Why Entrepreneurs and Start-ups Succeed in Silicon Valley? What Makes It So Special?
May 13, 2010
Silicon Valley is a special place. What makes Silicon Valley different? Why is it so entrepreneurial? Why do start-ups sprout like weeds here? Innovation is the life blood of economies and nations. Many other cities ad countries have tried to copy it and yet no one has really been able to duplicate the success of it. This is an insider’s answer to these enduring questions.
At this point, entrepreneurialism has become ingrained in the local culture. My daughter, who is in elementary school, does not have an annual science fair. Her school has an Invention Convention. The children are not only expected to invent something that makes their lives easier or better, they are expected to write a simple business plan as part of their project. This is 2nd grade! Recently I attended one of the more popular professional events held in Silicon Valley – Teen Titans. This annual event invites teenage entrepreneurs to talk about their organizations and their products, and concludes with a session where the teenagers pitch their products to investors for funding. One 17 year old started an investment fund which is targeted at providing funding to teenagers to make their product ideas into a reality. Another teenager received a grant to install centralized energy monitors into local schools so administrators could see which rooms and equipment were creating their huge energy bills; the result is a $5,000 per year savings on their electric bills for each school. Yet, another had started his first company at age 11 and had started three companies by the time he entered college. Entrepreneurialism is taught at a very early age.
Ideas flow in the valley like a river. There are numerous technical, business, and entrepreneur groups everywhere. People present their ideas at meetings; they talk with colleagues and potential investors about them. Product concepts are bantered about on a huge scale. It’s a regional brainstorming meeting. This is the reason why when an idea emerges there can be dozens of start-ups funded to pursue the same product. Recently, I’ve hosted colleagues from the Midwest that observed that Silicon Valley people are unconventional and they don’t feel the need to conform.
Bill Gates, Michael Dell, and Steve Jobs are newspaper headliners. To most people, they may as well be fictitious characters in a novel. In Silicon Valley, entrepreneurs abound. Our neighbors and colleagues around us seem to all be entrepreneurs or know someone who has succeeded beyond their wildest expectations. We don’t have to go far to find someone who has started a company, they live right next door to us or their children go to school with our children. Success goes hand-in-hand with failure. We often learn more from our failures, they define us more than our triumphs and Silicon Valley has had more failures than anything else. Access to “how to do it” and “how NOT to do it” is nearby and everyone is willing to pass on their experience. In Silicon Valley, we call this “Mentor Capital”.
Silicon Valley has immigrants from all over the world – India, China, Africa, Europe, Australia, Middle East, and every corner of the world. Immigrants are disproportionately entrepreneurial. They have left their homelands and families – they literally have get-up-and-go. I’ve been involved in many start-ups and the workforce is disproportionately immigrants – they are risk takers, they work long hours, they are ambitious, and they are willing to work for less than market salaries. This large immigrant workforce has also given Silicon Valley an great advantage in the era of globalization with its indepth knowledge and connections throughout the world.
Workers in Silicon Valley don’t expect to keep their jobs for life; most don’t even expect to make a decade at a company. I read the average worker in Silicon Valley changes jobs every 18 months. Silicon Valley people are stock option savvy individuals. Almost everyone works for options in Silicon Valley. There is even one recruiter who specializes in finding “employees without paychecks” searching for workers who will work for 100% stock options until the start-up secures its first round of funding. It’s not just the employees. Services will also defer payment until a start-up is backed by investors. Many building owners have made their money not from office rents, but by taking equity stake instead of monthly rent check. Suppliers will also take an equity stake instead of cash payment for equipment. The eco-system of service providers, employees, and investors is well established in Silicon Valley, and it’s not the exception, it’s the norm.
The cycle of life in Silicon Valley starts when a venture capitalist, angel investment syndicate or former start-up company provides seed capital to an entrepreneur with just an idea. If the idea succeeds, that same entrepreneur becomes an investor to the next generation of entrepreneurs and start-ups. And the cycle continues.
Filed under: From Concept to Start-Up
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