Virtual Products, Invisible Locations
In contrast to Main Street entrepreneurs, technology startups tend to offer products that are intangible, such as a platform or an app, or a virtual service or product (i.e., software you can download from a website).
There are a host of startups working in hardware technology or technology that produces physical goods or products (i.e., drones, medical devices, energy equipment, etc.) but there are vastly more startups with virtual or intangible goods and ser vices. This is gleaned by investigating the type of companies in Pitchbook's database, which collects information on any startups that has engaged in any financing round (loan or equity deals). In the United States, there are approximately 126,863 companies that are “hardware” or “physical” in nature—this search includes any industry or sub-industry that has a physical product component to it.[52] In contrast, a more conser vative search for more intangible or virtual goods and services (search includes companies that are only software in nature) yields 448,902.[53]4 In fact, within only the Information Technology industr y, there are 20 times more software startups than there are hardware startups.[54] Even with companies that tend to work with physical assets such as cars and homes (i.e., Uber and Airbnb), the product the companies are offering are the platforms, and not the cars or homes. The cars and homes belong to the individual owners. Uber's product is a technology platform, not a “smart car,” just as Airbnb's product is a platform connecting buyers and sellers, and not building homes or hotels for usage.Because the products and services that startups tend to offer are “virtual,” there are virtually no physical location shops where they sell these products and services. Many of these products and services do not require much physical capital.
In The Startup Owner's Manuel (2012), Blank and Dorf argue that “bit” (virtual) products coupled with “bit” (virtual) sales channels are how successful startups were able to move at “Internet speed” and obtain explosive growth (i.e., Facebook, Google). They advise startups to continue using these strategy of operating in the “bit” space. Thus, unlike a pizza shop or hair salon, those involved in the development and sales of a product/service can work virtually. It is often common that in the early stages of a startup, individuals are working remotely, from someone's home, from coffee shops, or more popularly, from co-working space such as WeWork, or related co-working spaces in accelerators or incubators.In a survey of co-working spaces, it was found that the average U.S. coworker space user is a “young, male, well-educated, and works in Tech.”[55] The conclusions of the survey indicate that co-working facilities are popular places for “starting and operating new businesses.”[56] These startups tended to be early stage startups. Larger and later stage startups tend to move to office spaces. In the fieldwork studies that included interviews of 45 startup entrepreneurs across the United States, interviewees indicated that members of their company tended to work virtually, from different cities in the United States, and from different countries. Many of these interviewees also indicated previously or currently working from a co-working space rather than an office. In fact, in discussion forums and articles geared for startups, there are business operations discussions on questions of “Does your startup really need a physical space?” or “Better to work without an office.”[57]
These characteristics are in contrast to Main Street entrepreneurs— the owners of hair salons, restaurants, bars, grocery stores, local banks, hardware stores, accountant ser vices, retail stores, galleries, and the standard “brick-and-mortar” stores one would expect to see on Main Street. These products are tangible—a dinner, an orange, a tool, a haircut, a seamed dress—and they tend to have a storefront location or a physical office space. It is of course possible that the local accounting service can offer virtual products. It is also possible for startups in cities to open up storefronts for accounting services. But perhaps one reason there are fewer office locations of startups is because most startup hub activity is happening in cities where the price of renting offices or storefronts is substantially higher than it would be on a typical Main street. The top three cities in the Unites states with greatest number of startups and venture capital funding are in silicon valley, New York City, and Boston, all three of which top the charts every year for highest commercial rental prices.