult!
Gimme a break. San Francisco is not the only city that has a bunch of unemployed consultants. If that is what it takes to be the center of tech — well, baby, we do not have to take a back seat to anyone. And, of course, they meditate. A statement of success is to take some time to do a little “ohming.” This demonstrates that you are a high-achiever and do not need to work that week. The Valley ethos includes “creative, mindful living,” which reminds me of Esalen 40 years ago or “The Kandy-Kolored Tangerine-Flake Streamline Baby” by Tom Wolfe. Isn’t it time for someone to yell “Bull ____? Enough!” Just go to work, and grind it out.
I am sick, sick, sick of the Valley arrogance. I am fed up with the mantra that you can’t build a big company in San Diego. “I am mad as hell and I am not going to take it anymore.” We have money and brains in San Diego. We are not a wasteland that only exists as a stepchild, as an incubator to the parents of power in the Valley who with a wave of their wand will anoint your company with money — and then insist you move north.
The average VC fund in the Valley has barely broken even over the past decade. The VC business model, to quote Fred Wilson, “is losing buoyancy.” Who talks like this? I race a sailboat, and if I lose buoyancy, I sink.
And to top it off — do you know where the really hot geography is right now? It is not the Valley. Famous VC Tim Draper, says, “like, Estonia is taking off right now.”
Tell this to Southwest Airlines. It is serving the wrong market. (Imagine being in one of those seats for 14 hours.)
I know this column is a rant, and I will not apologize for being a booster for the STEM communities in San Diego. No more time on the shrink’s couch. People, we need to be done with feelings of inadequacy or embarrassment for living here.