Rude VC: Silicon Valley’s secret sauce

Rude VC: Silicon Valley’s secret sauce
Opinions

secret-sauceOver the past few weeks in this space, inspired by Fleur Pellerin’s current government initiative to replicate Silicon Valley, I’ve recapped some of the history of the region and reconsidered the wisdom of attempts to reproduce the Silicon Valley model elsewhere.

I submit that trying to imitate Silicon Valley is futile. However, France’s government and business community can derive inspiration from the factors that rendered Silicon Valley a success. Regions finding 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 comes to mind as one prominent example. A local innovator there whom I had the pleasure of meeting just last week pointed out that it was only once New York ditched its Silicon Alley moniker that the city’s tech entrepreneurial ecosystem really began to take off.

So how can France derive inspiration from the Silicon Valley model ?

This is a tough question for two reasons. First, nobody can identify with certainty all of the factors made Silicon Valley such a success. There exists a certain degree of chance and cognitive dissonance rendering attempts to copy Silicon Valley impossible.

Secondly, one key ingredient to SV’s success – its excessive proportion of people with crazy ambition – cannot be so easily exported. According to an analysis of LinkedIn profiles, residents of Silicon Valley dream bigger than the rest of the world. People who include the keywords “change the world” in their LinkedIn profiles are far more common in the San Francisco Bay Area than anywhere else (source: Venture Capital Dispatch).

Perhaps a better question would be: which ingredients of Silicon Valley’s secret sauce might be transferrable here ?

Two prominent factors come to mind which might be relevant for France to carefully consider: i) proximity, and ii) immigration. (Note that I’ve deliberately decided to set aside a third factor – fiscal environment – in order to avoid summary dismissal of these constructive suggestions by bureaucrats that may be reading this).

Proximity

By proximity, I mean the proximity of educational institutions, businesses, and the design community. Proximity of this diverse group is important because when talented people of multi-disciplinary expertise come together, the odds increase exponentially for serendipitous encounters that spawn innovation. Subsequent to the traitorous eight’s creation of Farichild Semiconductor, two of the most familiar names (Robert Noyce and Gordon Moore) went on to found Intel right down the street. Not far away in Menlo Park, a third founding father by the name of Eugene Kleiner teamed up with a veteran from HP in nearby Palo Alto, Tom Perkins, to give birth to one of the world’s most renowned venture capital funds.

A more recent example and arguably one of the most successful entrepreneurial endeavors in history, Google’s ascendancy stemmed from the chance encounter at Palo Alto’s Stanford University of Sergey Brin and Larry Page. The proximity of institutions like Stanford and UC Berkeley facilitated the recruitment of high-caliber engineers and managers as the company grew, including for example, Stanford graduate Marissa Mayer, who conceived the Google home page’s elegantly simplistic design.

The design element cannot be underestimated either, especially in innovation today. Thanks to the proliferation of open source code bases, cloud infrastructures, open standards like html etc., creating a new high-tech offering is remarkably accessible. The innovation of a product or service lies not in the complexity of the underlying technology, but rather in its user experience. Design, or its more evolved form as creative intelligence, forms the heart of user experience, and Silicon Valley has always been rife with artists, designers, and creative conceivers.

Immigration

Immigration is a less obvious but equally important ingredient. Brad Templeton, Director of the Electonic Frontier Foundation, wrote an excellent piece last year in Forbes magazine, The Real Secret Behind Silicon Valley’s Success, in which he recounts his epiphany during a high-end conference for PC and internet executives in the late 90s. A speaker wanted to make a point about immigration to the room, which was full of founders and top executives from high-tech companies, instructing, “If you were born outside the United States, please stand up.” And more than half of those in the room stood up.

Researchers from Duke University concluded in a report that immigrant-founded companies created over 450,000 jobs in 2005, and that 52% of startup founders in the U.S. were immigrants. Most of these people gave up a life somewhere else to come to Silicon Valley in order to live the entrepreneurial dream.

There is something in an immigrant’s DNA that lends itself to entrepreneurship. Perhaps it’s an absence of fear of new adventures, an ability to operate on the fringe of society, unconstrained by social norms and conventional thinking, the sink-or-swim pressure of starting over, or some combination of all of these factors plus others.

So what are the lessons for France ?

I submit that one lesson is to establish a smarter policy on immigration that doesn’t hamper the retention of talented entrepreneurial individuals, regardless of their familial attachments to the hexagon.

Another is to think carefully about the gravitational importance of proximity. The rumored choice of Saclay as the hub of the Paris Capitale Numérique initiative grossly neglects the proximity concept. Why the government overlooks the one area that ticks almost all the boxes, the Sentier district in central Paris, (which Liam Boogar wrote about a while ago) – a place with already a critical mass of entrepreneurs, conveniently accessible, and adjacent to the heart of the country’s fashion and design neighborhood – still escapes me.

As we like to say in France, here’s hoping the mayonaise takes…

4 Responses

  1. Avatar
    Maurice

    Great article. Would love to see a French silicon valley but I think the current graduate educational system is too stringent and doesn’t really encourage creativity and “change the world” attitude.

  2. Avatar
    Jeff Abrahamson (@Jeff_Abrahamson)

    Don’t under-estimate the active role of universities. French universities (some grandes écoles _maybe_ excepted) are still behaving mostly like the state institutions that they mostly are. Despite the university reforms that encourage them to behave independently, their staff are still civil servants, including their professors. Hiring a nobel laureate (or serial entrepreneur with a good publishing and research record) would be fiendishly difficult, especially in the presence of pay competition. A professor is paid X, in France, period.

    But beyond the stodginess that comes from their state histories, French universities lack two important related ingredients: a press office and a patent office. The press office’s job is to keep the university in the press and to make sure the city, the region, the country, and the world knows what great things it does. Press coverage doesn’t just happen, and certainly not the prominent variety that is so critical to establishing and maintaining reputation. MIT researchers (to take an example familiar to me as an Economist reader) are not quoted more often than polytechnique researchers because of their language, it’s also because the MIT press office shoves information down the throats of journalists, so that there is always some low-hanging fruit or story inspiration that includes MIT. And this becomes a virtuous circle: MIT gets good talent because it has the reputation to attract it, and it increases its reputation by having good talent.

    The patent office, on the other hand, actively works with researchers to say “what have you done that we can patent”. And then it says “don’t you worry about that, we’ll handle the legal stuff, go do more research and found companies and stuff”. And, since it realizes that it makes money based on commercialising those patents, it goes out and seeks companies that might want to license them.

    That’s a significant cultural shift.

    (I exaggerate slightly for rhetorical effect, but only very, very slightly.)

  3. Avatar
    mark bivens (@markbivens)

    I fully agree. Moreover, French universities generally lack a technology transfer office, which enables (and actually encourages) the commercialization, assignment of rights, and granting of equity upside to spin-outs based on technologies developed at the university.

  4. Avatar
    thomas

    The immigration is very important for the valley: if you visit Stanford and Berkeley CS departments, you feel already like you’re living in Asia. But it is only one component of the Mayonnaise.

    If you want to create a dynamic and innovative environment, you should
    – let entrepreneurs become rich enough that they will invest back and go on to coach younger generations of entrepreneurs when they retire from startups;
    – making it ok for people to fail, without ruining all their chances, (failing == trying);
    – encourage an entrepreneurial mindset by pushing young people to question status quo and experiment. Make them understand they can change the world. In the US you start that at kindergarden.
    – create an environment where people with different cultures collide: not just a space for engineers from one school, but a space where artists, law students, engineers with diverse trainings, medical professional, investors, … can interact. Like the Stanford campus for example (or an interdisciplinary curriculum like the Design School).

    That means tearing down a lot of walls.

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