In the current tech boom in Silicon Valley, first-time tech founders can raise money from VCs before they have a software product or paying customers.
Outside of Silicon Valley, I don’t see SaaS founders raising VC-seed investment before they have software that works and a revenue run rate above $30K MMR.
Why is the startup funding game different in Silicon Valley than in other major cities in the US?
People are smart everywhere, but risk and reward for both the founder and the investor are still different in Silicon Valley.
Silicon Valley startup founders are encouraged to think crazy big and try to build something massively valuable. It probably won’t work, but these investors are chasing the potential for huge wins.
Silicon Valley startup founders and early-stage investors know there are huge risks with bad odds, but they are willing to swing hard and place early bets because a few of these companies might win big.
We don’t see such aggressive risk-taking outside of Silicon Valley in the US.
The odds for founders to change the world and create life-changing wealth for themselves are not necessarily better in Silicon Valley.
Silicon Valley is just playing a more high-risk craps game to win big. Investors everywhere else are playing blackjack to get better odds.
