What follows is a excerpt from my early doctoral dissertation draft about startup failure. This text didn’t make it to the final draft, so that’s why sharing it now.
Valley syndrome is a distorted view of market reality caused by immersion in hi-tech culture, such as Silicon Valley. It is similar to “living inside a bubble”, where internal culture, values and view of the world is adopted while consciously and unconsciously excluding external realities. The Valley syndrome is a particular problem for startups aiming at mass markets instead of niche markets comprised of cutting-edge early adopters.
Briefly, the condition can be defined as follows:
Valley syndrome is the risk of erratic strategic judgment based on a restricted view of the world resulting from strong geographical clustering and fallacy of similar thoughts or homogenous preferences
Startups seek closeness to one another, which was presented by founders in their post-mortems (see startup dilemmas). In fact, some founders found distance from a like-minded cluster as a partial reason to failure.
However, there is a contradicting view stating that being concentrated on Silicon Valley (or similar technology cluster), founders risk falling under a twisted view on reality. This stems from the idea of being “too close” to competition, simultaneously losing a view of possibilities crucial to innovativeness.
Close proximity to business networks may elude a startup to grow distant from its desired customers, thus breaking the “lean” rule of customer development.
With all the conferences, advice and money they may lose their business track. Furthermore, valley is populated by early innovators, whereas startups aim at mass market. The needs of innovators may be different from those of “ordinary people” and therefore success in immediate environment may produce a false signal on product’s feasibility.
This also relates to pioneer’s dilemma, described in the following, because some products are suitable for mass-market but others for niche. A startup can succeed in both but requirement for niche may be higher to justify a startup (e.g. willingness and ability to pay are high).
“It’s an interesting question why cities become startup hubs, but the reason startups prosper in them is probably the same as it is for any industry: that’s where the experts are. Standards are higher; people are more sympathetic to what you’re doing; the kind of people you want to hire want to live there; supporting industries are there; the people you run into in chance meetings are in the same business.”