What happened to startups Silicon Valley?

The entrepreneurial zeitgeist today is hard to ignore. Startup America regions have been launched in 32 states. MBAs are flocking to internet startups at an unprecedented clip — faster than during the original dot-com bubble. Even President Obama is calling our entrepreneurial job creators to arms. There’s a sense that it’s up to us to get the country back to work, and that’s driving entrepreneurs to Detroit, Baltimore, Providence, and any number of cities that have struggled with unemployment. And the numbers tell a similar story: startups are mushrooming up everywhere. From 2006 to 2011, the number of startups founded and funded outside of California, Massachusetts, and New York has grown by almost 65%.

But the reality for entrepreneurs outside of the established startup meccas is a difficult one: if you start a technology business somewhere other than the San Francisco Bay area, New York, or Boston, you’re stacking the deck against yourself.

Over the past five years, I’ve been involved with startups across the country. And while I continue to be a big believer that building new business is the key to America’s competitive advantage, it’s hard not notice the huge roadblocks in the way of entrepreneurs outside of the startup “super-hubs.” It’s generally acknowledged that it’s more difficult to find talent, raise funds, identify mentors… but the data suggests that it’s even worse than you’d imagine.

There are three pieces of data that are particularly shocking to internet, software, and biotech entrepreneurs who are on the verge of committing their firms to starting firms in secondary startup markets (and, in particular, outside of the San Francisco Bay).

It takes longer to raise money. Raising venture capital isn’t the be all and end all of entrepreneurial success. But it is an important metric. Many small businesses don’t require the sort of financing required by firms in pursuit of s-curve growth. You certainly don’t need to bang on doors on Sand Hill to start a restaurant chain or a real estate brokerage. But for an important subset of the business world — firms in pursuit of explosive growth — raising capital from angel investors or venture capitalists is an early step on a long and uncertain road to success. There is a reason venture-backed firms account for 11% of all US employment.