Why NYC Is Better For Tech

Silicon Valley isn’t “Building” because the high priests, despite the lip service they pay to innovation in blog posts, haven’t been practicing the religion they’ve been preaching.

A day before the NBA postponed all games and coronavirus, a friend of mine and I were out in Silicon Valley at a mixer put on by an investor. We both lived full-time in NYC but were out for fundraising. My friend was a successful tech founder, had a 50M+ exit for his brand name VC investors, and he was starting another company and already had 1M+ in commits. I am the founding CEO and executive Chairman of Mozio, which was at the time (pre the necessary COVID furloughs) a profitable 75 person travel & transportation company with clients like Hertz and AMEX. Three days earlier I had just begun the fundraise for the next business I had been incubating for a couple years, Maxwell, a new type of social club, which we promptly postponed the next day.

I was unaware, as a 5-times-rejected YC applicant (this will serve as the opposite of the not-so-humble-brag silicon valley “disclosure”), that YC demo day was a day away, but most of the founders at the mixer were YC founders.

I coincidentally ran into a VC I had just pitched a few hours before who had seemed fairly interested. I asked him, now that we had a drink in us, how likely was his firm to actually invest in ANYTHING in the next couple months considering what seemed like perilous times ahead. He admitted that likely they’d only be investing in YC companies and were battening down the hatches. After some brief chit-chat he leveled with me, “I’m sorry, I don’t mean to be rude but I’m trying to court some of these YC companies.”

My friend and I spoke to each other as we saw VCs suck up to wet-behind-the-ears YC founders with b2b SaaS sales startups. The only people who spoke to us were ironically those wet-behind-the-ears founders — they seemed to be the only ones to value our experience, making sure to connect on LinkedIn, etc. It was kind of adorable actually.

But I was doing something with physical space post-WeWork implosion. My friend was manufacturing an actual product. The minute we mentioned it investors seemed to tune out.

As I was eating I saw the VC who planned the meet-up, and who had also shined me on several times the minute he heard I wasn’t YC, leave to meet with a group of what could only be described as an HBO-Silicon-Valley-approved group of guys, go upstairs, apparently consummate some sort of investment, and then come back down.

My friend and I kind of rolled our eyes at each other and laughed and decided to at least take advantage of the free food before we caught our red-eye back to NYC.

Silicon Valley Has Its Own Cool Kids Now

Silicon Valley has lost its weirdness and has settled into its own set of cool kids.

If you have a B2B SaaS startup you are certainly sitting at the cool kids table. Various trends (AI, Virtual Reality, Cybersecurity, Remote work as of a month ago) are invited to the cool kids table intermittently. If you are not part of this group, good luck.

Silicon Valley disparages credentialing while replacing Harvard and Yale with YC. Silicon Valley prizes innovative thinking while having a disproportionate amount of funds that just follow onto ONE investor (YC) (yes, some as their actual stated policy, not just implicit).

Top VC firms push all their risk onto unknown seed firms and angel investors, waiting longer and longer to invest in world changing companies the more famous their firm gets.

And we apparently now take paparazzi shots of our stars getting out of cars!

Now, these things ebb and flow. The “Silicon Valley is Dead” narrative is well worn. The Axios article below says the Bay Area has had a lowest percentage of investment compared to the wider nation since 2013, and I’m aware that means at one point 7 years ago it was this low again, and it rose again, so really, what’s the big deal?

And I’m also well aware that VCs just having an investment thesis that doesn’t agree with mine is part of being an entrepreneur.

But more and more I see everyone in the Bay Area have some version of the SAME investment thesis.

Groupthink: You Either Die A Hero Or You Live Long Enough to Become the Establishment

I did this great exercise on ncase the other day about the wisdom vs madness of crowds. I highly recommend tinkering with it if you have the time.

The conclusion is simple — when things get too networked, you get groupthink.

Too many people looking at each other and asking each other “is this cool?” prevents anyone from being daring enough to say “this is cool!”

You either die a hero or you live long enough to become the establishment and stifle new ideas in favor of boring groupthink tech VC bullshit.

Andreesen’s “It’s Time To Build”

I was reminded of this with Marc Andreesen’s call that It’s Time To Build things — in it he talks about how we don’t have a vaccine despite years of advanced notice, we don’t have the ability to get federal bailout money to people who need it ASAP.

“We should have gleaming skyscrapers and spectacular living environments in all our best cities at levels way beyond what we have now; where are they?”

I find it to be the height of hypocrisy for an asset class in a geography that largely refuses to get its hands dirty to lecture on this.

VC hates investing in anything that touches government because it’s too high risk. They hate investing in anything that involves physical space. And they hate investing in anything that requires a ton of hardcore R&D research and potentially years before a payoff.

We get the occasional OpenGov, there are the funds that invest in biotech, and we have proptech VC firms. But the simple fact is that these are the exceptions to the rule, and to get one of these funded, ask any of the people starting them, you need to approach 50x more investors than if you have a B2B SaaS product . . .

We don’t have these things because firms like A16Z decide to wait until the series B to get into any “out there” company that had a big idea.

We don’t have these things because the VCs with the power who set the tone have decided to de-risk the hell out of everything they do and push all the risk onto angels and seed firms.

And Silicon Valley is Getting LESS Inclusive, Not More

A friend of mine said Uber wasn’t a tech company the other day because it dealt with so many physical assets. It made me realize Silicon Valley is on a pathway to basically being pure software plays that solve NONE of the problems that Andreesen addresses.

Solving real problems in people’s lives requires you to . . . *gasp* . . . deal with people in their actual lives! Deal with things in physical space!

But the bigger problem for Silicon Valley is that when you don’t let people sit with you, they go off and form their own cliques.

Fintech in London. Media, Proptech, Fintech, Fashion, Lifestyle & DTC in New York. Media, Entertainment & DTC in LA. And those specialist VC firms popping up — some in the Bay Area yes, but many in other locations.

Silicon Valley’s high priest may lament the lack of innovation, but Silicon valley is getting LESS inclusive, not more, and top tier VCs are one of the prime culprits.

I can’t help but think of this tweet from Nikita as ringing true to me.

If people who have never built companies themselves can so effectively parrot advice NOT built from their own experience, perhaps there isn’t much ACTUAL innovation going on anymore . . .

New York Is Better

5 years ago I was living in SF, and it seemed that anyone you wanted to meet was in San Francisco. Occasionally you’d find the random person in LA or NYC or even Boston, but overall if you wanted to connect with someone, SF was the place to be.

Two years ago I moved half-time to NYC. Within 6 months, 4 out of my 5 closest SF friends moved outside the bay area to Seattle, Reno, LA and NYC.

Yes, all of my friends were 30–32 years old and at some point we were bound to try somewhere else out, but the fact remains — I’ve become surprised actually at how often since I moved to NY the person I want to speak to now also lives in NY.

A year ago I finally cut the umbilical cord and gave up my SF apartment.

I’ve come to view New York as the perfect small world network. Our tech industry here is not so well connected to each other that we’ve fallen into groupthink. New York has the hub of many traditional fashion, finance, real estate and media companies. Our friend groups are diverse enough to be intermingled small world networks among our various industries instead of one large groupthink network.

How Silicon Valley Can Avoid Killing the Golden Goose

Industry towns can be advantageous, but Silicon Valley isn’t “building” because the high priests haven’t been practicing the religion they’ve been preaching.

It’s commonly understood that most top VC firms can afford to wait until the next round — if they have a big name, chances are you’ll let them in anyway.

If we want to change this, top firms need to start investing in big ideas early instead of pawning off the risk on new seed firms and angel investors — firms like A16Z should back companies that become the iconic investments they like to talk about like Lyft and Airbnb before their Series B rounds. Investors shouldn’t make Peloton beg for money for so long.

I hope the Bay Area can rescue itself, but until then I’d recommend you do what I did and move to New York.

David

Read our announcement post here on what we’re up to at Maxwell, Signup at maxwellsocial.com, signup for our substack newsletter, and follow us on Instagram or Facebook.

Founder & CEO of Maxwell Social

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store