Facebook was founded in Massachusetts and moved to California.
Why?- which of our candidates has spent anytime trying to learn why one of the hottest companies in America didn’t want to expand here.
Please share widely!
Reality-based commentary on politics.
is like wondering why a country star moves to nashville instead of sticking around in Seattle.
Brief summary
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p>In a nutshell:
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p>”… in California, the best talent moved to the best companies, while on Route 128, crummy companies could lock up great people for years at a time through non-compete agreements.”
I have worked in software in the Boston area for over 20 years and I haven’t noticed non-compete agreements have done anything to prevent people from hopping from company to company. Perhaps non-competes prevent executives from moving around, but I don’t see that happening with the people who actually do the real work.
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p>I don’t know if this is true, but someone once told me that non-compete agreements are only enforceable in MA if you are explicitly compensated for the non-compete clause through grant of extra stock options, bonuses, golden parachutes or the like to make up for the loss of income you may experience because you cannot go to a company who most wants to hire you.
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p>At one company I worked for a long time ago, I was once offered a small number of stock options. I thought this was a nice gesture until I discovered that it was attached to a non-compete clause. I found this strange since my original employment agreement included a non-compete clause. I suspected that the board was nervous that our original non-compete clauses would not be enforceable and thought that granting the options separately with a non-compete clause would make it stick. Sure enough, when I said “thanks, but no thanks”, my boss got upset that I didn’t take the options and said I wasn’t a “team player”. I doubt that taking the options would actually have made the clause enforceable in the end, but perhaps it would have been enough to prevent a lawsuit from being thrown out immediately.
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p>In any case, I find it much more likely that (a) the founders wanted to live in CA and (b) given the company’s extreme dependence on venture capital, it made sense to put it near the much larger VC community on the west coast.
… that is to say, they are a popular site that has been ‘monetized’. The reason they moved to California is because that is where some of the more aggressive and wealthy entrepeuneurs are. They are the ones who know how to monetize a site like Facebook. They like the climate and they like being around each other.
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p>entrepeneurship in America is at something of a crossroads. There is a schism, of sorts, between those who want to actually make things (pharma, robots, integrated circuits, etc…) and those who simply want to monetize an idea. Facebook is in the latter category and Silicon Valley is the nexus for this type of entrepeneurial endeavor.
Massachusetts is one of the best creators of new tech & science startups anywhere. Some stay here, but a substantial portion move elsewhere or get bought by companies from elsewhere, and #1 among those elsewheres is northern California.
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p>Now, northern California is the world’s #1 high tech business hub. It’s the first tier all by itself, and on the second tier, Boston has a secure place. So in a sense, we’re misled by looking at “why is northern California beating us at this game”, because northern California is beating everyone at this game, and nobody else is beating us (though some are at the same level).
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p>However, it’s still useful to look at, and in all the research I’ve seen, we’re as good or better on most of the important things (education, tolerance, people wanting to live here, etc.) but they’ve got two significant advantages:
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p>1. Network effect. We’ve got it big, they’ve got it huge. We can’t directly address that, since it’s a result of success. But it does perpetuate itself.
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p>2. How risk-taking their capitalists are. Investors in startups here – and pretty much everywhere else – are just more cautious than the ones in the bay area / silly valley. They’re less willing to fund some companies, and more importantly, the ones they are willing to fund, they act slower on. So when startups seek a round of capital, they might get it here, but there’s a significant chance they’ll find someone from California first, and will be offered the capital they need if only they’d move there. So they do.
and an important one that Governor Patrick and I have given a lot of attention to (including by visiting the headquarters of Facebook, Google and other CA tech firms last year). There are some advantages to that environment (beyond the weather), as have been mentioned above, including a culture where talent quickly moves to the hottest company (helped by the unenforceability of non-competes in CA)and the attitude of VCs to aim for the billion dollar winner. But, as also noted, some of it also is that CA has simply been the place to be for social media and Internet 2.0, while we have been doing great things in mobile communications, robotics, health care IT and other areas.
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p>But no question, it is important to the MA economy not just to be able to start small companies, but also to grow them big. A panel of us talked about that just last week, with the Globe’s Scott Kirsner moderating (audio here).
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p>And Bob is correct…tax policy plays very little role in the decisions of Facebook and similar companies…it’s all about where they can grow to scale successfully.
Regulatory policy might be.
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p>A start-up company in a garage has to have a non-smoking notice of a certain size and composition, as well as a written non-smoking policy with annual written updates. Even if nobody smokes.
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p>As a for example. There are more such instances.
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p>Of course, these regualtions are ignored all the time, making scofflaws of entrepreneurs, who never know when non-compliance might become important. Various agencies WITHIN Mass do not have a uniform standard as to what is and is not an employee, let alone comply with the Federal standard.
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p>The CA grass might not be greener in the long run, but it might look good to some.