Silicon Valley as a “Black Hole”

    I admire and respect startup communities globally, and I’ve worked with many of them. They should keep doing what they’re doing. There is plenty of room to build new businesses—and if it’s a very high-growth disruptor and strategic, odds are a Silicon Valley company will buy it.
    Why the “Next Silicon Valley” Doesn’t Really Exist. By Mark Zawacki, MIT Review.

See also some of the excerpts from the MIT Review readers’ comments to the above article:

    mzawacki: Startups can and do happen anywhere, but they hit a glass ceiling of sorts and the most promising ones continue to get acquired into Silicon Valley. For every company globally that gets acquired into Silicon Valley it actually weakens the very fabric of the local Silicon (Blank)… For instance, look for a moment at New York as the ‘next Silicon Valley’. When DoubleClick gets acquired by Google and Tumblr gets acquired by Yahoo, this actually weakens (not strengthens) the New York ecosystem … they are selling the family silver.

pasward: … That’s funny. I don’t remember them buying Amazon. Or Microsoft. Or Virgin. Or, for that matter, having much to do with the world of banking which has frequent innovation. Or having much to do with the world of energy production. Or … More to the point: every entrenched system uses its metrics to show why it will remain entrenched. Every new system changes the metrics, making the study pointless. Disruption cannot, by definition, be controlled or planned.

    mzawacki: … Amazon is a formidable disruptor, however their Silicon Valley headcount is approximately 5,000. They can’t do it all from Seattle. There is a tremendous multi-layer financial services ecosystem in Silicon Valley comprising 500+ companies. (1) Large multinational financial services companies are piling into Silicon Valley at an increasing rate and opening strategic outposts: BBVA, BNP Paribas, Axa, American Express, Citi, Capital One, JP Morgan Chase, Standard Chartered Bank, etc. (2) 400+ startups focused on various aspects of the financial layer (Square, Clinkle, Lending Club, SoFi, Kiva, Upstart, etc.) (3) established companies who understand the importance of the financial layer all doing plenty of experimentation (Facebook, Google, Apple, PayPal, etc). (4) add to that Visa, Wells Fargo, Intuit, Verifone, etc. Peter Sands, CEO of Standard Chartered Bank recently stated that banking is entering its ‘Spotify moment’ (check out Youtube and FT.com for reference) I’d welcome seeing data that shows a similar 500+ financial services cluster in any of the other 70+ Silicon (Blanks) globally. Silicon Valley certainly has it’s faults, and I entirely agree with you disruption cannot be controlled nor planned. I spend about 50% of my time outside the US (and having lived abroad for nearly decade) Executives globally often think of Silicon Valley as some ‘high tech capital of the world’, our research suggests thats a dated (and dangerous) mindset. More and more, Silicon Valley is launching businesses to compete with the very industries it was once a mere IT provider to.

cordell2: …Between 1997 and 2012, the average technology venture capital fund reportedly produced an annualized return of just over 2% for its general investors. They would have been far better off buying energy or REIT mutual funds. Most of the benefits of technology investment go to consumers, particularly as a given technology is commoditized, (e.g. disk drives, computer memory).

Silicon Valley’s main advantage over other areas lies in its wealthy entrepreneurs who recycle their winnings and expertise back into new ventures. This is an asset that cannot be copied but most be grown indigenously in any Silicon Valley wannabe — and that takes time and numerous successful ventures. How many people in these new “Silicon Valleys” are willing to write million dollar checks to a couple of young geeks working in their garage, as was the case with both Apple and Google? …

    mzawacki: … yes as an asset class, venture capital has done quite poorly. However, 10 or so VC firms consistent take a disproportionate amount of winnings (Sequoia, Greylock, Benchmark, etc.) that hundreds of other VC firms keep playing the long odds to find just one outlier performer. 10 to 15 VC firms rake the industry profits the rest are buying lottery tickets. They pay it forward model is also part of it’s success. Long before the PayPal Mafia there was the Traitorous 8 who set up Fairchild Semiconductor. Check out what they did when Fairchild became successful. Two of the eight did a startup up called Intel, another became the ‘K’ in KPCB. Once you’re lucky, twice you’re good. Our research shows these entrepreneurs are not doing it again and again and again to make money but rather to show that it wasn’t luck and they are that good/smart. Most entrepreneurs have an extraordinarily high need for achievement/validation/acknowledgement and a rather low need for social interactions.

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