Startups should be in Bad Areas – SOMA

I had some quick discussion with Matt during a meeting.

I realized that SOMA (South of Market) has been the new hot place for startups. There are many of the well-know startups there: Wired, Twitter, Dropbox,, BT, Yelp, Zynga, Rapleaf. Previously, Six Apart, and Rojo were there.

Recently, the government is putting a lot of effort there to turn it into a better place.

I said: Startup should always live in bad areas. Because by definition, startups should run very cheaply. Where is the cheapest place to rent? Bad areas.

Matt mentioned that bad in San Francisco area means a peson pointing a gun to your head when you leave office at night. I said: Yes. That is exactly bad area – some area that is so unattractive to others so startups come. If the area becomes too good that even established companies want to move in, it is no longer the place for startups.

The M50 is exactly the same story. The 50 Moganshan Road was traditionally an art district in Shanghai. The artist poor enough to even survive in Shanghai found the bad warehouses attractive so they can work on their art and sleep there. That is very cheap. I spent about 1500 RMB to rent the whole warehouse to hold my Personal Photograph Exhibition there. Now? Impossible. It has became the hotest site for visitors, and expensive bars are rushing in and pushing artist away.

Startups are really a different type of animal and that explains why most government sponsored tech park does not work.

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