Sam Altman: Startups are Destined to Die, Silicon Valley Could Help Them Cheat Death

November 6, 2014

4:30 pm

“The natural state of a start-up is to die; most start-ups require multiple miracles in their early days to escape this fate. But the density and breadth of the Silicon Valley network does sometimes let start-ups cheat death.”

So begins a blog entry posted three days ago by Y Combinator president Sam Altman. Originally published in the Financial Times, Altman reposted the entry on his blog since the article is behind a paywall – a very considerate move on his part. In the entry, Altman creates the argument about why Silicon Valley works (and will continue to work). His main argument: there is a high density of people working on and passionate about startups, that it’s created an environment where people are supportive of everyone else. This doesn’t come as a surprise – when I myself interviewed startup founders based in San Francisco and other Silicon Valley areas, the majority of them talked about the ecosystem’s inherently supportive nature as the best benefit of starting up in the region.

“Silicon Valley works because there is such a high density of people working on start-ups and they are inclined to help each other,” writes Altman.”Other tech hubs have this as well but this is a case of Metcalfe’s law – the utility of a network is proportional to the square of the number of nodes on the network. Silicon Valley has far more nodes in the network than anywhere else.”

For Altman, the network of people in Silicon Valley is its single most important trait. Further, he points out that what’s so unique about the Silicon Valley ecosystem is that new players coming into the environment don’t need to have pre-existing connections to that network; rather, Altman says that the only thing entrants to Silicon Valley need is the same passion for their products – for technology and for startups – as everyone else:

“Silicon Valley is a community of outsiders that have come together. If you build something good, people will help you. It’s standard practice to ask people you’ve just met for help – and as long as you aren’t annoying about it, they usually don’t mind.”

Of course, Sam Altman also goes into how a strong network has benefited Y Combinator participants and alumni. He notes the nearly 700 YC companies that – despite being separate entities with their own individual goals – continually offer help to each other. It’s a culture of founders helping founders, and this large network and its corresponding network effects isn’t something that can’t be replicated in other ecosystems. According to Altman, it’s all dependent on ideology and capital:

“Most people realize that the world of start-ups benefits tremendously from network effects, and think it sounds impossible to replicate the necessary density anywhere else. But my experience suggests it’s probably doable with a few thousand people and a reasonable amount of capital…I think you need two other things: an area where many ambitious people care most about start-ups and technology, and a focus on long-term compensation.”

Read more about what Sam Altman has to say about Silicon Valley, why it works, and how it can be replicated.

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Ronald Barba was the previous managing editor of Tech.Co. His primary story interests include industry trends, consumer-facing apps/products, the startup lifestyle, business ethics, diversity in tech, and what-is-this-bullsh*t things. Aside from writing about startups and entrepreneurship, Ronald is interested in 'Doctor Who', Murakami, 'The Mindy Project', and fried chicken. He is currently based in New York because he mistakenly studied philosophy in college and is now a "writer". Tweet @RonaldPBarba.

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