Category Archives: Silicon Valley and Europe

A few lessons from disruptive innovators

My friend Jean-Jacques (thanks :-)) sent me a link about the CNBC Disruptor 50, a list of 50 “private companies in 27 industries — from aerospace to enterprise software to retail — whose innovations are revolutionizing the business landscape”. One could criticize the method, the fields, what is disruptive and what is not, but the list is by itself interesting. And I have done a few quick and dirty analyses. (I mean by Q&D a very fast analysis on the age of founders based on available data – their age or the year of their bachelor – my full analysis is available at the end of the post)

I found the following:
– Disruptive innovators are young (33 years-old)
– They raise a lot of money: more than $200M!!!
– and yes, they are mostly based in Silicon Valley.

Disruptive innovators are young

The average age of founder is 33 (whereas the age of founders of start-ups is closer to 39 – see my recent post Age and Experience of High-tech Entrepreneurs). As it was the case with that general analysis, founders in biotech and energy are much older than in software or internet. This was something I had already addressed in that paper: disruption might be the field of young creators.

They raise a lot of money

A really striking point is the amount of money raised by these disruptive companies. With an average age of 6 years, these companies have raised on average $200M… In energy, it is more than $400M and even more than $250M for the internet.

Silicon Valley leads

Not surprisingly though, Silicon Valley seems to be the place where to be. 27 companies are based there (a little more than 50%). It is also where they have access to the most capital ($280M on average). Then comes the East Coast (25%). Surprisingly they are based in NYC, not in Boston anymore when East Coast is concerned. Only 3 are Europeans… (Spotify, Transferwise and Fon) even if a few Europeans have also moved to SV…

Here is my full analysis which as I said before might contain mistakes (particularly on the founders’ age…). You might also disagree with my field classification…

click on picture to enlarge

Why is Silicon Valley still the place

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I heard so many times that Silicon Valley is not any more the place where to be or where to go, that when I read again the emails I had recently with a student, I asked to let me publish some of his words.

April 2 – Dear Hervé,
I just wanted to update you on my achievements so far in the Silicon Valley. First of all, this place is amazing! It is the first time in my life where I feel so accepted. The events and style of those events is just incredible. This is so much fun!
I met so many inspiring people there. I spent the weekend getting to know the people I am living with. I guess I did not tell you exactly that I live in an entrepreneurs’ house. It’s like a long term hostel for entrepreneurs and by entrepreneurs. I am so inspired by all of the stories!
I also visited a European institution on Thursday. And talking just between you and me I was really disappointed. People were very nice on the surface, but did not help me very much. Just the night before we were talking with some entrepreneurs that a lot of entrepreneurial problems arise in Europe because of lack of cooperation and common goals between the governments.

April 8 – Hervé,
I definitely want to return to Silicon Valley later. Another update of nearly a week’s progress: I visited another amazing conference! Feel so inspired. I also visited one Meetup on the topic of big data. It was really good. I also had an opportunity to participate in an event organized by the Scottish government – it was a very high level event. This is what I love about the Silicon Valley – I would have to try very hard to get into something like that in Europe.
Best,

April 18
I really love this place! 🙂 […] I can also give a short summary of what I did during my 3rd week here. I am so proud of the fact that I have visited Google twice! It’s an amazing place! I have also driven past some famous Silicon Valley giants like Cisco, Intel, IBM, Oracle (I loved the Oracle style!). I also went to the place of Shockley Semiconductors and Fairchild Semiconductors.
I went to some events at Plug and Play – very nice place. People have good connections there. Visited an event at Rocketspace accelerator. Completely different atmosphere. Attended another event by IESE (European business school) at Runway accelerator. Saw some Germans, liked the style. Had another event at SRI. Such a protected space, looks like the military future is in there. The event was about robotics – I felt stupid there because I know nothing about robots, but learnt a lot of stuff.
Lastly, as I have mentioned earlier – had the chance to meet […]. I love his speeches. However, it was a bit disappointing because the material was not really new. He just spoke about the same stuff which is on youtube. In general, I just love my time here. I have almost no time to respond to emails (as you can see), but I meet so many people and visit so many places!

May 6
Regarding the last two weeks of my stay – boy were they crazy. I have visited a lot of events. I have met some Europeans who live in San Francisco area. Actually it was a bit disappointing because they were not really entrepreneurial, more like benefiting from the local atmosphere.
I have been to another pitching session in San Francisco – totally secured my opinion that everyone has a chance to pitch and so many people use the opportunity even though the technologies are not really exceptional. I have spent the Easter at Stanford. There was the demo day and final pitches from participants of E-Bootcamp. Stanford left a very good impression – the quality of pitches and organization is different from the rest of Silicon Valley. The next week I went to Entrepreneurial thought leaders event at Stanford – an interview with Morris Chang. Very nice idea to have such events.
To shortly summarize my trip to the Valley it was truly a revolutionizing experience! I have learnt and saw so much. I feel like I have done another semester at EPFL! I think that entrepreneurship around the globe is very different. It is always possible to make something different than Silicon Valley and tailor it to the local atmosphere but in many cases some traits of the culture need to be changed. And that is probably the hardest thing to change. It requires much more than money injections. I am very happy about my choice to go to SV and I think this has made a huge impact to me as a future entrepreneur.

A few years ago, I had participated to a roundtable in Grenoble. I was trying to explain my views about the differences between here, Europe, and there, SV. It was criticized a lot for that “biased, one-sided view” of things when a young entrepreneur reacted. She had just come back from a trip to SV and it was a first time there. “I met more people and learnt more things in 10 days than I would have in in 6 months in Grenoble.” This was in 2011. I believe it is still true in 2014. I still believe SV is the place where to be or at least to go if you want to accelerate your learning about innovation and high-tech entrepreneurship.

Something rotten in the Silicon Valley kingdom?

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I have already recently discussed the difficulty Silicon Valley has in talking about or dealing with politics, for example in The promise of technology. Disappointing? and even more in Silicon Valley and (a)politics – Change the World. I was referring to two articles (which I considered as exceptionally great) written by George Packer in the New Yorker in 2011 and 2013. It is an article published on January 27 on the same web site, Tom Perkins and Schadenfreude in Silicon Valley by Vauhini Vara which motivates me in asking the question: Is there something rotten in the Silicon Valley kingdom?

All this is rather indicative of a serious situation that deserves the attention. Four days earlier, Le Monde published the article by Jérôme Marin, In San Francisco, anti-Google protests go too far. The summary of all this can be done simply, but I encourage you to read these articles (especially those by Packer whose depth analysis is really of interest):

Many new millionaires (in particular employees of Twitter and Facebook), and even some billionaires (see Technology Billionaires in 2013) contributed to the recent acceleration of the gentrification of San Francisco. However, the authorities of San Francisco rather encouraged the phenomenon and to a large extent, the debate begins to rage. On the one side a population that expresses its frustration at this new situation by blocking the famous private buses carrying these high-tech employees from their home to their office (see A Google bus blocked, anger rises in San Francisco by the same Jerome Marin) or a Google employee at his home. On the other side, the “slip” of Tom Perkins comparing these protests to attacks of the Nazis against the Jews…

These reactions illustrate a increasingly visible debate between the proponents of the Invisible Hand (let the rich be richer and the market will self-regulate for the benefit of all) and opponents increasingly exacerbated by the consequences of the global deregulation. As if Occupy Wall Street was moving to Silicon Valley. As Americans usually react fast, the city of San Francisco has taken the decision to have these private buses pay for the use of public bus stops. Vauhini Vara also mentions that Mark Zuckerberg has become the largest private donor in 2013 in the USA (with $1 billion …) and Sergey Brin ranks fifth .

My opinion is of little importance and I’ll let you judge. Let me just add (and you will understand where I am assuming that you care!) that large U.S. companies pay ridiculous amounts of tax lawfully using the possibilities offered by the law of international trade. In 2011, Le Monde published USA: profit does not necessarily mean tax, and waht follows comes from it:

Out of 280 companies among the 500 largest U.S. companies, 111, or 40%, enjoyed an average tax rate of 4.6%. There must be a rational explanation for this particular treatment you must think, falling profits for example, justifying a lower tax burden? The problem is that according to the data compiled in this report, this argument does not hold. The 111 companies we are talking about even recorded a total greater than the benefits of th oher companies combined. Between 2008 and 2010 the telecom operator Verizon has accumulated $32.5 billion in profits, the conglomerate General Electric totaled 10.4 billion profits, and toy manufacturer, Mattel, won over a billion dollars over the period. However, none of these companies did pay federal income tax.

“This is not a report against businesses, the study says in its preamble. Instead, like most Americans , we want the business to go well. In a market economy, we need managers and entrepreneurs, as we need workers and consumers. But we also need a better balance in terms of taxation.”

U.S. billionaire Warren Buffett recently called on governments to make him pay more taxes at the individual level for a greater tax fairness. Will multinational companies be capable of the same citizen behavior?

Since I started by mentioning that Sillcon Valley has changed the world, I conclude from memory with a quote I heard on France Culture this morning: “If you do not change the course of History, it is History that will change you.”

Europe, wake up!

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This is a short text I wrote in 2012, and my friend Will from Finland had made comments about it which I added. Thanks! I read it again this morning and thought it might be worth publishing it now…

Intel, Apple, Microsoft, Oracle, Genentech, Cisco, Google, Facebook, Skype. You probably know these companies. They were at the origin of major innovations for our societies. Maybe you are less aware of Niklas Zennström and Janus Friis, Mark Zuckerberg and Dustin Moskovitz, Larry Page and Sergey Brin, Leonard Bosack and Sandy Lerner, Bob Swanson and Herb Boyer, or Larry Ellison but you know much better Bill Gates and Paul Allen, Steve Jobs and Stephen Wozniak, Bob Noyce and Gordon Moore. They are entrepreneurs; the founders of companies that were all start-ups one day in the not-so-distant past, but are global titans today. Europe does not seem to understand the importance of high-tech innovation produced by these young entrepreneurs. Skype is the exception in the list and the Americans were able to produce hundreds of such success stories. Why have we failed and what can we do to change the course of history?

Innovation is a culture where trial-and-error and uncertainty have huge roles. Failure, unfortunately or maybe fortunately. Just as life! The European culture in all its diversity has provided welfare to its citizens since the end of World War II. Ironically, the comfort-level we all appreciate will actually accelerate its end. A culture can only live with creativity and renewal. As a recent article in The Economist illustrated it well [1], we Europeans are no longer able to innovate, our businesses are too old, at least in technological innovation (e.g. Nokia or Alcatel) and we do not create enough innovations. The causes are probably numerous, but fear of trying is the most serious. And I’m not sure that we are aware of it. Do many Europeans understand that innovation through high-tech entrepreneurship is critical? I fear that we would rather have well-educated children to enter the large established firms than creative individuals willing to try their luck. Worse, what models do we have?

Bob Noyce was a model and a mentor for Steve Jobs.

In this unique place, Silicon Valley, thousands of entrepreneurs try each year. “The difference is in psychology: everybody in Silicon Valley knows somebody that is doing very well in high-tech small companies, start-ups; so they say to themselves “I am smarter than Joe. If he could make millions, I can make a billion”. So they do and they think they will succeed and by thinking they can succeed, they have a good shot at succeeding. That psychology does not exist so much elsewhere” wrote Tom Perkins, co-founder of the legendary Kleiner Perkins fund.

Europe is not fully unconscious of the problem. In 2000, the Lisbon agenda proposed by theEuropean Union had the ambition to make of Europe in 2010 “the most competitive knowledge-based economy”. This has been a total failure. A variety of support mechanisms were created, but the Europeans seem to have forgotten that innovation is primarily a question of adventurers, pioneers – these types of people by definition are not looking for safety and support. Entrepreneurs live on their passion. “Launching a start-up is not a rational act. Success only comes from those who are foolish enough to think unreasonably. Entrepreneurs need to stretch themselves beyond convention and constraint to reach something extraordinary” says Vinod Khosla, another Silicon Valley icon. A start-up is a baby whose founders are its parents. Not surprisingly, founders often start the adventure as a couple, because they have the intuition it will be difficult and they need more than one mind and body. They are often migrants. Probably because migrants do not have any existing network or “right” connections in the new places where they have settled, they simply work passionately on their innovation, again raising the probability of success. Half of the entrepreneurs in Silicon Valley are not Americans. Why are we afraid of that opportunity in Europe? Silicon Valley is an open culture where even competitors like Apple, Google or Facebook talk and cooperate. This is REAL open innovation, not high-level top down roadmaps, but grassroots, bottom up collaboration. Interestingly, entrepreneurs are often young. While this is not always the case, youth does not give up on creativity easily, largely because they have not lived through the many failures that the rest of us have. Silicon Valley is a unique place in the United States that no one could replicate. And yet every state, every region of Europe is desperately trying to create its own! Let’s work together. By no longer seeking to create the Holy Grail, one unified “European technology cluster”, and by instead deciding to cooperate on a practical level to enable innovators rather than trying to do the work for them. While our egos are still too large to give up our dreams of global domination, at least let us work together without unnecessary waste! In a recent talk [2], Risto Siilasmaa, the young chairman of Nokia, called for a similar reaction and added that “entrepreneurship is a state of mind, which implies pragmatism, ambition, dreams, perseverance, optimism and give-up-&-start-again attitude”. Without a large ambition, it is not worth trying.

One concrete area to focus on is creating an infrastructure where risk-taking investors can thrive. Entrepreneurs cannot succeed alone. Very early in the innovation process they need investors to enable them to embark on the adventure. America has created the best tool out there so far, venture capital: former entrepreneurs who become the supporters of the next generation once they have already succeeded, financiers who have “been there and done that” [3]. These VCs know the start-up culture because they have been there! This experience complements the expertise provided by others who have spent years in large corporations; a perfect storm of competence and culture is needed. It also requires employees who also digested this culture, employees who can take a stake of the future success of the company through stock options. I said stock option, the word that became a bad word, the tool to fatten those who do not deserve it. Stock options should go to those who try. No doubt it will also require some labor flexibility for start-ups as they face uncertainty and rapid cycles. But it should not be assumed that the absence of these mechanisms is the cause of our failures. It is the absence of this culture of innovation that hurts us. Do not be afraid of failure. Failure is the mother of success, says the Chinese saying. Does the child successfully ride the bicycle on her first attempt?

Failure will always be part of innovation. This is why we need a critical mass. In one single place or not, in Europe. And failure should not be stigmatized. I think everyone interested in innovation needs to experience the Silicon Valley culture, to spend time to understand. Weeks or even months. Without fearing that our children will not come back. It is better to try out there than be safe back here. They will return to teach us, at worst, and at best return to set up Europe’s future growth companies! We also need to support high energy mobility among entrepreneurs across European hotspots, as we have done very well for our students. Universities are still critical once the students have left to provide landing zones for mobile entrepreneurs. You may criticize me for being too fascinated by the American culture and technological innovation. “Europe has other ways to innovate,” I am often told. It innovates with large corporations such as Airbus or with German- or Swiss-like SMEs, or in services. And you believe that US companies do not?! I am told that venture capital is in crisis, that Silicon Valley innovates less, and that may well be true – outside of the web, creativity seems to slow down. Schumpeter, the great economist, has built a theory where large established firms die and are replaced by new entrants when they do not innovate anymore. Why would the twenty-first century be different from the previous one? Maybe … but our energy, aging, health problems are not going to require new innovations and new entrepreneurs? I do think so. Europe needs a new ambition, a new enthusiasm and we Europeans are aging. We owe this to our children, to our youth. From primary school onwards, let us our children express their creativity, let us teach them to say no, and tell them that this is positive. A career is meaningless unless it includes passion and ambition. Let us not encourage them to follow the paths of certainty that may be deadly. Steve Jobs in a wonderful speech in 2005 [4], indicated that we were all going to die one day, and before that day, we needed to stay hungry, to day foolish. Let us follow his advice. Let us help our children!

Hervé Lebret supports high-tech entrepreneurship at EPFL. He is the author of the blog Start-Up, www.startup-book.com.
[1] Les Misérables – Europe not only has a euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs. The Economist, July 2012. www.economist.com/node/21559618.
[2] Risto Siilasmaa at the REE conference. Helsinki, Sept. 7, 2012.
[3] Do not miss the movie SomethingVentured which describes wonderfully and humorously the early days do venture capital, www.somethingventuredthemovie.com.
[4] Stay Hungry, Stay Foolish. ‘You’ve got to find what you love.’ http://news.stanford.edu/news/2005/june15/jobs-061505.html.

Again a few key points:
• Europe is behind USA and Asia in innovation.
• Entrepreneurs are not considered heroes in Europe.
• Trial and error, uncertainty, and failure are integral parts of innovation
• Our high level of comfort will accelerate its own end (again creative destruction).
• Fear of trying is the most serious problem with innovation.
• Europe’s 2000 mandate to become the world’s leading knowledge based economy has failed.
• Open Innovation is bottom up, not top down.
• Youth are creative because they have yet to experience failure.
• We must create an infrastructure where risk-taking investors can thrive.
• All students that show interest and ability in innovation should experience the Silicon Valley Culture. We should not worry that they will no come back.
• Europe’s leading universities can be the game changers, the catalysts, by agreeing on what is important (what innovation, what education, what tech. transfer) and investing in it.

The Immigrant, Factor of Creation

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Here was my last column in 2013 for Entreprise Romande, with a subject that is dear to me, the importance of migrants.

The paths of innovation and entrepreneurship are paved with a myriad of dilemmas. Clayton Christensen a few years ago had explored the first topic in his Innovator’s Dilemma and last year Noam Wasserman has published the interesting Founder’s Dillemmas. The uncertainty of the market, youth vs. experience, disruptive vs. incremental innovation, the new vs. the established are just a few examples of these difficult choices. A more controversial and politically sensitive subject is the contribution of migrants and foreigners in the field of creation.

Just when he debate is growing in Europe as well as in Switzerland about the threat that would represent those who are different and come from elsewhere, it is perhaps worth remembering more positive elements about the importance of openness to outsiders. The Swiss history [1] reminds us that the watch industry is linked to the arrival of the Huguenots in the sixteenth century; a part of the textile industry in St. Gallen has its origin in England. There is also a French origin in the Basel chemical industry. Perhaps it interesting to recall that Christoph Blocher has distant German roots. But what about Nicolas Hayek, the savior of the watch industry, rocked by his Lebanese and French cultures.

Much further, Silicon Valley, the world champion of innovation and entrepreneurship, owes much to its migrants. Of course America is a land of pioneers, but the San Francisco area pushed the logic to an extreme. More than half of the entrepreneurs in this region are of foreign origin and for example Google, Yahoo, Intel had founders with foreign roots.

While Europe has a temptation of closing its doors due to its economic difficulties, in the United States, the Start-up Act 2.0 intends to streamline visas for foreigners and to regularize children of migrants to enable them to enter higher education. Japan was another major country for innovation a few decades ago nut it may have suffered from its low level of migration; the country is aging and has not really reinvented itself.

Switzerland is a land of migration, let us not forget it. This is one of its strengths. Today, the campus of EPFL and ETHZ have a great deal of students but also of researchers and teachers with foreign origin. The proportion increases much more if you focus on those who create businesses. For those who have received an entrepreneurial scholarship to EPFL, the proportion rises to 75% including 25 % of non-Europeans.

Would foreigners be more talented and creative? The answer is rather a larger experience of what is unknown and uncertain. Migrants have agreed to leave their homeland, sometimes leaving everything behind. And they know by experience that we can recover from this loss. They know well that it is always possible to start again and the fear of failure is reduced. He also learned to domesticate novelty. It should be added that a migrant has less access to established circles and is stuck by “glass ceilings”. They must often build they destiny. From this point of view, they do not take the jobs of anyone, they create new opportunities, that will become beneficial to others!

[1] http://histoire-suisse.geschichte-schweiz.ch/industrialisation-suisse.html

The promise of technology. Disappointing?

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After reading the great New Yorker article about Silicon Valley and politics, I searched for “Silicon Valley” on the magazine web site and found two contrasting articles:

– the first one is a kind of introduction to my previous post, it was also written by George Packer (clearly a great and insightful writer) in 2011 and is about Peter Thiel, the famous libertarian entrepreneur and investor: NO DEATH, NO TAXES – The libertarian futurism of a Silicon Valley billionaire.
– the second one is much older and is about the early days of Google and Internet search: SEARCH AND DEPLOY by Michael Specter.

They are kind of contradictory because the second one is optimistic about what technology can solve (Google greatly improved our access to knowledge) whereas Packer shows Thiel’s pessimism with the outcome of technology even if he has great hope in it. In fact as mentioned in the previous article about SV and politics, he belongs to the group of people distrusting politics to the point that he believes technology might / must be the alternative.

Let me begin with the optimistic first: in 2000, Google was already seen as the winner of the Internet search race. Even if it did not have yet its business model, Google solved better our search on the Internet. Page and Brin did it by finding a better mathematics algorithm, the PageRank system based on the popularity and frequency of reference of web pages. As a funny side result, Google had less queries than other sites on porn: “About ten per cent of Google queries are for pornography. The figure is lower than that of most other search engines. This reflects the demographics of the people who use the search engine, but perhaps it also demonstrates one of Google’s obvious failings: porn sites are sought out by millions of Internet users but are rarely linked to prominent Web pages. Without links, even the most popular page is invisible.”

The credo of Thiel’s venture-capital firm: “We wanted flying cars, instead we got 140 characters.” Photograph by Robert Maxwell.

It’s been known that Thiel has been disappointed with high-tech innovation. Just read again my 2010 post, Technology = Salvation. I think you should read Packer’s article if you liked (or even if you did not) his Change the World. Both articles show the power and limits of these visionary people and the sometimes scary vision of technology vs. politics. There is something of Kubrick’s 2001: A Space Odyssey in all this. He brilliantly shows the strange nature of these people (a high concentration of Asperger syndromes and dyslexia – apparently two rather high frequency features of entrepreneurs). Again just short notes (you have to read it to see the broadness of the topics:

“Thiel believes that education is the next bubble in the U.S. economy. He has compared university administrators to subprime-mortgage brokers, and called debt-saddled graduates the last indentured workers in the developed world, unable to free themselves even through bankruptcy. Nowhere is the blind complacency of the establishment more evident than in its bovine attitude toward academic degrees: as long as my child goes to the right schools, upward mobility will continue. A university education has become a very expensive insurance policy—proof, Thiel argues, that true innovation has stalled. In the midst of economic stagnation, education has become a status game, “purely positional and extremely decoupled” from the question of its benefit to the individual and society. It’s easy to criticize higher education for burdening students with years of debt, which can force them into careers, like law and finance, that they otherwise might not have embraced. And a university degree has become an unquestioned prerequisite in an increasingly stratified society. But Thiel goes much further: he dislikes the whole idea of using college to find an intellectual focus. Majoring in the humanities strikes him as particularly unwise, since it so often leads to the default choice of law school. The academic sciences are nearly as dubious—timid and narrow, driven by turf battles rather than by the quest for breakthroughs. Above all, a college education teaches nothing about entrepreneurship. Thiel thinks that young people—especially the most talented ones—should establish a plan for their lives early, and he favors one plan in particular: starting a technology company.”

Always consistent with his thoughts, he “came up with the idea of giving fellowships to brilliant young people who would leave college and launch their own startups. Thiel moves fast: the next day, at TechCrunch Disrupt, an annual conference in San Francisco, he announced the Thiel Fellowships: twenty two-year grants, of a hundred thousand dollars each, to people under the age of twenty. The program made news, and critics accused Thiel of corrupting youth into chasing riches while truncating their educations. He pointed out that the winners could return to school at the end of the fellowship. This was true, but also somewhat disingenuous. No small part of his goal was to poke a stick in the eye of top universities and steal away some of their best.”

I am not sure I follow him too much (I am just too normal), for example in his quest for eternity, but I understand many of his visions. He is as much a dreamer as a doer, his fund had mixed results, but he is with Elon Musk (one of his his co-founders in PayPal) among the people who push “trying” to the limits without being afraid of failing.

Silicon Valley and (a)politics – Change the World

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My colleague Andrea just mentioned to me this exceptional article about Silicon Valley and its lack of interest, not to say distrust, for politics. It’s been published in the New Yorker in May 2013 and is entitled: Change the World – Silicon Valley transfers its slogans—and its money—to the realm of politics by George Packer.

“In Silicon Valley, government is considered slow, staffed by mediocrities, and ridden with obsolete rules and inefficiencies.” Illustration by Istvan Banyai.

All this is not so far from a recent post I published: The Capital Sins of Silicon Valley. George Packer’s analysis is however profound, subtle and quite fascinating. I will not analyze the article, you have to read it even if it is a vrey long article, and to encourage you in doing so, here are just five quotes:

– “People in tech, when they talk about why they started their company, they tend to talk about changing the world,” Green said. “I think it’s actually genuine. On the other hand, people are just completely disconnected from politics. Partly because the operating principles of politics and the operating principles of tech are completely different.” Whereas politics is transactional and opaque, based on hierarchies and handshakes, Green argued, technology is empirical and often transparent, driven by data.

– Morozov, who is twenty-nine and grew up in a mining town in Belarus, is the fiercest critic of technological optimism in America, tirelessly dismantling the language of its followers. “They want to be ‘open,’ they want to be ‘disruptive,’ they want to ‘innovate,’ ” Morozov told me. “The open agenda is, in many ways, the opposite of equality and justice. They think anything that helps you to bypass institutions is, by default, empowering or liberating. You might not be able to pay for health care or your insurance, but if you have an app on your phone that alerts you to the fact that you need to exercise more, or you aren’t eating healthily enough, they think they are solving the problem.”

– a system of “peer production” could be less egalitarian than the scorned old bureaucracies, in which “a person could achieve the proper credentials and thus social power whether they came from wealth or poverty, an educated family or an ignorant one.” In other words, “peer networks” could restore primacy to “class-based and purely social forms of capital,” returning us to a society in which what really matters is whom you know, not what you could accomplish. (…) Silicon Valley may be the only Americans who don’t like to advertise the fact if they come from humble backgrounds. According to Kapor, they would then have to admit that someone helped them along the way, which goes against the Valley’s self-image.

– “There is this complete horseshit attitude, this ridiculous attitude out here, that if it’s new and different it must be really good, and there must be some new way of solving problems that avoids the old limitations, the roadblocks. And with a soupçon of ‘We’re smarter than everybody else.’ It’s total nonsense.”

– “This is one of the things nobody talks about in the Valley,” Andreessen told me. Trying to get a start-up off the ground is “absolutely terrifying. Everything is against you.” Many young people wilt under the pressure. As a venture capitalist, he hears pitches from three thousand people a year and funds just twenty of them. “Our day job is saying no to entrepreneurs and crushing their dreams,” he said. Meanwhile, “every entrepreneur has to pretend in every interaction that everything is going great. Every party you go to, every recruiter, every press interview—‘Oh, everything’s fantastic!’—and, inside, your soul is just being chewed apart, right? It’s sort of like everybody’s fake happy all the time.”

The Dream of Silicon Valley

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This is my translation (well Google translation) of a very good article I read in newspapers La Tribune de Genève (pdf here) and 24 heures (pdf here). I am not sure I have the rights to do such a transaltion. I will do it the Google was and hopefully the news papers will not complain…

If you do not want to read it all, here are just two short quotes: “Some explain the excitement that prevails here because of a feeling of urgency, says Christian Simm. We must go quickly, people know they cannot work 80 hours a week for twenty years.” and
“You want to know the secret of Silicon Valley? asks Fadi Bishara, head of the incubator Blackbox. Failure is not an issue. It is completely accepted. It is even considered an apprenticeship.”

The Dream of Silicon Valley
Can the Lake Geneva area reproduce the ecosystem of the U.S. technology hub ?
by Renaud Bournoud

Often imitated, never equaled. The famous ecosystem of Silicon Valley, near San Francisco, is one of the most dynamic regions of the world. The success stories of Google, Apple and Facebook continue to fascinate, even on the Lake Geneva. But on paper, this Eldorado for innovation has much in common with our region. In a similar geographic area, a large bean sixty kilometers long, the two countries are ranked in the world’s most successful regions. If Silicon Valley is based on the prestigious universities of Stanford and Berkeley, the Lake Geneva can count on the EPFL, the Universities of Geneva and Lausanne or the IMD, the High School of Management. In both cases, the density of highly qualified people is high. Even daily commuters from Silicon Valley experience the discomfort that we know well . They also wait for hours in traffic jams. U.S. Highway 101, which irrigates the valley is as congested as the A1, between Lausanne and Geneva. Housing is also a concern that we share with them. The real estate prices are well above the U.S. average and have nothing to envy to those on Lake Geneva. So what are the ingredients that make Silicon Valley so special?

Demographic factors

A century ago, the orange groves reigned as kings over this corner of California. Now the land has nearly four million people. More broadly, the population of the San Francisco Bay is the size of that of Switzerland. The presence of reputable universities brings a lot of talent, as well as the attraction of the region. Silicon Valley Community Foundation considers that 60% of the engineers were born abroad, many of whom are from Asia. But the valley also attracts many Americans. “Here we are at the extreme west of the United States. We cannot go further, says Christian Simm, founder of Swissnex (note: the Swiss Agency for Promotion of Science and Innovation) in San Francisco. People who consider Boston too quiet come here to create. Because everything seems possible.” This density of great talent pool is ideal for company recruitment. A startup like Square, active in payment systems, could recruit 600 programmers in less than four years. This would not necessarily be feasible in the Lake Geneva region. These people have often come alone and can concentrate fully on their work. “Some explain the excitement that prevails here because of a feeling of urgency, says Christian Simm. We must go quickly, people know they cannot work 80 hours a week for twenty years.”

Cultural factors

A they arrived alone in Silicon Valley, people are quite willing to meet others, creating a culture of networking. Many networking events are regularly organized, like the Start Up Weekends. They also exist here, but in smaller proportions, simply because the population and the number of start-ups are lower. “It makes it easy to find a partner to build a startup,” says Ahmed Siddiqui, one of the organizers of Start Up Weekends Bay Area. “Here the world lives around the field of technology , explains Alexandre Gonthier, the boss of PayWithMyBank in Redwood City. I met my partner at the playground where I watched my children.” Not only can we can find a future partner in the sandbox, it is also easy to cross the pundits of Silicon Valley at random from a barbecue party. They are available and are ready to play mentors for younger people. “It is not as easy to meet bosses in Europe … Unless they learn that you are installed in Silicon Valley. There, the doors open,” notes Alexandre Gonthier. Contacts are natural, and the mentality towards failure also has a role. “You want to know the secret of Silicon Valley? asks Fadi Bishara, head of the incubator Blackbox. Failure is not an issue. It is completely accepted. It is even considered an apprenticeship.” And if the project does not fail, it will soon be on the market. “The minimum viable product” is the leitmotif of the Silicon Valley. “We need to create something simple that you can use right away,” says Solomon Dykes, the founder of the start-up Dotdoud in San Francisco. “I would add that the idea is not very important, Fadi Bishara continues. Googje invented nothing, there were already search engines. What matters is the “packaging”, how the project is sold.” It’s the reason why storytelling is used a lot to sell. These stories also serve to develop an entrepreneurial spirit. Many myths have grown from Silicon Valley. There is the famous story about the birth of startups in garages. Like, for exampl , Google, which had rented a garage, whereas it had already raised $ 1 million.

Financial factors

Good idea or not, nothing is possible without money. The region of Silicon Valley attracts 46% of venture capital in the United States, according to the Bay Area Council Economic Institute. This happens especially much earlier in the development of projects than here.” If, after a year , the start -up has not found funding , we believe that we need to move on,” adds Jeff Burton , director of Skydesk , an incubator located on the Berkeley campus . “For us, the institutional money comes much later, said Joao Antonio Brinca, representative of BCV board at the Foundation for Technological Innovation in Lausanne. Financing through venture capital funds typically occurs between the fifth and seventh year of the project life. “The sums involved are not the same. A young company of Lake Geneva can hopee to raise between 300,000 and 600,000 francs for its first round of funding. In Silicon Valley it is at least twice. So there is a gap between the first efforts of startups to exit the academic world and the interests of investors . This longer period may explain the difficulty of transforming research into marketable products. Another advantage of Silicon Valley is its close proximity maintained between universities and private firms. In this regard, the Lake Geneva is still lagging behind. But it would be wrong to say that nothing is done about it. EPFL has worked in recent years to attract firms in the area of innovation, so that they mingle with the start-ups. But again, the structures of the same type that abound in Silicon Valley are favored by the scale. The density of start-ups produces a unique emulation world. Also keep in mind the economy of scale to explain this difference. A U.S. start -up happens in a domestic market of 320 million potential customers. In Switzerland, an emerging company has to deal with a much smaller market, divided into three languages and twenty- six cantons.

This article was produced as part of a tour organized by BCV for ten young Vaudois.

The Startup Kids – a film that any wannabe founder should watch!

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Movies may become a better way to communicate about start-ups & entrepreneurship than books or blogs. It’s something Neil Rimer had told me when I published my book. It is true there has been a number of new features in fiction (The Social Network, Jobs) and non-fiction (SomethingVentured) recently without a need to mention old stuff such as Triumph of the Nerds Silicon Valley Pirates and special events on television such as PBS.

Startup Kids belong to this new trend and it is an interesting (and fun) document. You may watch the trailer here and I will quote a few entrepreneurs thereafter. The document had been mentioned to me by colleagues (merci Corine ) who showed it to me, including the very good blog article of Sébastien Flury: The Startup Kids – a film that any wannabe founder should watch! (whom title I used, nice Sébastien 🙂 )

What’s entrepreneurship?

Drew Houston, Dropbox: “It’s like jumping out of a cliff and having to build your own parachute”

Kristian Segerstrale, Playfish: “An entrepreneur is a person who dares to have a dream that not many people have and even more important dares to chase it, put their money where their mouth is and their time and their career and dares to take the risk to going out there to realize that vision.”

Alexandre Ljung, SoundCloud (from Sweden and based in Berlin and San Francisco): “I did not have the typical entrepreneur background, […] but in hindsight I was very focused on projects so I was very entrepreneurial but not in a business sense.”

In European Founders at Work, his co-founder Eric Wahlforss states “I think we could have easily done this in one year faster if we would have been a little bit more bold and thinking a little bit more in terms of scale early on. We started out very small, had almost no money at all, and a very small team. I think we could have been bolder. […] and running with a bigger vision from the start.” And then “Do it.” It’s the best decision I’ve ever done in my whole life. […] And I was studying engineering as well, and I had one hundred classmates. And I know that almost zero of them actually went on to start a company, which is kind of crazy because I know a lot of them have good ideas. But none of them quite felt that they were able to pull it off.

Luck is an important topic in the movie

Segerstrale again: “Successful start-ups need a lot of things, they need a great idea, they need a great team, they need to be there at the right time, they need the right level of funding, and they need a lot of luck.”

Tim Draper, founder and investor, DFJ: “There is a lot of luck in the success of all the companies which have succeeded. You need a lot of luck, there were 25 search engines funded before Google was funded. There was Friendster and LinkedIn and MySpace and about 50 others before facebook became the big winner in that area.” [And it was the same with computer companies in the 80s!]

Finally do not miss Zach Klein (founder of Vimeo) in his beautiful wood cabin which reminds me of Thoreau’s Walden.

Stanford will invest in companies founded by students

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“The prestigious American university Stanford will now invest in start-ups.” Thus begins an article in the newspaper Le Monde. The author, Jerome Marin, is rather negative about this decision, as the following quote shows: “The confusion is fueled even at the top of the university: the president has close ties with several giants of Silicon Valley, including Google as it is a member of the Board.” Without trying to argue, I think the reporter is misled.

But before I give you my point of view , I’d like to mention that I looked for other articles related to the topic, I found at least two :
– That of TechCrunch, close in spirit to Le Monde’s one, Stanford University Is Going To Invest In Student Startups Like A VC Firm. The article is also critical but I think better informed… and it also deals with the tension between the academic and business worlds. “That tension between academia and industry was highlighted this past spring when a number of students dropped out of school to start Clinkle”.
with references to another New Yorker article.
– The press release by Stanford University, StartX, Stanford University and Stanford Hospital & Clinics announce $3.6M grant and venture fund. If you read the statement carefully, it is about a gift from Stanford to StartX and a joint Stanford-StartX fund. StartX is an accelerator created by Stanford students and I understand that the University therefore supports this initiative. There is no mention, however, of a fund managed by Stanford as a VC fund.

The reason I think the reporter is mistaken is when he says that “Stanford will invest in companies created by its students”. As if it was new. Even if I agree that the stakes taken in start-ups in exchange for licensing of intellectual property is not an investment per se, Stanford still has acquired stakes in more than 170 of its spin-offs in the past . In addition the Stanford endowment has invested on an individual basis in many start-ups in the past (not to mention in many VC funds). For example, I found in a database I am building on Stanford-related companies, that Stanford invested in Aion (1984), Convergent (1980), Gemfire (1995), Metreo (2000), Tensilica (1998). Website LinkSv mentions Stanford invested in 143 companies. [I am aware there might be some confusion between investor and shareholder, so the topic remains somehow confusing].

Finally, in the 2000s, the Office of Technology Transfer at Stanford managed two funds, the Birdseed Fund (for amounts of $5k to $25k) and the Gap Fund ($25k to $250k) as shown the 2002 OTL annual report.

It is not at all new that Stanford invests in its start-ups. There has also always been tension, let’s do not deny it either. A little-known example of Cisco-Stanford early relationship. So nothing new under the sun. But you will not be surprised if I add that the overall result seems (is) extremely positive for all stakeholders, the university (including in its academic dimension), individuals, start-ups and the economy in general.