Via Scoble, I ran across Paul Graham's latest essay - "How to be Silicon Valley". He starts off by observing what makes Silicon Valley - well, Silicon Valley:

It wouldn't be surprising if it were hard to reproduce in other countries, because you couldn't reproduce it in most of the US either. What does it take to make a silicon valley even here?

What it takes is the right people. If you could get the right ten thousand people to move from Silicon Valley to Buffalo, Buffalo would become Silicon Valley.

He then goes on to say that you need two types of people: nerds and rich people - nerds to build stuff, and rich people to fund them. There's a lot of truth to what he says, but I wonder what he'd make of Avi's path to starting up - something he spoke about with Andrew Catton at Smalltalk Solutions. My notes on what Avi said then:

DabbleDB came out of their experience in consulting - the ad-hoc spread of semi-shared data that really should have been fully shared (eg - emailed spreadsheets). Had they tried this a decade ago, they would have gone the whole VC "take the money" route. That's not the way they went - they believe in a "late binding" approach to business planning. Once you take venture money, a lot of options get closed off - you are committing to a specific set of plans.

"Taking Venture $$ is a premature optimization"

It's certainly easier to try what Avi and Andrew have done now, than it would have been a few years ago. They mentioned that they did most of their communication through IM chat and email at first, and managed to build up the core of DabbleDB while they were working elsewhere. In essence, they traded sweat equity (extra hours) for venture capital.

It's not limited to the US, either - the Software With Style guys started out inside another firm, and are only now venturing out - as Avi and Andrew did, with a services contract in place.

Will the ability to create "virtual" Silicon Valleys replace the need for the real thing? I doubt it, but it should make it possible for a lot of people to get involved in the business without their having to relocate. I'd much rather live here in suburban Maryland, for instance. Further down, he gets into what makes for an area that will attract the right kind of people:

The exciting thing is, all you need are the people. If you could attract a critical mass of nerds and investors to live somewhere, you could reproduce Silicon Valley. And both groups are highly mobile. They'll go where life is good. So what makes a place good to them?

What nerds like is other nerds. Smart people will go wherever other smart people are. And in particular, to great universities. In theory there could be other ways to attract them, but so far universities seem to be indispensable. Within the US, there are no technology hubs without first-rate universities-- or at least, first-rate computer science departments.

He hasn't said it, but there's another piece there - most "highly mobile" people are young. Now, it also happens to be the case that most people willing to burn the candle at both ends are young, so it works out. However, there are plenty of great people you can get - but only if you don't demand that they relocate. We (the Cincom Smalltalk team) hired a number of great Smalltalkers a few years back, and only one of them moved (his choice) to California. The rest of them stayed where they were - they had families, many with children, and were established where they were.

It's harder to get people to move as they age - we lay down roots, we make friends, our kids go to school. Taking a kid out of school is a very hard thing to ask, and it's also very hard to drop friends who who've spent a lot of time with. Sure, you can "keep in touch" - but keeping in touch is not the same as the weekly game night, to use my example.

The bottom line is, I'm not sure that the future is in Silicon Valley, or places like it. It's on the network, and wherever people want to live. The limiting factors of time dilation still exist; it's possible to have constant communication with people a few timezones away. Once you get out as far as 5 or six though - it's a near impossibility. You have to be virtually close, but not necessarily physically close.

I touched on the VC need earlier, and Graham goes back to it at the end of his essay:

Venture investors, however, prefer to fund startups within an hour's drive. For one, they're more likely to notice startups nearby. But when they do notice startups in other towns they prefer them to move. They don't want to have to travel to attend board meetings, and in any case the odds of succeeding are higher in a startup hub.

I'd be very, very interested in hearing his toughts on the style of startup I brought up earlier. There are problems with VCs - they exert control, and they enforce othodoxy on your firm (I saw this at ParcPlace). Graham extolls the need for the nerds to be in control, and if there's one thing that VCs do, it's prevent that. I expect to see less centralization like what happened in Silicon Valley, not more.