Paul Graham Explains What Makes Some Cities Great Startup Hubs

Paul Graham, image via Inc

Paul Graham surprised us at Y Combinator’s first ever Manhattan meetup tonight. In town for the innagural YC in NYC, Mr. Graham recalled that when he set out to build his first startup, he was living in New York. It was the dot-com boom, and even though he hated the weather, and how sweaty it made his upper lip, he could see that New York would eventually surpass Boston. “New York investors had balls that folks from Boston didn’t.”

But the sudden prominence of New York has left Mr. Graham questioning his universe. “Will New York catch up to the Valley, will it surpass us?” he asked the hundreds of local hopefuls gathered at the Metropolitan Pavilion. He had long wondered why certain cities seemed to seemed to be poison for startups. “I realized I was asking the wrong question. Startups die naturally and certain cities are the antidote.”

In a great startup hub, said Mr. Graham, you have a better opportunity to make the chance meetings a company needs to survive. “Amazing, random things happen by chance in a startup hub that counterbalance the the terrible things that always happen to young companies.”

The young dropout building a photo sharing site for college kids, let’s call him Mark Zuckerberg, would not have met Sean Parker anywhere but the streets of Palo Alto. “He might have met someone who could fix his car, but not his cap table.”

Meeting someone unepxected, said Jedi Master Mr. Graham, is like letting your mind relax. “Suddenly you find a new idea that stops you from spending six months going down the wrong path.”

There will not be a YC branch in New York, said Mr. Graham. “We think having no branches is a good filter, it allows you to attract the most dedicated applicants.”

Local startups can of course connect with California, perhaps by attending YC, or taking an investment from one of their backers. “Ron Conway is open for business in New York,” said Mr. Graham. In fact it was Mr. Conway’s comment at a YC event–that twenty percent of SV Angel’s portfolio was now in New York–which snapped Mr. Graham’s head up and made him realize he had to pay attention to The Alley.

But New York’s size is not enough. California will remain the leader, says Mr. Graham, because it has a different set of values. “It’s a cultural problem that goes way back. New York cares too much about money. Palo Alto is home to nerdy idealists who want their product to be perfect. As long as finance continues to exist in New York, it will drain too much talent from New York’s tech scene.”

Paul Graham Explains What Makes Some Cities Great Startup Hubs