Rude VC: Copying Silicon Valley

Mar 5, 2013
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A couple weeks ago I provided a very svstripsuccinct recap of the Silicon Valley narrative. For a more in-depth review, A History of Silicon Valley by Piero Scaruffi and Arun Rao might well be the most comprehensive, and Robert Cringely’s Accidental Empires focuses on the pc industry empire-building during the pre-web era. Understanding the Silicon Valley story is important for those who are striving to replicate the Silicon Valley model in their own communities, such as what the French government is trying to do.

Witnessing these government efforts re-surge over the years, of which France’s current incarnation is dubbed Paris Capitale Numérique, I submit that two fundamental questions should be addressed: i) should governments even try to copy Silicon Valley, and ii) what is the secret sauce that makes Silicon Valley such a bastion of entrepreneurship and innovation ?

Regarding the first question, my opinion is that the answer should generally be no. Silicon Valley today encompasses such a unique confluence of factors — some planned, most serendipitous, and many even difficult to identify — that government attempts to create a replica of Silicon Valley in their home market will inevitably end in futility.

For the Silicon Valley model is one that has evolved over decades. No European government has demonstrated an ability to cultivate a 30-year project. Furthermore, Silicon Valley is not the result of a centrally-planned state endeavor. The government, more specifically the State of California, created an environment that fostered the emergence of Silicon Valley, in large part by trying to do no evil. But it was predominantly the private sector and an abundance of rugged individuals that built the foundation for today’s Silicon Valley.

An experienced European VC that I respect reminded me of The Netherlands’ misplaced ambition to replicate Silicon Valley in 1997:

In 1997 the Dutch Government thought of stimulating IT entrepreneurship by setting up a Government supported VC fund called Twinning. All those hype days….. Anyway, like so many other initiatives of governments also this idea ended in a mass failure. In my opinion there is no way of just copying the Silicon valley concept. That is an unique situation, the environment, the infrastructure, the knowledge, experience, but also the heritage, the long experience and history. No way of copying it in 5 years. No way of copying it anyway!

Don’t try to copy. Think different.

None of this wisdom has prevented numerous regions from trying. Silicon Alley, Silicon Prairie, Silicon Roundabout, Silicon Gulf, Silicon Welly, Silicon Beach, Silicon Border, Silicon Desert, Silicon Glen, etc. and those are just the ones beginning with the word Silicon, the list is actually quite ridiculous.

Yet the areas with the most success in creating clusters of innovation have been those that do it on their own terms and play to their own unique strengths, where the government facilitates an environment that doesn’t penalize failure and then gets out of the way.

New York City has emerged as the world’s second largest market of VC-backed digital media startups thanks largely to the area’s fashion and media sectors (and ironically the Silicon Alley term has fallen out of fashion). Mayor Bloomberg’s policies have supported a vibrant ecosystem of lifestyle and design.

Los Angeles is now gaining status as fertile ground for games startups, its proximity to the Hollywood film studios undoubtedly playing a key role.

Israel boasts the highest concentration of high-tech firms per capita in the world, often companies developing cutting-edge communications and security technologies for export worldwide.

I submit that governments should not seek to copy Silicon Valley, but rather take inspiration from the factors that rendered it a success. In the third and final post of this series on Silicon Valley, we’ll look at the most relevant ingredients of the region’s secret sauce which might inspire France in its goal to spur innovation.