There Is Only ONE Silicon Valley

December 28 2011 No Commented

Silicon Valley is a very special place – the nucleus of high-growth, high technology entrepreneurship in the US, indeed, in the world.  The Valley is world-class entrepreneurs, angel investors, venture capitalists and successful high-tech companies – all growing companies and creating jobs on one relatively small peninsula.  The Valley has been a unique place for over half a century with an environment which many other communities have attempted to emulate, but they haven’t and they won’t.  Many other communities are entrepreneur-friendly and, by any measure, have the tools in place to spawn new high growth companies.  Boston, New York City, Seattle and Southern California spawn many exciting startups…but do not exceed the Valley in any measure of entrepreneurial achievement.  My view is that there are only two places for entrepreneurs to thrive in the world:  (1) the Valley and (2) everyplace else. And, while the undisputed leader in breeding and growing startups, the Valley is not the only place in the world (or the US) where entrepreneurs thrive.  In fact, we can find very successful startup companies in every state and region in the country.

Recognition of the peerless setting in the Valley leads me to observations for several groups in the entrepreneurial landscape:

To entrepreneurs:  If you need to raise tons of money and/or create critical strategic partnerships with high tech companies, move to Silicon Valley (or perhaps NYC, Boston, Seattle or Southern California).  You are much more flexible than are VCs or strategic partners – they prefer not to travel and have lots of local opportunities to invest.  Your chances of raising venture capital from a Valley VC for a startup in the Bay Area are much higher than being located anywhere else.  But, know in advance that the competition in the Valley is fierce.  If you don’t need to raise $10s of millions, stay where you are and grow your business in the friendly confines of your community.  Most of the tools are there…they are just harder to find.

To investors:  Stay where you are.  Entrepreneurs in your area need funding and the environment close to home is likely much less competitive than in the Valley.  (This is not to say that there is no competition for deals in Seattle, Boston, New York and elsewhere.)  While deal flow may not be as high as where you are now located, attempting to break into the Valley will be daunting.

To economic developers:  Don’t think or say “we are going to create the next Silicon Valley here”!  Instead, compare you environment to other entrepreneur-friendly communities and then beef-up the startup weaknesses in your community.  But, don’t set up false expectation:  You will fail to create the next Silicon Valley – like so many others have before you.

To the press:  I know this is difficult…but please recognize that “There Is Only ONE Silicon Valley”!  If you want to report on entrepreneurial activity in the US, get off your butt and travel a bit.  You will find that entrepreneurs and investors do things differently in Boise, Tucson, Little Rock, Cincinnati and Atlanta that they do in the Valley.  Valuations are generally higher in Silicon Valley, term sheets are different, capital sources are different, building a management team and Board of Directors requires a different strategy; just to scratch the surface on the dissimilarities.  Please stop pontificating from the Valley about “how entrepreneurship or startup funding works.”  Your message, in many cases, simply does not apply outside the Bay Area.

To research universities:   You may compete for research grants with the best and the brightest, but if you are not located in the Valley (or a few other places), tech transfer to a whole new generation of startups is unlikely to happen.  Don’t attempt to emulate Stanford and MIT when you can’t match their entrepreneurial landscape.  Figure out what will work for you by looking at similar communities that seem to be doing better at tech transfer than you are.  And, unfortunately, there are not many good examples.  Tech transfer from first class research universities in the US to startup companies is embarrassingly low.  Do something about it!  How?  How about eliminating royalties on licenses to alumni!  By any measure I’ve seen, successful alumni-entrepreneurs give more money back to universities than the entire tech transfer royalty stream.  Why make it so difficult to move technology from universities to startups?

The Valley is a magical place where all pieces of the entrepreneurial landscape come together.  It will not be duplicated in my lifetime.  My advice is that players understand the Valley landscape and then carefully adopt and adapt those characteristics that are important to your future.