On the successful model of Silicon Valley

Abstract: Editor's note: Sam Altman an article about Silicon Valley's success model: Why Silicon Valley Works, but in the FT read this article to charge, so he put it on his homepage. The natural state of startups is to die,

Editor's note: Sam Altman wrote an article about the success of Silicon Valley: Why Silicon Valley Works, but he had to pay for the article on ft, so he put it on his homepage.

The natural state of startups is to die, and most startups need a lot of miracles in the early stages to escape this fate. But the density and breadth of human networks in Silicon Valley do sometimes allow startups to cheat death.

Silicon Valley works because there are a lot of people who are committed to entrepreneurship and they tend to help each other. Other technical centers also have this feature, which is also an example of "Metcalfe Law": The utility of a network is proportional to the square of the number of nodes in the network. There are many more network nodes in Silicon Valley than in the area.

One of the biggest misconceptions about us is that you have to have relationships in advance to get value from the Web. Obviously, you don't have to! If you are creating something good, there is a natural person to help you. Usually you can turn to someone you just met, and they usually don't mind if you're not annoying.

The YC I'm running now is a bunch of start-up and a lot of advice, and we do two batches a year. The reason our network works is that it has strong links. The founders of startups are usually closer to the early investors and less close to the investors. The first to fight with their own partners is the most iron. As a result, the founders of YC are willing to support each other, and sometimes the help is to become a customer or to invest, sometimes as a referral, sometimes as a suggestion and an investment link, but usually it's just mental support.

I often ask the founders what surprises them most about YC's experience, and the usual answer is that YC is, to some extent, a "meta-company". Yes, about 700 YC-hatching companies are already independent legal entities, but the links are so tight that all companies get a lot of benefit from helping each other. Most founders tell us that they get more help from other founders than their friends, consultants and investors in their own company. Most of them are willing to try the YC company's products first when they choose to use a product.

This is the future I see-many independent companies are free to join together.

I often ask a question how to replicate the success of Silicon Valley elsewhere. Most people realise that the world of startups benefits greatly from the network effect, and that it is almost impossible to replicate the necessary network densities elsewhere. However, my experience is: if there are thousands of people and reasonable funds, replication is feasible.

I think there are two other things: a region of aspiring people who are most concerned about entrepreneurship and technology, and a focus on long-term rewards. Most cities have a dominant field: New York is Finance, Washington is politics, Los Angeles is a movie, and San Francisco is a start-up. It would be hard to replicate the Silicon Valley if it came second.

In Silicon Valley, it is also important to focus on long-term gains. Almost everyone wants to be rich, but they are willing to wait. Spending isn't that cool, and few people are driving a Ferrari and talking about their vacation homes. Unlike in many other cities, most of them are concerned about this year's cash compensation, and in Silicon Valley, people are more concerned about equity than salary (of course, I have to assume that they can afford to live almost out of control, which is probably the biggest failure of Silicon Valley now). The key to creating a company that has a huge impact is to make long-term gains at the expense of short-term costs – because it takes a long time for such a company.