This Critical Lesson in MySpace's Failure is Still Relevant Today
Many articles have been written about the rise-and-fall of MySpace, the LA-based social network that in its heyday was the most popular website in the world. I had a front row seat to the experience — MySpace was Aster Data’s flagship customer and I was responsible for the relationship. For nearly two years, I flew back-and-forth between San Francisco and LA every week to be onsite with our largest customer as we brought the world’s first 100TB commercial data warehouse into production.
When we first started working with MySpace in 2006, the company had just eclipsed Yahoo! to become the most visited website on the internet (nearly 5% of all US internet visits were to MySpace), “The Facebook” was a fledgling startup that had only recently opened up access beyond U.S. university students, and Twitter was but a few months old.
Peak internet in 2006
At the time, MySpace easily had one of the top technical teams in the world. Everyone I met there was unquestionably an A+ player and the conversations we had on topics ranging from infrastructure to data analysis to user privacy were lightyears ahead of nearly anything else I’d encountered in Silicon Valley.
At the time, MySpace was growing at an insane pace and needed to expand. They needed more engineers, more designers and more data analysts (the term “data scientist” hadn’t yet hit the mainstream). There was just one hitch: the founders had made it their mission to build LA’s first massive tech company and insisted that all employees be based there.
But LA’s startup scene was still in its infancy. There wasn’t enough experienced, homegrown talent to satisfy MySpace’s needs. And candidates in the Bay Area had zero interest in moving south (the NorCal / SoCal rivalry was in full swing in those days, and the prevailing viewpoint in Silicon Valley was that a move to LA meant abandoning tech relevancy).
That’s when MySpace’s leadership made a fatal mistake: instead of keeping the bar high and expanding northwards to Silicon Valley (which other leading startups at that time were doing), the company doubled-down on its “LA-only” mantra. As a result, in less than two years, MySpace went from hiring only the best-of-the-best to bringing onboard people who previously wouldn’t have made it past the first interview.
When competition with Facebook heated up, MySpace simply didn’t have the talent to compete. The company ultimately relented and opened a San Francisco office in late-2007, but by that point it was too late. And we all know what happened after that.
For startups based outside of the Bay Area, the lesson from MySpace’s failure isn’t that every tech company needs to relocate to Silicon Valley. Or even that every tech company needs to open a Silicon Valley office. Rather, founders need to be honest and objective about whether or not the talent pool in their local market meets their needs:
In what areas is the local talent pool strong and in what areas is it lacking?
Is the local talent pool large enough to satisfy the needs of the company as it grows?
Does the local talent pool have experience building high-growth, globally-competitive companies?
Canada, for example, has strong engineering and product talent, but relatively little sales and marketing talent (and almost no experienced executive-level talent). Most Central and Eastern Europe countries have exceptional engineering talent, but limited product talent. And so on.
Similarly, a country like Canada has a large enough engineering talent pool to support thousands of high-growth companies, while the smaller size of Scotland’s talent pool objectively requires companies to look south to England (or to Europe) once they reach a certain level of scale.
And the vast majority of countries not named the United States have virtually no talent who have actually seen the full journey of a globally impactful tech company from inception to exit (and, no, being part of the “founding team of Uber Canada” or the “country manager for Facebook” does not qualify — you joined a stable, well-funded company with thousands of employees, plenty of process, a big, fat salary, and a lot of wind at its back).
The problem is, many founders are either unwilling or unable to look for talent outside of their home market. And even when they are, peer pressure from local investors, politicians and the media to “build a home grown success” often makes it more challenging.
But at some point, every fast-growing tech company based outside of Silicon Valley will be faced with the same question: do we hire an inexperienced, unqualified person locally for this role and hope they grow into it, or do we keep the bar high and go to where the talent is.
When that time comes, just remember that you’re competing against my friends.
