I was speaking to a startup that I help advise the other day when he told me something interesting – he told me that he saw a prominent “fund provider” speak and that person said that he would never consider funding a startup that was outside Silcon Valley. Im not sure why my knee jerk question to him in response was “is this person old?”. The CEO of the startup I was talking to said, “Yes, how did you know?”. Well the answer is, I’m not really sure. I am not age-biased or anything. In fact I enjoy soaking up the wisdom of those that have come before me (I learn a ton each day). However, I was irked by the comment from the “fund provider” and not sure why…
I have been on Wall Street for over 20 years. I have met with, covered, and advised more companies than I can possibly count. No matter what widget the company was making, I found that sometimes management got caught up in historical process, (ie doing what they’ve always done). There are likely several reasons for this: it’s what they know, it’s easy, incentives may be aligned to the old process, there is a fear of doing something new, or management just doesnt see the value in the “new way”. There may even be a neurological / scientific reason for repeating past behaviors – for example, the 15,000 synaptic pathways that a 3 yr old’s brain has is cut in half by the time one is an adult. That is because as we learn, some of our connections get stronger, while others get eliminated.
This may be why that fund provider said what he said – it’s just what he knows. However, with the amount of change in our industry, my guess is that this view will change over time. In fact the brain is capable of something called Structural Plasticity, which refers to the ability to actually change its physical structure as a result of learning. As leading companies like FourSquare, Tumblr, GroupMe, Gilt, StockTwits, etc lead innovation from a different geography than Silicon Valley, I think the industry’s old way of thinking will change. In fact, as a collective, our minds will experience this structural plasticity.
To me point, the NY tech scene happens to be hot right now and I think there are many reasons for this: bright people with traditional careers in banking are considering different careers, NY is filled with capital and investors, Madison Avenue is the advertising mecca of the world and many business models rely on advertising. In fact, recently it was announced that NY has overtaken Boston in VC funding. Also adding to the intrigue in NY is the new tech campus Mayor Bloomberg is seeking to develop with Cornell or Stamford, going as far as pledging $100m and use of land for the campus. Adding new talent to NY will only accelerate the the NY tech scene.
So, I remain perplexed by the fund provider’s comments. NY’s current and future tech scene seems so robust now and it’s only getting better. And finally, as I thought about it further, wouldn’t a Silicon Valley fund provider want to diversify their holdings to include NY companies – I mean, isnt’ diversifcation the idea of a “portfolio” of investments?
I think its just a matter of time till this thinking shifts. Keep an eye of for the impending Structural Plasticity of our industry – it’s going to happen….
– Robert Peck, CFA
President, CoRise Co. LLC