Marc Andreessen: The World Would Be Better If We Had 50 Silicon Valleys

http://techcrunch.com/2013/04/20/marc-andreessen-the-world-would-be-much-better-if-we-had-50-more-silicon-valleys/

by swohns • 13 years ago

27 44 13 years ago

loceng• 13 years ago

That means 50 cities that have a startup that has a billion+ $ exit, so then the trickle effects can do their thing..

rexreed• 13 years ago

It would be helpful if some of the Silicon Valley venture capital / startup capital was as enthusiastic in investing in non-Silicon Valley companies. I've heard on more than one occasion that the company was great, but the only reason they are not investing is because it is not located in Silicon Valley.

The truth is that the World Would be Better if a) VC in the Other 50 Silicon Valleys had the Same Appetite for Risk Taking as is present in Silicon Valley or b) If Silicon Valley VCs were much more open to investing in the Other 50 Silicon Valleys.

Yes, it is true that at the Angel level, there's a much broader access to capital now more than ever in a broader range of geographies, but once you start to get into Series A rounds and higher, the bottleneck ("squeeze") becomes evident, and this is where Silicon Valley has a sizable advantage over other regions.

There's no lack of entrepreneurial talent, willpower, or ideas in the Other 50 Silicon Valleys. Rather, the lack of investors willing to invest in these risky endeavors to the point where they can reach the liquidity necessary to self-perpetuate their local entrepreneurial ecosystem. Small exits are necessary, but not sufficient to keep a startup ecosystem going on its own. You need large, $1B+ exits and IPOs on a fairly regular basis to do so... and that requires the financial power equivalent to what's now mainly in Silicon Valley, and perhaps one or two other locations, tops. But not in the other 47+.

richardjordan8• 13 years ago

The problem is that most parts of the world, while they want to reap the benefit of a Silicon Valley they don't want to put in place the ecosystem necessary for it.

It's not a coincidence that Silicon Valley exists on the doorstep of the most diverse community in the US - not just ethnically but in all areas of lifestyle diversity. Many places are not prepared to embrace that.

Embrace of failure is incompatible with deep seted cultural values in many parts of the world.

Tax regimes... Legal structures favoring equity sharing... At will employment...

Most of the places that want to recreate Silicon Valley always seen to add a "But Our Way". Problem is "our way" means keeping in place many of the sources of the failure which those places have had to date in having already created their own Silicon Valley. (Typo apologies via iPhone)

gonehome3• 13 years ago

While I think your point about cultural issues causing problems in other areas has truth to it, I think it's funny to call silicon valley the most diverse community in the US.

The valley exists on the doorstep of stanford - an incredibly highly selected (this year the most highly selective) university. In addition to that a large portion of the people I've met here come from fabulously wealthy backgrounds (dynasty money) where failure is largely irrelevant because there is always a near infinite supply of backup money.

I think part of the reason the valley does well is because the population is some of the most homogenous and highly selected in the world all living in the same place and there is enough wealth to try things.

richardjordan8• 13 years ago

I think it's hard to argue that San Francisco is not the major city most open to cultural diversity in the country. The Bay Area is very diverse ethnically. New York perhaps but its economy is dominated by finance which sucks the air out. The Bay Area's openness is key to the success of Silicon Valley. Stanford certainly has a lot of positive influence, sure, but there's more to the Bay Area than Palo Alto.

EDIT: To clarify not just ethnic diversity, but diversity of opinion and openness to all kinds of cultural diversity. For example I see a non-trivial number of non-straight people in startups, and it's pretty easy to argue many parts of the world claiming they want to create a new Silicon Valley are not as embracing as the Bay Area when it comes to sexual identity.

rdouble7• 13 years ago

Whether or not you think it's funny, Silicon Valley is statistically the most diverse community in the USA.

rayiner3• 13 years ago

Are you joking? Silicon Valley is overwhelmingly suburban middle class white, with a substantial minority of suburban white-washed asians and indians. It's incredibly homogenous culturally.

New York is far and away the most diverse place in the country, and only a few places in the world can compare (e.g. London).

rdouble7• 13 years ago

San Jose is the main city in Silicon Valley and is the most diverse city in the country.

http://www.forbes.com/sites/trulia/2012/11/13/finding-divers...

richardjordan8• 13 years ago

> "white-washed asians and indians"

I am pretty sure a lot of Asian and Indian people will find that racist and offensive. I certainly do, and I'm neither.

As to New York, per my comment NY might be but Wall Street sucks the oxygen out of the talent room, similarly London where the City takes all the tech talent and starves startups of top-tier talent.

dctoedt2• 13 years ago

> New York is far and away the most diverse place in the country, and only a few places in the world can compare (e.g. London).

"The Houston region is now the most racially and ethnically diverse large metropolitan area in the United States, surpassing the New York metro area, acccording to a new analysis of Census data." [1]

(Granted, the study was done by folks at Rice University here in Houston ....)

[1] http://content.usatoday.com/communities/ondeadline/post/2012...

ArkyBeagle2• 13 years ago

http://www.huffingtonpost.com/2012/03/05/houston-most-divers...

Houston is more diverse than New York.

Zigurd• 13 years ago

VC investors have prefer to have their investments close by, yet they tend to rely on the managers they backed and/or picked to lead these ventures, rarely intervening. If the non-interventionist approach is good, and it probably is, then finding and locating ventures all over the planet should result in discovering more talent, and holding down costs.

Snoptic• 13 years ago

With all the Superfund sites in SA, I don't know...

w1ntermute• 13 years ago

That's quite rich, considering that a pretty high up guy at a16z told me that they were parochial when it came to investing, preferring to focus on SV companies. Maybe they should put their money where their mouth is.

pbiggar2• 13 years ago

I read this as "I would prefer if there were 50 SVs we could invest in, but there aren't".

lambdasquirrel• 13 years ago

I think it is more important to note that the white, upper-middle-class denizens of the valley actually like (or ar least don't mind) being near people who are not like them, relative to the other upper-middle-class people elsewhere.

New York has some of that going too, but it's worth pointing out that the culture in New York subsumes you. New York could still become a tech spot, if it could overcome other difficulties, like the whole employer-owns-all-your-work default.

auctiontheory• 13 years ago

(1) If we had 50 Silicon Valleys rent around here would be a lot lower. Thumbs up to that.

(2) San Francisco may be diverse by some analyst's spreadsheet, but in meatspace it is incredibly ghettoized. How many black people (to take an extreme example) do you see in Pac Heights or the Marina or even the Sunset? How many white people live in Bayview? It is the opposite of diverse.

The closest to "diverse" I've experienced is Toronto. If Canada had better weather, I think many more would move there. Pray for global warming, eh?

graycat• 13 years ago

One reason for not having 50 Silicon Valleys is in a recent post of Fred Wilson at his AVC.com: On average in the US over the past 10 years, venture capital has had returns lower than the S&P or index funds. So, basically the ROI of venture capital sucks. Silicon Valley has such a large fraction of US venture capital that basically the ROI of Silicon Valley has to suck. But the top tier venture firms are doing well, right? Well, recently KPCB got a 'reality check' about ROI from their limited partners and made some changes. So, well, maybe Sequoia or AH is doing well. Maybe. Has any venture firm made much money since Facebook or Google?

So, why should the world have 50 places that have ROI that sucks?

Actually, there's good reason to suspect that not all the blame for the financial suckage belongs on Silicon Valley or venture capital. Instead likely we have to look to constraints put on that 'asset class' by the limited partners. But to the limited partners, the venture capital asset class is usually at most small potatoes. So, the limited partners are reluctant to bend over backwards to give the venture partners, in a small asset class, relaxed constraints.

The good news is the ratio of price and performance for the 'raw material' for an information technology startup -- an 8 core, 64 bit, 4.0 GHz processor for about $180, ECC main memory at less than $9 per gigabyte, hard disks with 3 TB for about $135, Internet bandwidth enough for well over $500,000 a month in revenue for less than $100 a month, fantastic infrastructure software for free or nearly so -- Linux, open source, the Microsoft BizSpark program, etc. Can still be wet behind the ears and remember when such computing performance cost factors of 10 more.

So, the challenge is to find something valuable to do with such information technology raw materials. Maybe it is a challenge, but I have to believe that it is also one of the best business opportunities in the history of the planet.

Heck for what it costs to open a pizza shop, buy a truck for an electrician, get a mower, trailer, and truck for mowing grass, or equip an auto repair or auto body shop, can set up one heck of a server farm. Or just use the cloud.

But my take is also that more is needed than just a bright business 'idea' and programming language experience.

It does appear that the day of the 'organically' grown startup without equity funding is about to become more common or even dominant. E.g., there is the Romantic Matchmaking site Plenty of Fish in Canada, long just one guy, two old Dell servers, ads just from Google, and $10 million a year in revenue.

With enough programming experience, can bring up such a site and get nicely profitable in less time than it commonly takes for a venture capital firm even to respond with a no.

hga• 13 years ago

Is there anywhere in the world where there might be a "Silicon Valley" besides California where non-competes are unenforceable as a matter of long standing public policy?

richardjordan's "But Our Way" exception for this applies to every place in the US---in fact, I'd say there's a general obsessive focus on what's perceived to be good for individual companies to the exclusion of what's good for the ecosystem, like a liquid labor market. That would include the critical "embrace of failure", the areas I've worked in (Boston in the '80s, D.C. in the '90s) aren't good with that.

ArkyBeagle2• 13 years ago

There was one of a sort around Dallas, but it's dead.

Marc Andreessen: The World Would Be Better If We Had 50 Silicon Valleys

Related Stories