Is The Valley Better For Software Startups?

I want to start out by saying that this is one of the more troubling articles that I've written for this blog. The topic is something that is near and dear to my heart (i.e. Boston as a center of software entrepreneurial activity). As much as it pains me to say this, there seems to be increasing evidence that Boston (and New England in general) is losing further ground to the West Coast as the place to be to start an exciting new software company. I've long accepted the fact that Silicon Valley has the edge when it comes to the necessary ingredients to foster the right kind of entrepreneurial energy for high-tech startups. They've got more VCs and angels. More successful serial entrepreneurs that are putting their cash back into new companies. More startup employees that made money on earlier startups and going back and doing their own thing. Generally speaking, The Valley has much more of the right stuff to spark a ton of exciting new companies. I've known this for a while, but was reminded of it today when I came across an article titled "What's Wrong With Startups In Boston? Here are some random thoughts and ideas I have on the East Coast vs. West Coast theme.

Where did we go wrong? On a relative basis, Boston is still the second best place to be if you're involved in startups (of the software kind). There's no decision or moment I can point back to and say, "There! That was moronic, we shouldn't have done that" Reality is, we still have lots of the right ingredients here too (just not as much as what can be found in the valley).

As an entrepreneur that has bootstrapped two prior companies (and working on my third), I think one of the biggest "costs" of raising capital is not dilution, but distraction. I wrote about this in my article "
As investors on the East coast, we are too careful. As entrepreneurs, we are not careful enough. This is the point that keeps me up a lot, because I think I'm part of the problem. Or, more accurately, I'm not enough a part of the solution, and so I'm part of the problem.

In my own small way, I'm trying to change this. Last year, I made three early-stage investments (and when I say early stage, I mean early-stage). The average due diligence for each of these investments was should work. This is why I have a fair amount of respect for Paul Graham and CommonAngels, and they are certainly moving in the direction that I think early-stage investing should go, but we're still not quite there yet. It simply takes too long. It doesn't matter if the startup doesn't have financials to ponder or customer references to check up on. It still takes months to get a deal done. That's too long. But, it's changing for the better and I'm encouraged by this.
As for the entrepreneurs themselves, I think many of them are not understanding the reality of the mindset here. Sure, you might have a game-changing, paradigm-shifting, belief-shattering idea for a consumer Internet play. But, you're going to spend a couple of months finding the right people to talk to, another couple of months educating these right people and the last couple of months (if you make it that far) convincing them to invest. At the risk of alienating a lot of the people I know in the investment community (and even a few entrepreneurs), I'll give you my sound-bite: Many software entrepreneurs may be better off moving to the west coast than dealing with the pain of trying to get funded on the east coast. There, I said it. I'm going to walk around for a little while now because I feel so traitorous. pause As much as I hated to do it, I think it needed to be said.