There have been a lot of stories lately about the importance of
location, or lack thereof, to an Internet company’s success.  Pascal
Zachary wrote a New York Times piece recently entitled "PING: When it Comes to Innovation, Geography is Destiny" where, essentially, he argued that Silicon Valley’ is the place to be if you want your venture to succeed.  Tom Foremski, In his post yesterday, went as far as saying that "Silicon Valley is rapidly turning into Media Valley–and New York, NY
should look out–the capital of the media world is shifting about 3,000
miles westwards."  Come on.

A number of people have argued for and against the theory that
location, particularly being in Silicon Valley, is a key success factor.  While
the debate is interesting, I’m not going to rehearse in detail the
arguments in support (e.g. Silicon Valley gives greater access to
engineering talent, money, magic, etc.) and against (e.g. Skype didn’t
come from the Valley; there’s less Kool Aid drinking elsewhere, etc.).

What I will say is that location can enable a company to foster a
certain type of culture.  That culture can shine through the company’s
products and image, and it can be a key ingredient of success.

Wired ran a piece last week called "Web Startups Reboot ‘London 2.0’"
that detailed the city’s burgeoning tech venture scene.  In it, Martin
Stiksel, co-founder of Last.fm (which is rumored to be entertaining a $450 million buy out offer from Viacom), praised his company’s East End location,
saying "if Last.fm would have started in Silicon Valley, it would
already be
very derivative and bland like most of the projects coming from (that)
part of the world.  It’s great to be here."  While that is a broad
generalization and maybe a bit defiantly Euro-centric, there’s definitely some truth in it.  In fact, at least
where digital music is concerned, it reminds me of my own experience.

My first venture, Cductive, was an early online music retailer of mp3
downloads and custom CDs.  We started in a tenement apartment in New
York’s Lower East Side
in January 1997 (when it was a lot different than today).  We
bootstrapped and angel-funded the company’s development over three
years until we sold to main rival eMusic,
a company then based in Silicon Valley which was publicly traded and
had raised about $120 million in private and public equity.  Clearly,
both companies were too early.

At Cductive, we had a group of hip, young, modestly paid employees who
lived and breathed music.  Even our lead programmer, Bing, was an
accomplished DJ.  We worked in a open warehouse loft, where music
blared loudly and continuously.  We went out to clubs until late to see
bands and mingle with artists and indie label folks.  Our site was edgy – black in color with a cobra as
our logo.  This  culture was created partly by
design, partly because of limited funding, and partly because we were
based in New York.  We signed up hundreds of labels without big advance
payments, largely because we knew them and their music.  They felt
comfortable dealing with like-minded people. 

Although eMusic was probably the best known first wave digital music retailer and helped kick start the digital music revolution, they
were cut from the typical Silicon Valley start-up cloth.  They were overly funded (like most ventures back then) and housed in luxurious but sterile corporate offices in Redwood City,
CA.  They had some very talented people, but, at its core, it was a
tech company – with a tech company culture.  In fact, the only time I heard "music" in their
offices was when someone said the company name.  That was eMusic 1.0.
The company is now headquartered in New York and
owned by Dimensional Associates (which bought it on the cheap from
Vivendi Universal a few years ago).  Now that digital music is mainstream, portability has been solved through the iPod, and the company has continued our original focus on open mp3 (which provides complete interoperability), eMusic is now doing quite well.  It’s the #2 music download site after Apple’s iTunes Music Store.

eMusic certainly went through ups and downs and was always bigger than
Cductive.  However, Cductive would never have gotten as far as it did
on a slim budget — to compete with eMusic so effectively that they had
to buy us — without a street-smart, music obsessed-team and a
left-of-center culture.  I feel that we were able to craft that culture
in large part due to our downtown New York location.  So, when I hear
Last.fm credit their edgy East End home as an ingredient of success, I
understand.  In fact, besides strong traffic and community, perhaps it’s partly their
cool image and hipster appeal that Viacom sees in them.  After all, isn’t
that what MTV had going for it early on?