Why are most of the well known startups originated from USA?

I'm not trying to throw a flamebait, but on the other hand I want to learn from the success.

Why is the ecosystem to build a startup seems to be so viable in USA? How did it all started? I know this might seems to be a Chicken or Egg question, but I'm sure we can trace the root and learn it from there and hopefully try to implement it outside the USA.

It seems the whole ecosystem in USA is so supportive and orchestrated so well.

INVESTORS There's lots of Angel investors and Venture capitalists that have faith in you. In some countries, there isn't enough (or close to none) Angels and VCs.

MARKET On the other side of the spectrum, the consumers is willing to spend lots of money on technology that can scratch the itch on their back. It seems technology has become a primary needs in USA, which sometimes is ridiculous and hard to do elsewhere. :d

TALENTS Many innovation also originated in uni in the US. Take a look at how many startups started from uni students from MIT, Stanford, Berkeley, Harvard and Carnegie Mellon. The collaboration between business and university seems to work really well.

So does anybody know the answer to this question? So those of us that is not currently living in the USA can learn and try to implement it at the place/country where we live now instead of keep asking this forum how to go and start a startup in Silicon Valley?

EDIT Yes we know there many cash cow in the US, but I'm sure cash tycoon is anywhere and not limited to the US alone. But how does the cash cow in the US are willing and have faith to invest in a startup?

Can I really conclude it's all in the mentality of Americans which like to be different therefore they innovate? e.g:

• Take a look at the steering wheel in American cars which is on the left hand side
• Take a look at American english which is alot different with British English
• Take a look at the unit of measurement which is totally different that other country use
  etc.

Note: That was only for educative purpose, not flaming.

I don't know what makes USA so receptive to startups, but as a Malaysian, I can tell you what will kill startup culture:

1. Corruption. The ones with the fund are not distributing it according to the merits of the idea but according to who-is-knowing-who.
2. Bureaucracy. Government can make the startup life a nightmare by asking them to filling in an excessive amount of forms.
3. Conservativism. The people are so get used to their 9-5 jobs that they don't dare to try outside the box.
4. Slow broadband. I don't think you can have a good startup culture if you have poor broadband.
5. A population that values get-rich-quick route over hardwork. If you are living in a country where the majority of the successful persons are getting their wealth through their parents, or government contracts, or by just sitting on top of gold mines, I don't think startups can grow there.

They keys to success of a startup nation are having a capitalist system where the local culture idolizes successful business people rather then consider them are greedy. In communist countries and in some European countries that were controlled for years by the catholic church this is not the case. Being capitalists leads to highly effective financial institutions, and the ability to invest funds in high risk high return investments such as startups.

In addition, government support is key. This does not mean big government, but rather one that supports R&D in the local industry. The two best examples for that are the US, where DAPRA developed what later became the Internet, and Israel, that is leading in IT technology due to the high investment in military technology.

If you want to read more about Israel, check out Star-up Nation, as it shows an example of a country that is 61 years old, with a remarkable star-up culture.

-- edit --

If you want to read more about the US, check out this link:

http://www.paulgraham.com/siliconvalley.html It talks about what it takes to create a Silicon Valley

In addittion to what is mentioned above, I'd suggest a nice essay on the subject written by Paul Graham explaining some concepts that make it possible to startups to succeed in Silicon Valley. He outlines, and I do agree with most of them:

• Smart people
• People with money eager to invest
• Low bureaucracy
• Universities


• Free Competition

I'd say that easy and economical access to broadband is a plus not the key issue. This problem, which is a real problem in developing countries such as Uruguay (my country), most entepreneurs struggle and usually end up putting their servers somewhere else.

Free markets and the rule of law. Opinions differ on how fair or desirable unfettered capitalism is (defined as free markets and rule of law, not bailouts and such), but that environment will produce results in the fastest way possible. Speed to market does seem to be the dominant factor in the successful startup.

I think you will find that all startup environments have those two things in common.

A viable small business needs to have a few things:

• People with ideas
• People with the skill and education to act on and execute those ideas
• People with the motivation to act on those ideas
• The infrastructure to execute the business idea
• The funds to support the effort
• A political system that is favorable enough for businesses to be able to start and grow
• An economic system that allows companies to grow and to reward those who contribute

In the US there are lots and lots of ideas that fail and we generally have "all the right ingredients". If any one of those items is missing it makes it that much harder to succeed. It is still possible, but just isn't as easy.

There is also the question of culture. The US has a deeply ingrained culture of entrepreneurship and risk-taking.

I was listening to one of the Stanford podcasts about entrepreneurs. One of the speakers was talking about this very same question he got from some people in India - asking why there are not that many successful startups there. The answer was that until the parents and culture accepted and supported kids dropping out of school to pursue their ideas/startups it would not happen (or something to that effect.) The speaker said he just about got booed off stage for suggesting something so foreign to their ideas (dropping out of school.)

Don't underestimate the cultural issue. It is a big factor.

Like Fred Wilson says: The main reason is that there are rich people here, and there are also smart people.

Smart people without investment are just potential wasted (just look at so many countries with MDs/PhDs/etc.. driving taxis for a living.

Investment without investing in smart people is money down the drain. Nepotism and favoritism shows up in third world countries big time (as Ngu also mentioned). My native Mexico has one of the top three richest guys in the world (Carlos Slim). Do I think he will bring Mexico out into the forefront? Never. He is a moron when it comes to investments that do not involve some sort of government corruption or some other "outside" help. In terms of money in the bank he is on the same league as BillG and Warren Buffet. As anything else he is a non-factor. That's why when questions arise about the direction of the world economy nobody asks him.

Sorry for the tangent :-)

Anyway, the USA is a great place for startups because we value merits and competition more or less all through our culture, from top to bottom. There are anomalies such as the Haliburton military contracts, but they are anomalies. People here in general value hard, smart work. Which is exactly what you need for a startup to succeed. Throw in the fact that people here earn good money and love to buy things and spend that money (as opposed to saving it), and you get a huge market of new products coming up with consumers to buy them up.

It's a very tough combination to beat.

I think the reason is simply that a lot more people take the risk there, so even if we assume that the ratio failure/success is the same everywhere else, we have to assume that more successful companies start there.

Another reason is that of a self-fulfilling prophecy: if everyone believes that startups are made in Silicon Valey, people will go there if they have an idea - or if they have money to invest. They meet there, thus reinforcing the believe that everything happens there.

Not true.

Well I would suggest that if your from the states you get state business news and so your more aware of startups in America. In 2000 to 2010 China and India are outpacing the states in startups and actually do better for startups.

It use to be that in the States that startups were better but that has changed. I was reading a blog the other day and he was talking about how great Japan is on the economy and how it was outperforming America but that isn't true anymore Japan has been in a recession for way more then a decade and though its the 2nd richest country in the world it has not been inovating for some time.

I think that this consistent idea of positioning stuck in our collective minds. I don't recollect the marketing language for that phenomenon but that is why you still believe it. The truth though is the states does not have the largest number of startups nor the best environment for it. So the questions should be about the characteristics of China and India which are both vastly different.

China
- Government sponsored economic districts where the party has numbers they each need to achieve.

- Low amount of enforced regulation allowing companies in the grey market to floorish.
- Massive investment in infrastructure and centerlaized orchestration of this investment for long term planning.
- Party district and sub district leaders held accountable to the central party.
- Strong education system and well educated, and inexpensive labor.
- A large population that has been experiencing corporate enterprise from Britian and the states and now building their own companies.

India
- Decentralized poor country sponsored investment.
- Excelent education.
- English as a native language
- Masive investment in universities
- Massive investment by individuals in technolgical methods to get around the poor governement services.
- Low regulation on internet based companies.
- Deregulation for outsider inestments.
- A large population that has been experiencing corporate enterprise from Britian and the states and now building their own companies.
- Lower cost of labor.

So let's not be so ethno centric. Truth is the Asian Tiger has been around for more then a decade and appers to be moving fast into the future.

I'll answer with a question that'll make the issue much clearer:

Why is Israel one of the countries that produces the most startups per capita?
http://www.vccafe.com/2007/12/10/israel-second-largest-concentration-of-startups-per-capita-following-silicon-valley/ Notice that back in the 90s when Israel became one of the rising stars in this area, it didn't have many of the advantages that US based startup do:

• Relatively easy access to capital
• A government and business environment that's supportive to the startup model
• Strong familiarity with the American market

Just today I was reading http://www.techcrunch.com/2008/06/14/why-kytetv-will-kill-qik-and-flixwagon-in-cell-phone-video-space/ and when I checked out crunchbase, the Israeli company was operating with a fraction of the funding of its American counterparts.

So what makes Israel so special? In my opinion:

• A highly educated workforce
• A strong belief in their ability to succeed.
• A culture that encourages people to think outside the box.

These are all traits that I find in Silicon Valley too.
Notice that I'm not saying anything about funding. Israel now has a quite large VC community, but I believe it developed as a result of the success there, not the other way around.

ATTITUDE Someone advised me yesterday that I must take up a job and live an easy life. And day before the other person said - Come over obsession. (yeah some people equate passion with obsession)

A friend's start-up was recently showcased on a popular portal here in India. And many people cursed these guys for setting up a biz. Read discussions. He was dismissed for being an IITian, criticized for having a larger than life dream. The guy was recently listed as one of the top 25 promising e-commerce start-up in India.

This will be changing in the future, but one thing that has helped the US a great deal to incubate startups is the fact that so many foreign students would come here with new ideas, and while they are studying they decide to start up a company and see what happens.

When you have many people in the same area from different cultures, or even just different types of people, then you will have more probability of having new ideas to solve problems, which leads to more opportunities of a successful startup.

But now more students are going to study in other countries, other than the US, due to restrictive visa requirements, so we will start to see startups begin in other countries, but, eventually they will come to the US but that doesn't mean they will have started here.

Legal Predictability - The US has a particularly advanced (and expensive) legal system that allows talent and new ideas have a chance to incubate and grow without being disrupted by arbitrary government decisions. Of course, measurements of legal sophistication are relative, and certain countries have better case law/history in certain areas of law than others. And at the same time, the legal system can pose a barrier to the next leap in innovation (i.e. FDA red tape or current SCOTUS leanings in the Bilski case).

Great suggestions posted by others above -- I'd tie them all in with an understanding of the extant legal framework.

Two words:

1. Resources
2. Market

The silicon valley model can be replicated - but it does take a concerted effort to make it take hold. Florianopolis in southern Brasil is an interesting example. This youtube video (good info, a but cheesy) gives some background to the area. Better info about the technology outlook can be found at the acate site.

Also helps to be in a beautiful part of the world.. ;)