Friday, May 14, 2010

It takes successful startups to build more startups

There's a number of elements that are generally accepted as essential for a city or region to have a successful startup culture:
  • Good colleges and universities, preferably with strong engineering programs, in order to provide an ongoing supply of qualified young talent
  • A good quality of life that encourages graduates to stay in the area rather than relocate after graduation
  • Availability of venture capital
There's another element that's less-discussed, but possibly the most important of all: Local, successful startups that get big enough to spin off other startups. This is one of the reasons that Silicon Valley has been able to maintain its lead for several generations now. Shockley Semiconductor begat Fairchild Semiconductor, which begat Intel, National Semi, Signetics and others. Those companies spun off other semiconductor companies, and the chain continues today. Hewlett-Packard employees founded Apple, Tandem and many other companies, and those companies have spun off countless other startups. Yahoo and Google have each spun off many startups. eBay acquired PayPal, and now the ex-PayPal team has built a new generation of startups. Twitter (which spun off from Google) has already sprouted Square, and many other companies will bud off over time. Facebook will have the same effect.

It takes a big success to first recruit and then spin off the founders of future startups. In Chicago, where I'm located, Groupon looks like it has the potential to spin off more startups. It's too early to tell whether that will be the start of a sustainable startup culture in Chicago, but it's a big move in the right direction.
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