Anchoring startups

February 6, 2012

Yesterday I put fuel on Jesse’s fire by talking about the importance of helping startups be physically close to one another. Work spaces are a small part of the bigger issue: how do we get great tech companies to grow and anchor in our city?

Greg and Danny at BCIC put it thusly:

Anchoring means that a company has hit a level of maturity where it starts to give back to the community in the form of creating jobs, educating the talent pool, adding credibility to the region, inspiring young entrepreneurs, and spinning out new entrepreneurs, and tax revenue. This is the ultimate goal, and the ideal outcome. However, it doesn’t happen often, so the question becomes how do we make it happen more - or - how do we increase conversion?

Nailed it.

When people talk about Silicon Valley they focus on the investors and the schools - but the large anchor companies are the core of it all. Companies like Apple and HP have spent decades attracting top talent, training them, making them wealthy, and spinning out fresh founders. Their profits fuel that ecosystem.

So we’ve identified the goal: we want an HP, a Microsoft, or a RIM to start here, grow here, and stay here ((I pick these examples because they are tech giants that grew where there was no giant before.)). Once that happens, we become Palo Alto, Redmond, or Waterloo respectively. Once you’ve become Palo Alto, your existence may bring neighbours Cupertino and Mountain View into existence, and a technology Mecca is born ((For those who aren’t familiar with Silicon Valley anthropology, HP started in Palo Alto, helping turn the surrounding valley into Silicon Valley. Steve Wozniak worked at HP, but founded Apple in neighbouring Cupertino because HP wouldn’t get on board with his idea of building a personal computer. Like a nuclear chain reaction, success fuelled success and most large tech companies are now founded by ex-employees of other Valley companies.)).

So how do we get an HP, Microsoft, or RIM in Vancouver? BCIC says to simply increase the number of startups. Jesse says to increase the number of startups that exit. Boris says to increase the number of startups that exit or get to Series A. None of these will hurt.

However, anchor companies are not born from landing a big investment, building a revenueless consumer app and selling to Google.

Anchor companies are born from smart people who love where they live, bootstrapping a company to profitability, then growing the shit out of that company.

Companies that are built to be acquired won’t stay in their home town. Acquisitions that happen for talent usually come with the requirement that the employees move to their new HQ ((It’s worth recognizing that people returning to their hometown after a big Valley exit are good candidates for later bootstrapping an anchor company here.)). On the other hand, if a company buys you because you’re profitable, they’ll often let you keep doing your thing.

I’ve been called “old fashioned” ((“Old Fashioned” was the title the Lining Things Up episode I was on recently, referring to my fondness for making things and selling those things.)), because I have a great fondness for bootstrapping and profitability. As far as I know, Nitobi, Mobify, and iQmetrix were all bootstrapped to profitability. As were HP, Microsoft, and RIM. As was Lululemon, a company that could only have been started in Vancouver. 37signals put Chicago on the tech map with only a couple dozen employees.

So how do we get companies to stay here? We help founders build profitable companies - then grow them.

© Allen Pike. See also Twitter and Steamclock.