Can Silicon Valley Be Recreated Online?
I am a citizen of the world. French by birth, I lived 17 years in San Francisco, and the rest in Europe where I managed different companies in 9 countries. This experience gives me a unique perspective on cultural and business differences.
Every country wants to become the next Silicon Valley. It’s an $840B economy which would make it the 18th largest global economy, bigger than the Netherlands.
For this reason, startups are at the center of political initiatives. Full employment is what creates stability, and startups are the new engine, creating new jobs and new economies. So politicians are riding the startup wave. Most of them do it for the wrong reasons, as they see this movement as a PR opportunity.
Recreating Silicon Valley is not easy. A lot of initiatives have been tried and failed, China being the exception. Now the COVID pandemic clearly demonstrated that we could work and perform remotely, at least in the tech world. We have become digital and we live on the internet.
So can we recreate Silicon Valley online?
Let’s point out what makes Silicon Valley such a rich and different ecosystem and see if it can be replicated online.
It starts with changing the world
Ambition. Ambition is the hallmark of Silicon Valley. Changing the world is the objective, nothing less. To outsiders, this is pure arrogance. However, they are looking at it through the wrong lenses. It is because you set the bar high that you can achieve incredible things. In the rest of the world, the bar is what you know you can do. In Silicon Valley, how we get there has less value than what you want to achieve. I’ve seen how difficult it is for foreign founders to change their mindset and become Silicon Valley aspirants.
Online: This mindset is hard to bring online, it’s cultural!
Startups are experiments. Silicon Valley is the region that has experimented the most. Every experiment leads to more knowledge. This new knowledge is shared via blog posts, books, and other means; no ecosystem does this better than Silicon Valley. In most other places, what you know is your special power. In Silicon Valley, knowledge sharing creates a better ecosystem, and “giving back” is the norm. Knowledge also flows through people. Failed startups let go of savvy individuals. Failures are opportunities for others to accelerate the transmission of knowledge. The speed at which knowledge is shared is critical to creating an “up-to-date” environment. Unmature ecosystems don’t know what they don’t know and are significantly outdated.
Online: The internet is clearly the best means to share knowledge. However, you need to be “connected” to Silicon Valley to know what to read, who to follow. The give-back culture is also essential and, again, connecting to the right people is going to be difficult to replicate.
We often mention the need for entrepreneurs, but a startup ecosystem needs all kinds of smart, resourceful individuals. Business and technical skills are often pointed to, however, if we dig a little deeper, we need product managers, product designers, growth marketers, customer happiness managers, data scientists, and so many other key roles. Each has a specific skill set. These skills are dynamic and what was true yesterday might no longer be. Silicon Valley still concentrates the best of the best in each area. I would argue that some skill sets are unique to Silicon Valley. If you take growth marketing, outdated ecosystems are still leveraging tools to attract clients, whereas Silicon Valley tries to understand predictive customer behavior to anticipate the best time to capture their attention.
In addition, a good ecosystem thrives on sharing experiences. Successful entrepreneurs can reinvest their time, knowledge, and money. Most, if not all of the Valley’s venture capitalists are former entrepreneurs who have had incredible success. In other places, I’ve often seen financiers instead of entrepreneurs. That makes all the difference in the world. Having a pool of super talented individuals willing to give back creates a virtuous cycle, unlike some toxic ecosystems filled with parasites who never created anything and give stupid advice.
Online: Online did not help much create talents elsewhere. There are great talents anywhere in the world, and Silicon Valley talents have also spread around the globe to improve local ecosystems. Stanford and Berkeley are not unique; the world is full of incredible universities. 52% of Silicon Valley founders were not born in the U.S. Silicon Valley Venture Capitalists are now looking outside the U.S. and have set foot in many other places to scout high-potential startups because of it. So without the online push, the world is catching up.
A balanced mix of technology companies
Arguably, two ecosystems are leading the movement: Silicon Valley and China. In both ecosystems, there is a mix of hardware and software companies. Software feeds off hardware, so having them both in the same place is a significant advantage. I remember working with the Intel RealSense engineering team and the Google Tango engineering team during the development of the next iteration of our software. Intel and Google needed use cases and we needed hardware capabilities to take it to the next level. Most ecosystems are software-driven as it requires less infrastructure.
Online: That connection is difficult to recreate online.
Corporate pure players
Corporate pure players are incredibly important. Names that come to mind are Google, Apple, Facebook, Microsoft, Alibaba, Tencent, Baidu, TMSC, or Samsung. They play 3 key roles. They train young talents incredibly well. They are corporate investors, Intel venture was a pioneer, but they all do it now. Finally, they create a large M&A market, as they often acquire startups. This creates liquidity for investors. Without corporate pure players, it is impossible to build a balanced ecosystem.
Online: The Internet can’t change anything. These companies will have more influence in their local markets. This is still their main market, they understand local regulations and do not like to be exposed to foreign regulations. They will continue to train, invest, and buy, some may happen abroad but many will happen locally.
Investors are the cornerstone of a well-designed ecosystem. It’s not just about being able to invest money, but knowing how to invest it. Good investors have long understood that money is not an unfair advantage. Money is money regardless of the source. Silicon Valley investors have come a long way to become super attractive. They have an incredible network of experts, potential customers, and partners. But more than that they have the data. They see more startups, more entrepreneurs than anyone on the planet. They have developed a fantastic knowledge of different markets- they’ll tell you about potential competitors that you’ve never heard about - they have seen countless business models and can provide feedback, and they’ve been involved with numerous startups from inception to IPO and learned a great deal. That makes them different and better.
In addition, let’s not forget that Silicon Valley has deep pockets. Uber raised $21B in total! Funding across Europe in 2020 was $40B, $156B for the US!
Online: You no longer need to be a “Silicon Valley” startup to appeal to top investors. However, you still need someone in your network that can put you in touch with these folks! VCs outside of Silicon Valley have still a lot of catching up to do.
Success in Silicon Valley puts the startup in a global spotlight. If you create a successful startup in Germany, you will likely have created a brand in Germany. If you create a successful startup in San Francisco, you have created a global brand.
Online: The internet is putting even more emphasis on Silicon Valley success stories. Everyone wants to be the next billionaire startup. The world still looks to Silicon Valley as a model.
We live in an era where going fast matters more than building barriers to entry. Of course, I believe in patents for some specific industry segments, like Biotech for example. However, for most projects, speed is the key. Silicon Valley is fast. Fast to grow and fast to die. That’s why we sometimes have trouble understanding money raised and money lost. In many other ecosystems, surviving is the norm. To survive is simply to die later. Speed is not only about startups but also about individuals. Meetings are short, calls are timed, no icebreakers, everything means business.
Online: It’s a mindset, really hard to change!
Feeding off a large Market
Perhaps the most obvious advantage is the market size. In 2021, the global information technology (IT) industry is estimated to be valued at 5 trillion U.S. dollars, with over a third of its market share coming from North America. Silicon Valley startups can target the largest technology market in the world. This is a very significant difference, probably the most important. The same startup in Europe or Asia (except China) doesn’t stand a chance if there is a similar startup in the U.S. The one in the U.S. will grow much faster and therefore at some point outperform its competitors, simply because it can reach more customers with the same effort.
In addition, it can work with well-intentioned corporate accounts. This is not the case everywhere, because in many cases, companies do not really work with and help startups. They talk about it, but rarely play the game and do not go beyond the stupid POC, read Proof of Concept. Working with a startup means, buying the product, providing a flexible legal framework, and putting resources at its disposal to make it succeed.
Online: This issue is rooted in the physical world. Local markets are the launching pad for startups. The better the local market, the better the startup ecosystem.
Online is not a clear solution to replicate Silicon Valley. Most wannabes ecosystems have the right resources, money via local investors, but have the wrong mindset (no ambition, too slow, no give back culture), operate on small markets, lack M&A dynamics with corporate pure players, and hardware players to feed off.
I’d love to say that we could see Silicon Valley clones sometimes online. However, I am a realist, and recreating the strengths of such an ecosystem is going to take a long time, with culture and mindset being probably the hardest things to replicate.
We need to record a Silicon Carne on this ;-)