Tag: silicon valley

Where will the next Silicon Valley come from?

As US research and development spending declines, where will the next Silicon Valley be?

In the development of any global industrial hub, there’s always a series of factors that attracted talent, capital and resources to that location. It’s true whether we’re talking about fifteen century Venice or the English Midlands of the eighteen century.

Silicon Valley is today’s equivalent of those historical powerhouses and what drove California’s Bay Area to be the technological centre of the world was the massive government research spending of World War II, the Cold War and the Space Race.

Which means declining research and development spending by the United States is going to hurt the region’s position in the medium to long term, a warning made by Fareed Zakaria in The Washington Post.

So the question is ‘if Silicon Valley and the US are in decline, which will be hub of the next business and technology revolutions?’

 

 

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Knocking at Silicon Valley’s door

Chasing the Silicon Valley model may be a mistake for cities trying to become modern industrial hubs

In opening Salesforce’s new London office yesterday, former BT CEO Lord Livingston described the city as “knocking at the door of Silicon Valley.”

Judging from the Computing UK article that description hasn’t impressed the rest of the British tech community as it confirms in their minds there is, as usual, too much focus on the capital and Livingston’s view also raises the question of whether London really wants to be another Silicon Valley.

Like all global industrial hubs Silicon Valley the result of a series of happy coincidences; massive defense spending, determined educators, clever inventors and savvy entrepreneurs all finding themselves in the same place at the same time.

Trying to replicate the factors that turned the region into the late Twentieth Century’s centre of technology is almost impossible – even the United States couldn’t afford the massive defense spending over the fifty years from 1941 that underpinned the Valley’s development.

Apart from the spending; the culture, economy, geography, markets and workforce of Silicon Valley are very different to that of London’s.

This not to say London doesn’t have advantages over Silicon Valley; access to Europe and relatively easy immigration policies make Britain a very attractive location for tech businesses. If the local startup community can tap The City’s banking resources then London could well be the next global hub.

If London is the next global tech centre – history will tell – it will almost certainly be very different to Silicon Valley.

Strangely, the event Lord Livingston was speaking at reflects how the Californian tech sector is evolving; Salesforce is a San Francisco company and represents a shift in the last five years from the suburbia of San Jose and Palo Alto to the quirky city life of SoMa and the Tenderloin.

At the same time Silicon Valley itself is evolving into something different, just as it did in the 1990s with the switch from microprocessor manufacturing to software development.

That shift illustrates the risks of trying to imitate one industrial hub; by the time you’ve build your replica, the original has moved on.

If you spent your life trying to knock on the door of heroes you want to imitate, it would be shame to finally make it only to find they’ve moved.

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Reinventing venture capital

How Google Ventures James Temple wants to reinvent venture capital

James Temple writing in on tech website Re/Code has an excellent profile of Google Ventures founder Bill Maris and his quest to re-invent the venture capital industry.

Certainly the Silicon Valley venture capital industry is ripe for disruption; Maris is not alone in pointing out that most investors in the sector and focused on short term incremental gains like shopping apps and online stores.

Probably the biggest thing that Temple points out in the story is the importance of Big Data to the Google Ventures model, although Maris seems to be acutely conscious of the limitations of relying on algorithms to make decisions;

Because you can 100 percent use data and statistics in exactly the wrong way. That’s a trap some fall into, one that we really try hard to avoid. But I think it’s important to use that as a tool.

The data is a support. It’s just like having your other partners there.

Being skeptical about the infallibility of  Big Data and algorithms seems a very un-Google thing, but it may work well for Bill Maris and his team.

Whether Maris and Google Ventures can upend the Silicon Valley investment culture remains to be seen; the real message though is that the venture capital industry is just as vulnerable to disruption as any other.

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Uber’s Travis Kalanick on the highly valued business of disruption

Uber’s Travis Kalanick speaks on his company’s $17 billion valuation

For a four year old business, hire car service Uber is certainly causing a lot of trouble.

Bloomberg Businessweek’s Brad Stone has an interview with the company’s founder and CEO Travis Kalanick on his plans after announcing a 1.2 billion dollar fundraising that values the venture at $17 billion.

Seventeen billion dollars is a hefty valuation for the business and many believe it marks the peak of the current tech bubble, although many of us though Facebook’s billion dollar purchase of Instagram two years ago was that marker.

Kalanick’s views are interesting in his take on that valuation – as he points out the San Francisco taxi market alone turns over $22 billion each year, so Uber’s valuation isn’t beyond the bounds of possibility.

Uber and Logistics

Also notable is Kalanick’s view on the logistics market, something that this blog has maintained is the real business of Uber. In that field, Fedex’s stock market value is $44 billion although Kalanick is discounting the company’s potential in that field.

Right now Uber is on a high, and regardless of any set backs they may get with their ride sharing services, it’s hard to see how the company isn’t going to grab a healthy slice of the global taxi industry and possibly disrupt the logistics industry as well.

Even should Uber end up being the poster child for today’s tech sector irrational exuberance, the company is a stunning example of how businesses we once thought were immune from global disruption are now being shaken up.

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It’s hard copying Silicon Valley

New York City struggles to create its own Silicon Valley, but should it need to?

This site has looked at cities wanting to become imitations of Silicon Valley in the past.

New York, along with London, has been one of the places most likely to create its own Silicon Valley.

The New York Times though describes how that journey isn’t proving easy, with the city boasting few major tech successes.

The question though is does New York really want to be Silicon Valley – or San Francisco for that matter?

Right now the Bay Area is sexy and the centre of the world’s growth industries; but so too were Detroit and Birmingham, England once upon a time.

Perhaps it’s better to work on being the next big thing rather than trying to imitate today’s successes.

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Business as a commodity

Becoming a commodity business is not part of the Silicon Valley business model, but it’s the best most startups can hope to become.

What happens when your hot startup turns out to be in a commodity market?

According to Danny Crichton at TechCrunch two of the hottest startups of the last five years, Box and Square may be finding out.

You can make good profits out of a commodity operation – supermarkets around the world have shown you can earn good money from 2c profit on every can of baked beans you sell – but it’s hard work and it’s definitely not glamorous.

It’s also not particularly attractive for investors looking for the next big thing and commodity businesses struggle to justify the massive burn rates

The truth for most startup businesses is this is as good as it gets; no billion dollar buyout, no adulation from the tech press and no buying a yacht to rival Larry Ellison’s. Just a decent return from hard work.

While many of us blinded by the billion dollar success stories of Facebook, Google and Amazon, it’s worthwhile considering that most successful businesses are far more modest ventures.

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Playing the startup lottery

Building a startup is not for everyone as Reuters’ Felix Salmon reminds us

Silicon Valley is in the grip of a mass delusion says Reuters’ Felix Salmon in a blog post that dissects the reality of life as a startup founder.

The Most Expensive Lottery Ticket in the World starts with nod to Gideon Lewis-Kraus’ No Exit: Struggling to survive a modern gold rush that examines the harsh truths and brutal realities of building a new business.

Salmon though goes further in skewering some of the myths around startups; pointing out that with 90% failure rates not everyone can be ‘killing it’, yet few startup founders will admit their venture are doing anything else but crushing the market, despite the mantra of ‘celebrating failure.’

Possibly the most telling point Salmon makes is on the myth of the engineering entrepreneur, the truth is most coders value stability over the uncertain life in startup.

There is no reason whatsoever to believe that computer engineers make particularly good entrepreneurs. Quite the opposite, in fact: engineers tend to do quite well in structured environments, where there are clear problems to solve, and relatively badly in the chaos of a startup, where the most important skills are non-engineering ones, like being able to attract talent and investors. No Exit makes it very clear that the life of a startup founder is a miserable one, and that engineers are invariably happier when they’re working for a big company.

Life in a startup, or any small business, can be miserable if you don’t have the skills – and most importantly the risk appetite – for doing your own thing. This is a point often missed by those hyping the start up world.

Salmon’s piece is a good read and it illustrates that founding a business or taking the risk of working in a startup is not for everyone. It’s a timely reminder for anyone looking at liberating themselves from their cubicle and making the jump into self employment.

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