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Saturday, June 03, 2006

The Silicon Valley Edge

Paul Graham writes about the supremacy of silicon valley. He writes,

Startups happen in clusters. When one were to consider what it would take to reproduce Silicon Valley in another country, it's clear the US is a particularly humid environment. Startups condense more easily here as the advantages thatstartups get from being in America are quite unmatchable anywhere else in the world. He lists immigration, prosperity, individual freedom, good education system, hiring policies, cultural issues, domestic market size, capital availability & venture firms , attitude etc as the key determinants for the valley’s prominence as the seat of technology & innovation. He is spot on when he says that outside the US, most business cultures are too slow and stuffy to buy new technologies from a bunch of kids working in their mom's basement. No doubt, It's hard for a startup to grow when there isn't much VC money, customers, employees, infrastructure, etc. A fiercely competitive business landscape also force big companies to look to startups for new ideas.

Read my earlier note here wherein amongst other things I noted that more than 95%( again my estimates based on feel) of the web2.0 setups have primarily come from within the US. Kudos to the technology leadership that the US is showing here - Forget Asia or Europe - initiative, speed and zest for trying out in the tech sector still remain a US vestige - Good for America and by extension good for the world. As I see it, Its time for action in places like India right now.
Some like CK.Prahalad expect China & India to dramatically change things in the years ahead. A recent delegation of venture capitalits visiting india while noticing infrastructural problems, also noted the ethos of circumventing such difficulties to carry on. While some investments are beginning to happen, the ground reality very much echoes what I coveredearlier here. Vast majority of venture money tends to go into existing and later-stage businesses. There is little or no real VC money available in India. Companies that are receiving money in India are either spin outs from existing large businesses, captive units or second tier outsourcing providers that may lack the size or scale to compete with IT service giants and want the private equity money to grow through rollup and acquisitions. In the US, venture money goes into early stage, pre-product or pre-revenue companies , while in India, a majority of the private equity is going into late stage businesses. A friend upon seeing this post asked me when to expect the likes of next Google to come out of India. I had no answer to provide. Truth is that in general most indian enterprises are hardly innovation chasing entities, and the framework for VC entry & exits are poorly defined. Coupled with limited VC activity in the past and archaic regulations – these make it a tougher breeding ground for enterprises like that of what is seen in the valley. I have to agree with Paul that the valley shall continue to be the springboard of innovation and technological advances for some more time to come and we may see some limited action in other parts of the world – we may see the activity in India to be the equivalent of say a Boston area or Texas area for springing up startups but valley shall remain the central node for technological advances. Lets hope breakthrough big deals and innovative enterprises spring out of this momentum.

Recently, a well wisher indicated to me that some of my writings show a lot of pro-India leaning. Not true – I tend to take a global view – I consider myself a global citizen and as such am just sharing my perspectives based on what I see, hear & experience. Hope this sets the record straight..

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