Silicon Valley: Land of funding, partners, acquisitions...and few customers

Some suggest a business must move to the Valley. Here's why that's complete rubbish.

Fabrizio makes a good point in his blog highlighting Openbravo's success but potentially also a shortcoming: The company is based in Barcelona, not Silicon Valley. For people in the Valley, the Valley Fetish is very strong. It is, after all, the source of all light and truth.

Fabrizio's point is unintentionally cynical: If you want to get bought for a "gazillion dollars," move your company to the Valley:

Why Silicon Valley for open source? Beside funding and partnering, think for a second about the open source companies that have been bought lately for gazillion of dollars: MySQL, Zimbra, Xensource, Trolltech. Where were they based? Utah? Barcelona? I do not thing so. They maybe started somewhere else, but they were headquartered in the Valley.

Where are the customers in that statement? The primary concern seems to be the exit. That's very Silicon Valley. This is why I encourage Silicon Valley denizens to take field trips to the real world where technology is a nice complement to life, but not life itself.

What Fabrizio forgets (though of course he knows this) is that with each of the companies he notes, with the exception of Zimbra, the vast majority of the company was based outside the Valley. So if would-be buyers are only interested in a "head" with no "quarters" in the Valley, then by all means sham a Silicon Valley presence by moving an executive or two to the Valley. It won't hurt to bloat their salary so long as you don't have to waste more money on other employees there.

The larger point, however, is what Fabrizio thinks you'll find in the Valley: Partners (true), funding (true), and maybe a big exit (probably not as true as Fabrizio states, for reasons stated above, as well as others). The one thing - the most important thing - that he's missing is the thing that matters most:

Customers.

You won't find many of these in the Valley. Even MySQL, which ostensibly had a large percentage of "customers" among the Valley's elite (e.g., Google) didn't see much money from those customers, I suspect. Silicon Valley is a development center, and developers don't buy software. Not much, anyway.

A much more sensible place to locate - if customers matter to your company - would be Boston, since it has both customers (all along the Eastern seaboard), developers, and venture funding.

Or how about London? Some of the most interesting open-source companies (Alfresco, Openbravo, Path Intelligence, Canonical, etc.) come from there. It's not easy to get funding out of London, but it is the center of European customers. Remember those people? Customers? The ones that make a company worth a gazillion dollars (everywhere except in Silicon Valley, where "eyeballs" without "purchases" can still command a lot of money :-).

Silicon Valley is a great place. Some of my best friends and favorite food is there. But it's a nice day trip to see them and eat the food. The rest of the time is spent with customers...virtually all of which are based outside of the Valley.

Really, though, people should live where they enjoy living. Work can be done from anywhere, including in Utah, Fabrizio. I've established Alfresco's US sales in Utah because our low-cost model allows us to close business over the phone and email while living wherever we please (and while it's nice you can occasionally enjoy yourself by getting on a plane, I can make the once every four months trip to the Valley to finish everything I need to do there...in half a day).

Great people cost a lot less outside the Valley and are much easier to find. Just ask MySQL: Its inside sales and lead-gen people are based in Boise, Idaho. Open-source companies shouldn't waste money on bloated salaries in the Valley. Not more than they can help, anyway.

It's our solutions/sales engineers who need to live closest to customers so we have them all over the place...and our one guy in Silicon Valley is thinking of moving away. This makes it possible for us to pay exceptionally well while being close to customers.

If our only concern was selling the company a move to the Valley might well make sense. But we're actually more concerned with selling to customers and with enjoying the finer things of life (skiing, family, etc.) along the way. Customers are the ones who justify the gazillion-dollar valuations; families and recreation are what makes having the gazillion dollars worthwhile.

Parking on 101 gets me no closer to either the customers or the family/fun.

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About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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