Is there a bias against women in Silicon Valley? And in the technology world in general?

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Why are there so few women in Silicon Valley start-ups? Why so few in technology in general? Why so few in science? And even why so few as famous cooks or fashion designers when they do most of this daily work at home? I do not have the perfect answers or maybe too many. The debate became passionate again a few days ago when Vivek Wadhwa criticized Twitter for not having female board members, first in the New York Times article Curtain Is Rising on a Tech Premiere With (as Usual) a Mostly Male Cast then in a follow-up article he wrote for TechCrunch My Response To Dick Costolo: Twitter Must Lead Silicon Valley On Diversity.

With violent words, “This is the elite arrogance of the Silicon Valley mafia, the Twitter mafia”, “It’s the same male chauvinistic thinking. The fact that they went to the I.P.O. without a single woman on the board, how dare they?” and “The root of this problem is arrogance and a “don’t-care” attitude,” Wadhwa does not buy the argument that the Twitter’s CEO and others are using: “There is definitely a supply-side problem.” Dick Costolo, Twitter’s chief executive, has prioritized finding a woman to be on the board, but has found it difficult, according to two people with knowledge of his plans who were not authorized to speak about them publicly. “Everyone is trying for diversity, both gender and ethnic diversity, on boards and in operating positions,” said Rick Devine, chief executive of TalentSky, a Silicon Valley recruiting firm. “The issue isn’t the intention, the issue is just the paucity of candidates.” (same NYT article)

Again you should read the entire articles. I do not have good answers but if there is a paucity of candidates, I can only mention here that twice in my life, first in the VC world, then in the academic world, I heard decision makers seriously say that hiring a woman would be a risk because of the pregnancy possibility. As if having anyone in a team was not risky, just because they can always leave at any time…

Catarina Fake

Let me finish with another quote by Catarina Fake in Founders at Work, that I already used in the past: “There is a lot of institutionalized sexism working against women in business and I think that people aren’t even aware that it’s there. One example happened when we went down to Silicon Valley to meet with a venture capital firm. After the meeting, the VC spoke to someone associated with our company and said to him, “Tell Stewart not to bring his wife to VC meetings.” It takes a lot of nerve for women to face up to this assumption — and the assumption is everywhere, even in some of the most surprising places — that they don’t measure up, that they’re not good or tough enough. Twice as much will be expected of them. I hear this from women again and again in business: they have to be twice as prepared as men.”

The Entrepreneurial State: the important role of government in innovation (part 2)

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As I said in The Entrepreneurial State: the important role of government in innovation (part 1), Mariana Mazzucato has written an important book even if I do not agree with all her arguments.

We agree on the issue of funding of technologies, inventions and innovations. It has been generally understood that the commercialization of products and their prior development is the responsibility of the private sector in a capitalist economy. The funding of research (at least basic research) is generally the mission of the state, but applied research (though I never really understood what this is) might be done by the State as well as by the private sector.

Let me open a short parenthesis here: I am not of big supporter of the concepts of basic and applied research, but I understand better other concepts from an early to later stage. Here they are:

Research has no known output a priori, except knowledge, whereas at a later stage the objectives are a little clearer. This being said, I am not fully comfortable about the arguments Mazzucato brings on the table when she says the State is doing a lot in innovation. But she clearly shows there is a grey zone between the 3 stages I have above. I belong (at least for now) to the group of people who believe it is the mission of the State to be active in the first two ones, and the private sector being in the third. Nothing forbids the private sector to go earlier and the public sector to be more active later, but it is seldom the case. Here are my notes on Chapters 3 and followings:

Chapter 3 – Risk-taking state : from « de-risking » to « bring it on ! »

During a visit of President Mitterand to Silicon Valley, Thomas Perkins which fund started Genentech extolled the virtues of the risk-taking investors who finance the entrepreneurs. Perkins was cut off by Stanford Professor and Nobel Prize Paul berg. He asked, “Where were you guys in the 50’s and 60’s when all the funding that had to be done in the basic science?” [Page 57]

Entrepreneurship, like growth, is one of the least-well understood topics in economics. According to Schumpeter, an entrepreneur is a person willing and able to convert a new idea or invention into a successful innovation (i.e. product, service or process). Entrepreneurship employs the “gale of creative destruction” to replace, in whole or in part, inferior innovations, simultaneously creating new products including new business models. Each major new technology leads to creative destruction. [Page 58]

[Again I need to react: where I fully agree with the Entrepreneurship and Innovation definitions, I am skeptical about the comment on technology: some major new technologies never destroyed anything because they were not commercially successful (artificial intelligence, speech recognition for example and there are many others). I would say major new successful innovations lead to creative destruction. This is important because as Mazzucato rightly says, there is no linear process for innovation and a lot of uncertainty too.]

Entrepreneurship is about risk and is highly uncertain. R&D investments that contribute to technological change not only take years to materialize into new products, but most products developed fail. Silicon Valley model tells a story of “freewheeling entrepreneurs and visionary venture capitalists and yet misses the crucial factor: the military’s role in creating and sustaining it. [Mazzucato shows the same issues in Pharma where the big players develop me-too drugs and let the State fund radical innovations in universities, as is shown in the anecdote above with Mitterand, Perkins and Berg.]

Again, I have some concerns with this decription. First in the image above, I would have liked to see the R vs. D and not only the fundamental R vs global R&D. Mazzucato is right in the funding of research, no doubt about it. I used such data for many years where the funding of research in universities by the industry is 4-7% whereas the federal funding is around 60%! You can look at Figures 1 and 2 below. But then, when it comes to innovation, I do not see where the State produced the biotech or IT industry. It made inventions available. You still needed the visionary entrepreneurs and investors as I told about in the Genentech case on my blog a few years ago [see Bob Swanson & Herbert Boyer: Genentech
and Robert Swanson, 1947-1999]

Figure 1: Federal and Industry funding of university research in the USA.

Figure 2: Federal and Industry funding of research at Stanford University and MIT.

Chapter 4 – The US entrepreneurial state.

In this short chapter, Mazzucato shows through four examples how the US government fostered innovation. These are DARPA (the funding of American research by the military), SBIR (The Small Business Innovation Research), Orphan Drugs and Nanotechnologies.

On Darpa, “A series of small offices, staffed with leading scientists, are given considerable budget autonomy, … funding a mix of university-based researchers, start-ups, established firms and consortia… helping firms to get products to the stage of commercial viability”. [Page 78 ] Again the impact of DARPA in funding research is a no brainer. And Yes, I should be said. Mazzucato is right about too much silence on the role of the State. Check as a great reference Rebecca’s Lowen “Creating the Cold War University – the Transformation of Stanford”.

I am less convinced about the SBIR. “Government agencies designate a fraction of their research funding to support small, independent, for-profit firms.” Mazzucato claims Apple was funded with such a fund, Continental Illinois Venture Corp. but I checked Apple IPO document and CIVC was not at the origin of the company. Arthur Rock and Don Valentine convinced Markkula to help the two Steve and invested in January 1979. Even if CIVC invested that early, it was a minority and passive shareholder. Furthermore, CIVC was the VC arm of a bank, so not a purely State investment… She also quotes Lerner and Audretsch, leading professors as references. In a recent book (Boulevard of Broken Dreams – Pages 125-126), the same Lerner explains that the lack of flexibility of SBIR and ATP was detrimental (it had to be pre-commercial funding for ATP; start-ups had to be 51% owned by US citizens or residents, to the point that the presence of venture capital could exclude the firm from SBIR funding!) I have been struggling for years to find the real impact of SBIR and could never find convincing data of an important role. State direct role in VC funding has been a recurrent debate with unclear answers for years.

I do not know about orphan drugs, but I am skeptical about nanotechnologies. “Nanotechnology is very likely to be the next general purpose technology”. [Page 83] “It will be even more important than the computer revolution.” “Today it does not yet create a major economic impact because of the lack of commercialization of new technologies, due to the excessive investments made in research relative to the lack of investments in commercialization. […] This raises a question: if government has to do the research, fund major infrastructure investments and also undertake the commercialization effort, what exactly is the role of the private sector?” [Page 86]

Well again many things are unclear and somehow contradictory in the arguments. If nanotechnology was just another low hanging fruit thanks to the State investment, we should have already seen early results. The US initiative on Nanotech was launched in 2000. There has been a very visible start-ups such as Nanosys or A123 to a lesser extent. Next is Nanosys cap. table as of 2004. One can read the then and additional funding from private sources.

I am now reading chapter 5 and will come back on Mazzucato’s book in a part 3!

The Entrepreneurial State: the important role of government in innovation (part 1)

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Mazzacuto’s Entrepreneurial State is I think an important book. The author claims we have been unfair with the role in innovation of government and the public sector in general, which has provided funds for most not to say all R&D (Pharma, IT, Space). I share the blame as I am a strong supporter of start-ups, venture capital, Silicon Valley being the ultimate model. And the idea that the State should just provide the basics (education, research, infrastructure) and let the private sector innovate may have been a big mistake (of mine included). I will not take the blame on the second argument as I always shared with the author the idea that tax breaks and tax evasion makes the judgment even more unfair. Finally, the private sector is very risk averse so that there is less innovation (not only venture capital but corporate R&D, compared to the past when corporate R&D labs at IBM, Bell or Xerox were big or when VCs really contributed to innovation in semiconductor, computers and biotech in the 60s and 70s)

Let me now quote Mariana Mazzacuto following her book linearly. You can also listen to her when she gave a talk at TedX.

While innovation is not the State’s main role, illustrating its potential innovative and dynamic character – its historical ability, in some countries, to play an entrepreneurial role in society is perhaps the most effective way to defend its existence. (Page 1.)

Entrepreneurship is not (just) about start-ups, venture capital and “garage tinkerers”. It is about the willingness and ability of economic agents to take on risk and real Knightian* uncertainty, what is genuinely unknown. (Page 2.)
Note: *Knightian uncertainty relates to the “immeasurable“ risk, i.e. a risk that cannot be calculated.

Even during a boom most firms and banks (would) prefer to fund low-risk incremental innovations, waiting for the State to make its mark in more radical areas. (Page 7.) Examples are provided from the pharmaceutical industry – where the most revolutionary new drugs are produced mainly with public, not private funds. (Page 10.)

Apple must pay tax not only because it is the right thing to do, but because it is the epicenter of a company that requires the public purse to be large and risk-taking enough to continue making the investments that entrepreneurs like Jobs will later capitalize on. (Page 11) Precisely because State investments are uncertain, there is a high risk that they will fail. But when they are successful, it is naive and dangerous to allow all the rewards to be privatized. (Page 12)

Chapter 1 – (The Innovation Crisis)

The emphasis on the State as an entrepreneurial agent is not of course meant to deny the existence of private sector entrepreneurship activity, from the role of young new companies in providing the dynamism behind new sectors (e.g. Google) to the importance source of funding from private sources like venture capital. The key problem is that this is the only story that is usually told. (Page 20)

It is naive to expect venture capital to lead in the early and most risky stage of any new economic sector today** (such as clean technology). In biotechnology, nanotechnology and the Internet, venture capital arrived 15-20 years after the most important investments were made by public sector funds. (Page 23) The State has been behind most technological revolutions and periods of long-term growth. This is why an “entrepreneurial” state is needed to engage in risk taking and the creation of a new vision.
Note: ** Well maybe not in the 50s to the 70s, certainly in the last 10 years.

Big R&D labs have been closing and the R of the R&D spend has also been falling. A recent MIT study (1) claims that the current absence in the US of corporate labs like Xerox PARC (which produced the graphical user interface technology that led to both Apple’s and Windows’ operating systems) and Bell Labs – both highly co-financed by government agency budgets – is one of the reasons why the US innovation machine is under threat. (Page 24) Rodrik (2004) states that the problem is not in which types of tools (R&D, tax credits vs. subsidies) or which types of sectors to choose (steel vs. software), but how policy can foster self-discovery processes, which foster creativity and innovation – the need to foster exploration trial and error (and this is the core tenet of the “evolutionary theory of economic change” in chapter 2)
References
[1] MIT 2013. Innovation Economic Report, web.mit.edu/press/images/documents/pie-report.pdf‎
[2] Rodrik, 2004. Industrial Policy for the 21st century. CEPR Discussion Paper 4767

Chapter 2 – Technology, Innovation and Growth.

Progressive redistribution policies are fundamental, but they do not cause growth. Bringing together the lessons of Keynes and Schumpeter can make this happen. (Page 31) Solow discovered that 90 per cent of variation in economic output was not explained by capital and labor, he called the residual “technical change”. (Page 33)

An “evolutionary theory” explains this as a constant process of differentiation among firms, based on their ability to innovate. Selection does not always lead to “survival of the fittest” both due to the effects of increasing returns and also to the effects of policies. Selection dynamics in products markets and financial markets may be at odds.

Innovation is firm specific and highly uncertain. It is not the quantity of R&D, but how it is distributed throughout an economy. The old view that R&D can be modeled as a lottery where a certain amount will create a certain probability of successful innovation is criticized because in fact innovation would be an example of a true Knightian uncertainty, which cannot be modeled with a normal (or nay other) probability distribution. (Page 35 – the Black Swan again)

Systems of innovation are defined as the “network of institutions in the public and private sector whose activities and interactions initiate, import, modify and diffuse new technology”. (Equilibrium theory cannot work; rather than using incremental calculus from Newtonian physics, mathematics from biology are used, which can explicitly take into account heterogeneity, and the possibility of path dependency and multiple equilibria.) (Page 36) The perspective is neither micro nor macro, but meso. The causation between basic science, to large scale R&D, to applications to diffusing innovation is not linear, but full of feedback loops. One must be able to recognize serendipity and uncertainty that characterizes the innovation process. […] Using Japan as an example, “the contributions of the development state in Japan cannot be understood in abstraction from the growth of companies such as Toyota, Sony or Hitachi aside from the Japanese State’s public support for industry”. (Page 38)

Regional systems of innovation focus on the cultural geographical, and institutional proximity that creates and facilitate transactions between different socioeconomic actors, including local administrations, unions and family-owned companies… The State does this by rallying existing innovation networks or by facilitating the development of new ones that bring together a diverse group of stakeholders. But a rich system of innovation is not sufficient. The State must develop strategies for technological advance.

Mazzacuto finishes Chapter 2 with 6 myths about innovation I totally agree with!

Myth 1: Innovation is about R&D. “It is fundamental to identify the company-specific conditions that must be present to allow spending on R&D to positively affect growth.”

Myth 2: Small is Beautiful. “There is confusion between size and growth.” What is important is the “role of young high-growth firms. Many small firms are not high-growth. […] Most of the impact is from age.” “Targeting assistance to SMES through grants, soft loans and tax breaks will necessarily involve a high degree of waste. While this waste is a necessary gamble in the innovation process,” it should be targeted on high growth and not SMEs, i.e. support “young companies that have already demonstrated ambition”.

Myth 3: Venture Capital is Risk-Loving. “Risk capital is scarce in the seed stage; it is concentrated in areas of high-growth potential, low technological complexity and low capital intensity.” […] “The short-term bias is damaging to the scientific exploration process which requires longer-term horizon and tolerance to failure.” “Rewards to VC have been disproportional to risks taken”, but Mazzacuto also recognizes that “Venture capital has succeeded more in the US when it provided not only committed finance, but managerial expertise.” Finally “The progressive commercialization of science seems to be unproductive”.

Myth 4: Patents. “The rise in patents does not reflect a rise in innovation”. [I will not come back here on the topic, read again Against Intellectual Monopoly]

Myth 5: Europe’s problem is all about Commercialization. “If the US is better at innovation, it isn’t because university-industry links are better (they aren’t) or because US universities produce more spinouts (they don’t). It simply reflects more research being done in more institutions, which generate better technical skills in the workforce. US funding is split between research in universities and early stage technology development in firms. Europe has a weaker system of scientific research and weaker and less innovative companies.”

Myth 6: Business Requires Less Tax. “The R&D tax credit system does not hold firms accountable as whether they have conducted new innovation that would not otherwise have taken place, or simply pursued routine forms of product development.” “As Keynes emphasized, business investment is a function of the gut instinct of investors about future growth prospects.” This is impacted not by tax break, but by the quality of the science base, education, credit system and human capital. “It is important for innovation policy to resist the appeal of tax measures of different kinds”.

More will follow when I have read chapters 3 and followings. Now I need to share some of my concerns, first by quoting again:

“Entrepreneurship by the State can take on many forms. Four examples: DARPA, SBIR, the Orphan Drug Act, Nanotechnology. (…) Apple is far from the “market” example it is often used to depict. It is a company that not only received early stage finance from the government (through the SBIC program) but also “ingeniously” made use of publicly funded technology*** to create “smart” products.” (Pages 10-11)
Note: *** Internet, GPS, Touch screen, Siri.

“Many of the most innovative young companies in the US were funded not by private venture capital but by public venture capital, such as that provided by the Small Business Innovation Research (SBIR) program.” (Page 20)

My concerns are that
– research is not innovation & the transfer is where entrepreneurship occurs so that investing in research is not innovating or even being entrepreneurial. This is at least my experience in the field.
– SBIR real impact unclear
– Green and nano-tech impact also unclear
But I have not finished reading yet…

Is there an ideal age to create?

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Here is my new contribution to magazine Entreprise Romande, which they entitled “Let the Expression of Energies Emerge from the Youngest Age.”

In recent years, there’s been a recurrent debate: is there an ideal age to create? I ‘m not talking about artistic and scientific creativity, even if the question deserves a study in itself alone. What artist has indeed produced a major work after 40 years? The Nobel Prize is often awarded for the culmination of a career, but the work had been produced decades earlier. Finally, the Fields Medal, the highest prize in mathematics, is given to individuals who are under 40 years. Is it the same for the creation of business? In a few months, Scott Shane [1], and Vivek Wadhwa [2] have recently denounced the myth of the young under-30 entrepreneur that Silicon Valley would have unduly celebrated. Shane finds entrepreneurial activity twice as much with individuals in their fifties, including in high technology, as with young entrepreneurs. Wadhwa concludes with an average of 40 years for those who succeed.

I will not hide my surprise with these new analyzes because my intuition and my experience made me move towards a cult of youth. In an analysis, – perhaps a little fast-, I had found an average of 27 years for famous entrepreneurs in Silicon Valley (those who founded Intel, Apple, Oracle and other stars of the Internet such as eBay, Google or Facebook ) and even 33 for their famous European counterparts (SAP , Logitech, etc.) The explanation seemed simple: if the experience is an important criterion of success for the management of a company, enthusiasm and energy will compensate for its absence when it comes to breakthrough innovation in markets where uncertainty is greater. In addition, the experience can be provided by surrounding oneself with experienced professionals. Finally one has nothing to lose and family responsibilities are seldom hard to bear when being 20-year old. Enjoy risk-taking as long as you are young!

I decided to do again my own analysis by studying the 500 founders of 200 companies, mainly in the field of high technology in the U.S. but also in Europe. I got an average of 38 years, similar to that suggested by Shane and Wadhwa. But do not conclude too quickly that the debate is over! The devil is in the details… By considering only the first entrepreneurial experience, counting only entrepreneurs who commit their body and soul in the adventure (and not those who are advisers or early investors) it drops to 34 years. There is however a point of agreement between these analyzes: the average has been steadily increasing in recent years.

I still personally believe that youth is an asset, simply because entrepreneurship is about enthusiasm and energy, and sometimes unconsciousness. Entrepreneurship is not about being young so much as what motivates to be an entrepreneur, is to have certain qualities which, overall , are more often found in young people. Would there be an explanation that bring closer these rather discordant findings? An idea that is dear to me is to see that experience is useful for incremental innovation, where one improves what already exists. Creativity and adventure are related to disruptive innovation, which has created new industries for 50 years (computers, software and biotechnology for example.) Another remark: I think innovation has been less revolutionary in the last 10 years, since the maturation of internet technologies. As a consequence, large companies seem to have taken the hand, as some experts noticed [3].

Last observation: the average age of those who have created exceptional companies (I measure it with higher than $100 billion capitalization) is 27 years. Even the founder of Genentech, the company which was at the origin of biotechnology, was 29 years old. All these companies still had one of their founders as CEO at the time of IPO. The slowdown in major innovations correlated with the increasing age of entrepreneurs could unfortunately be a sign that our world is less creative because older. There is probably no ideal age to create, but we must encourage the expression of enthusiasm and energy from an early age by encouraging creativity, loose from the constraints of experience and knowledge.

References:
[1] Entrepreneurship Is a Midlife Game http://www.entrepreneur.com/article/225843
[2] The Truth About Entrepreneurs: Twice As Many Are Over 50 As Are Under 25 http://www.pbs.org/newshour/rundown/2013/04/the-truth-about-entrepreneurs-twice-as-many-are-over-50-than-under-25.html
[3] The Empire Strikes Back. http://www.technologyreview.com/news/426238/the-empire-strikes-back/

On a similar topic, I was a little puzzled by a short article I mention here, from Swiss magazine Bilan. The future, a question of youth (link to French article: L’avenir, affaire de jeunes, by Stéphane Benoit-Godet)

The future, a question of youth
Google wants to extend the lives of people and defeat death. An event that has not been so noticed. Yet it is not only an announcement effect. The possibility of downloading our own memory in thirty years so that a part of us can survive represents a formidable challenge to humanity and creativity.
Is this crap? There are many “deniers of progress”, those who fight in vain their time because they do not understand its implications. There is however an exciting movement in the science that envisions o convergence of engineering, information science and neuroscience.
Patrick Aebischer is a pioneer in Europe with the vision he imposed at EPFL. Others work hard at the convergence of these different techniques to get to the mother of all scientific epics, the understanding of the brain.
If Google decides to work at this breakthrough, we must be interested because the resources the Silicon Valley firm dedicates to its special projects division are enormous. And when it comes to processing data on a gigantic scale, its founders are experts.
Henry Markram who has raised 100 million from the EU for his Human Brain Project at EPFL also fits perfectly in this revolution. What has been made possible here thanks to the will of one man – Patrick Aebischer had a good part of the establishment against him when he arrives at the EPFL – has spread further.
If Larry Page and Sergey Brin, at Google, dare to embark on this adventure, it is because they are immersed in the bath of innovation that is Silicon Valley. The place where are created start-ups that disrupt social interaction (Facebook), technology (Apple), how to learn (Twitter), move (Tesla and SpaceX) or consume (PayPal).
Ironically, the head of that company, David Marcus, a Geneva serial entrepreneur who moved to California, is shaping the future of money when Swiss bankers have never been in such bad shape.
This culture is still missing here. The trigger is perhaps encourage people in their 20s and under to start their own business. As the crazy visionaries in Silicon Valley who have a mission to improve the lives of people, the desire to create and the entrepreneurial enthusiasm could lead to huge success.

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.

Twitter discloses numbers through SEC filing

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Twitter finally published its S-1 document. In 2011, I had tried to make a tentative assessment in my post, If Twitter was going public, some far-fetched assumptions.

You can compare the cap. table below to the one in the post (click on the picture to enlarge image). Of course there were missing data and there are still some today. The investors shares are not described in detail. I do not have the shares of one of the founders, Biz Stone, but only those of Jack Dorsey and Evan Williams. I plan to update info when I have more. (A small detail: series A was probably $100k and not $76k for example.) Enjoy and react!

click on picture to enlarge

Criteo files to go public

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The latest French success story, Criteo, just filed to go public on Nasdaq. You can find all the details in the SEC F-1 document. I had tried to build Criteo’s cap. table, one of my favorite exercises, in What’s Criteo worth?

I was not too far from the truth. The numbers are different because there was a 2-for-5 stock split and probably other little things, I consider minor. You will see my cap. table again at the end (figure 3), but first here are Criteo’s impressive numbers (profit & loss – figure 1) as well as the current shareholder structure (figure2):

Figure 1 – Criteo’s P&L – click on picture to enlarge

Figure 2 – Criteo’s main shareholders – click on picture to enlarge

Figure 3- Criteo’s “old” cap. table – click on picture to enlarge

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.

What makes an entrepreneur great? (according to Max Levchin)

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Ashort quote from Max Levchin taken from the latest issue MIT Technology Review. Q: What makes an entrepreneur great?

A: I don’t think entrepreneurship can be taught. I don’t think it’s like: “Do these five things and you’ll be an entrepreneur.” And by extension, I don’t think it’s: “Do these five things better and you’ll be a better entrepreneur.” Everyone I know has their own style. The unifying characteristics are all the same: drive, inability to play well with others, decisiveness, general indifference to reason on occasion. Entrepreneurship is this weird process of constantly flying blind, by the seat of your pants, and also of constantly projecting this extreme confidence that everything is going to be just fine. And the only way you can do it is you have to believe that it really will be. So it’s the continuous ability to suspend your own disbelief, basically. —Max Levchin, a founder of several companies, including PayPal, who was an Innovator Under 35 in 2002.

In addition I just read an interview of Bernard Dallé, General Partner with Index Ventures in Entreprise Romande, in the same special issue dedicated to failure where I wrote a short note entitled “Does the Swiss culture tolerate failure?”. Bernard is asked about common features of entrepreneurs. He just says: “Often they are not attracted by money. They are not afraid of failure. Their goal is to have an impact on society.”

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Twitter discloses numbers through SEC filing

Criteo files to go public

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

Stanford will invest in companies founded by students

What makes an entrepreneur great? (according to Max Levchin)