A few days ago I was hosting a foreign government delegation visiting our area in an effort to understand Silicon Valley’s ecosystem and economic development model, and use it as a template for creating or improving their own innovation-driven economies. Many countries but also US regions send such delegations here. Over the course of three days we met with entrepreneurs, investors, bankers, startup advisors, university professors, corporate executives, and lawyers. While I’ve lived in Silicon Valley for the past 20 years, 10 as a startup founder and corporate executive, and 10 as VC, and consider myself an active member of this ecosystem, visits like last week’s bring to focus the Valley’s uniqueness, efficiency, and adaptability.
In a previous post I wrote that people, universities and research labs, risk capital, and modern infrastructure (legal, financial, physical, technical) make up Silicon Valley’s basic ingredients. But during this three-day visit I was able to really appreciate:
- Stanford’s central role in this ecosystem. Fifty years after Professor Terman started what is we now know as Silicon Valley, Stanford continues to be not a mere member of the Valley’s ecosystem but its core. It appears that each one of its students is a potential entrepreneur ready to start or participate in an innovative company. Professors advise students on company concepts, often fund these concepts, and actively participate in the resulting companies. Science and business classrooms, cafeterias, and the hallways of the campus buildings are the places where ideas are exchanged and where teams are formed. Recognizing the quality of faculty and students and the IP they create, investors “walk the hallways” in search of the next fundable idea. The University actively encourages the smooth flow of IP from its labs to the startups knowing that it will benefit from their success in multiple ways, as the founders of HP, Google, Yahoo, and of countless other companies have demonstrated over the years.
- The ease with which university professors, laboratory researchers and students move between academia and industry, research and development. These people know that without repercussions they can leave their academic or research positions to start companies and create a product or service out of the IP they created in their labs. But they also know that they can as easily return to their old positions to continue their academic or research endeavors.
- The willingness and drive to rapidly prototype an idea, test it with prospective customers, evaluate the results, repeat the success and discard the failure, learn from either outcome, change/pivot as appropriate, and try again.
- The ecosystem’s completeness, connectedness, efficiency and high execution speed. Many have spoken about the ecosystem’s characteristics but only as you drive from a meeting in Palo Alto (Trident Capital) to one in Mountain View (Fenwick and West) and back to one in Menlo Park (Silicon Valley Bank) you come to realize the efficiency advantages offered by close proximity (VCs, lawyers and bankers within a 10-mile radius). You also realize the advantages of being part of a people-network that has been created and strengthened over many startup-related transactions, focuses on the entrepreneur, and is based on openness, trust, sharing knowledge (successes and failures) and optimism.
- The entrepreneurs’ ability to select investors and advisors not based on the money they can invest, but based on the value they bring (connections to customers, connections to executives, help anytime and anywhere on anything from closing the next customer, interviewing and helping to hire the next executive, to refining the business model).
Several countries from around the world, but also many US regions, are trying to replicate Silicon Valley’s ecosystem and economic model in the process of creating innovation- and entrepreneurship-driven economies. Successful will be the ones that analyze this ecosystem and model and properly adapt them, rather than trying to directly copy them. In their analysis and adaptation they must take into account their regional characteristics, peoples’ competencies and temperaments, university environments and IP portfolios, as well as their overall economic environments. While they will make mistakes, they need to remain optimistic, flexible and be willing to experiment, analyze, pivot if necessary and try again until they get it right, just like everybody in Silicon Valley does.