View from the ‘Loo: Networks matter more than hierarchies Anthony Reinhart April 18, 2013 Startups, View from the ‘Loo In a world that seems ever more awake to the power of networks, why are we still hypnotized by hierarchies? It’s something marketing guru Seth Godin, who spoke at our Tech Leadership Conference last month, talks about all the time. It’s also something I’ve been mulling over since I returned from a fruitful four days in New York City last week with Cohort 2 from Communitech’s HYPERDRIVE accelerator. The trip is all about helping our startups to tap into the massive potential of the Big Apple, whose tech community has seen phenomenal growth in recent years. In fact, New York is second only to Silicon Valley for tech investment activity – but there I go, focusing on hierarchy, when it’s the network effect of tapping into these places that really matters. Maybe it’s just human nature to want to classify the world into best and worst, big and small, winners and losers. Rankings based on a set of general, objective criteria offer a quick and simple way to see where we stand, or at least where we think we stand, in relation to others. The danger comes when we fixate on rankings to the exclusion of context, nuance and thoughtful consideration of the countless factors – some measurable, others not – behind what works best for any given individual, or more specifically, any given startup. This fixation leads people to say some pretty silly things, like “Silicon Valley is the best place to do a startup” or “New York is the best place to do a startup” or “Boulder (or Vancouver or Berlin or Toronto or Waterloo or Chicago or wherever) is the best place to do a startup.” These statements are effectively meaningless because they are all true, depending on who you talk to. In Canada, this need to rank everything can have the added effect of activating our dubious national pastime of self-loathing and feelings of inferiority to our neighbour to the south. This was on full display this week in the comments section of a Techvibes piece titled Why Startups Should Choose Canada Over Silicon Valley. The author, David Quail, explains why he returned to Canada after five years in the San Francisco Bay Area. It’s impossible to argue with his reasons, because they are just that – his reasons. Travel to any flourishing startup community in the world – and thanks to our increasingly networked society, there are now hundreds of them – and you’ll find entrepreneurs making their own arguments for why they’re not starting up in the fabled Valley. Waterloo Region alone is home to many companies that, after spending time or securing investment from the Valley and other larger centres, have returned here to build their companies, including Vidyard, TribeHR, Maluuba, BufferBox (now part of Google Kitchener-Waterloo), Thalmic Labs and Desire2Learn. Ask their founders why and you’re sure to hear different reasons from each, ranging from the intensely personal (family) to the purely practical (lower costs). The point is, they’ve considered all the factors and made what they feel are the best decisions for their companies, all the while maintaining, expanding and strengthening their relationships with key contacts in the Valley and elsewhere. In the process, those key contacts are gaining ever more appreciation for what’s going on here in Waterloo Region – an appreciation that stands to benefit us as well as them, as investors from other places fund job growth right here. Brad Feld, the Boulder, Colo.-based venture capitalist and author of Startup Communities, talked about this when he visited the Communitech Hub in February. “If you look at the history of vibrancy around startup communities, the ones that have the most people that come in and leave over a period of time are the most robust, because they have connective tissue to other startup communities,” Feld told me in a video interview. “If people leave and go to the Bay Area, as long as you make it easy for those people to stay connected back to you, you get this extended network into the Bay Area, or New York or Boston,” Feld said. “If you’re insular, what you do is you starve off all that other activity.” When I asked Feld how smaller startup communities like Waterloo Region can address the challenge of retaining top talent, he challenged my implicit assumption that larger centres are always more attractive to knowledge workers. “…People like different things,” Feld said. “I’ll use me as an example; I chose to live in a smaller city, because I didn’t want to live in a million-person or a five-million-person city.” Building a startup community, like building a startup, will always require hard work no matter where it is. But that work is made easier when communities connect with each other, leveraging each other’s strengths. Last week’s HYPERDRIVE trip to New York is but one small example of this networking effect in action. On the first day of scheduled meetings, the 11 companies of Cohort 2 met with John F. Prato, Canada’s Consul General to New York, at the Canadian Consulate in midtown Manhattan. Prato is determined to make his “the innovation consulate,” and has empowered his staff to make it happen by providing Canadian startups a landing pad in New York and access to their contacts in the city’s tech sector. HYPERDRIVE was the first Canadian entity to take advantage of the consulate’s Canadian Technology Accelerator services when Cohort 1 travelled to New York last September. Startups from across Canada have since benefited from these programs. “Our role here is to help you; just as Communitech is doing an incredible job in Waterloo (Region), we are trying to do the same here,” Prato said. “The role here is to help you use New York as a global platform for the world. We want you to think big, we want you to succeed, we want you to meet other companies that are in the same development phase as yourselves because of the importance of collaboration.” Joanne Wilson, a New York angel investor whose Gotham Gal Ventures supports many female-led startups, also underscored the importance of network thinking to startup success. “I think as an entrepreneur, or even as an investor, it’s important to sort of educate yourself in everything that’s going on in different industries,” Wilson said when I asked her why Canadian startups should visit New York. At a reception at Prato’s official residence on Park Avenue on the last evening of the trip, Reddit co-founder Alexis Ohanian stopped by and stayed for three hours to chat with HYPERDRIVE entrepreneurs. Ohanian has taken a growing interest in Waterloo Region startups through his work as “east coast ambassador” for Y Combinator, the Valley-based accelerator where Reddit was born, a role that introduced him to local YC attendees like Vidyard, BufferBox and Thalmic Labs. Last October, Ohanian visited Waterloo Region, at Vidyard co-founder Michael Litt’s invitation, for Communitech’s Techtoberfest and HYPERDRIVE demo day. “To have a sexy, cool thing like Thalmic back there in Waterloo; it’s a story people want to talk about,” Ohanian told us. “You look at those videos and ooh and aah, because it looks like sorcery.” Ohanian said “there is certainly a reputation within YC, and I think in most savvy investor circles, that everything going on in Waterloo is, like, head-and-shoulders above 99.9 per cent” of what’s happening in other places. While that admittedly sounds like another example of hierarchical thinking – placing Waterloo Region’s startup prowess above that of other communities – the takeaway for me was that Ohanian would not have had cause to utter those words had we not summoned the self-confidence to build our own startup community in the first place. I also found it telling that no one we visited in New York suggested our startups need to permanently relocate to succeed. If the tech world’s savviest players know about Waterloo Region, it’s because of the ecosystem our entrepreneurs have built here and the network they’ve developed with other startup communities – not because they deferred to the supposed hierarchy and flocked to Silicon Valley, never to return. Robbie Abed of Chicago-based Technori perhaps put it best in a blog post earlier this year, when he wrote, “There is no such thing as ‘my startup community is better than your startup community’…We are all special in our way. Didn’t our parents teach us that already?” Anthony Reinhart is Communitech’s senior staff writer. View from the ‘Loo is a weekly look at the issues, people and events that shape Waterloo Region’s technology sector.