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February 24 2014

21:42

February 08 2014

01:00
Here’s A First Look At Mike Judge’s Hilarious Take On Silicon Valley
SILICON_VALLEY_0012Here it is. Mike Judge's long-awaited and irreverent take on the tech scene in Silicon Valley -- creatively titled Silicon Valley -- debuts April 6 on HBO. And we've got your first look at the show's trailer, which debuts on the premium cable channel this weekend.

October 28 2013

11:20
Why European Enterprise Startups Should (Or Shouldn't) Move To Silicon Valley
Should European enterprise startups stay in Europe or head to Silicon Valley? That’s a question our enterprise panel with TechCrunch’s Ingrid Lunden, Klarna‘s Niklas Adalberth, Huddle‘s Andy McLoughlin and Zendesk‘s Mikkel Svane at TechCrunch Disrupt Europe in Berlin tackled today. Both Zendesk and Huddle decided to move a large part of their companies to the U.S. while the Swedish payments and e-commerce company Klarna decided to stay in Europe. For Klarna, of course, being in the payments business means it has to deal with a variety of regulatory issues that make it easier for the team to grow inside the more homogeneous European market. Moving outside of Europe, Adalberth argued, is “tricky.” Payments, he also believes, are local by default and because the company only tries to tackle a few new markets per year, it will likely stick with expanding to more European markets for now and only look into expanding to the U.S. at a later time. What Klarna has, though, are U.S. investors and so the team believes that while it may miss out on some of the action in Silicon Valley, it’s still connected to the Valley in many ways. For Zendesk, moving to the U.S. was apparently on the radar very early on. As Svane told the audience, it’s business grew very quickly in the U.S. – but not because it specifically targeted the U.S. market but because “the early adopters and tech hungry companies are in the U.S.” He also admitted that he got bitten by what he called the “TechCrunch bug.” “We heard all about the action taking place in San Francisco and the big rounds and the free T-shirts,” he said. “We had this American dream and wanted to be where the action takes place.” For Huddle, the reason for moving a large part of its operations to the U.S. was quite different, though. When the company raised its B round, its investors really wanted at least one – if not both – of the founders to move to Silicon Valley. Not every company, McLoughlin noted, needs to be in Silicon Valley. “If you work in fashion, you don’t need to be in Silicon Valley,” he said. But if you are an enterprise company and looking for funding, Silicon Valley is “where the funding is. It’s where the press are and it’s where the guys who will buy you are if you’re looking

August 05 2013

11:49
Aussie Recruitment Marketplace RecruitLoop Closes $500,000 Seed Round To Fund American Expansion
Demystifying the cabal of recruitment, Australian start-up RecruitLoop has just closed a $500,000 seed round to establish a United States presence for its hiring marketplace, which promises to undercut the incumbents by at least 80 per cent.

August 18 2012

14:00
Unicorns, Banana Suits, and 500 Startups; Just Another Night With Dave McClure
Screen shot 2012-08-12 at 1.52.44 AM
Editor’s note: Derek Andersen is the founder of Startup Grind, a 20-city event series hosted around the world to help educate, inspire, and connect entrepreneurs. He’s an ex-Electronic Arts employee, as well as the founder of Commonred and Vaporware Labs. Until a few weeks ago I’d never met Dave McClure. Like many of you I have read all about him, casually Twitter followed him, and personally censored many of his YouTube videos over the past few years. After attending 500 Startups Demo Day earlier this month I was really impressed by the founders and their products which were as good or better than any I’ve seen. The person I shook hands with at the end of that day was a soft spoken, humble guy who seems to be in full grind mode pushing 500 Startups to a new level. Last week I interviewed him at Startup Grind in Palo Alto. It was a nice week for McClure and the family. 500 Startups had just had its second anniversary, McClure was celebrating his 46th birthday, and one of his earliest investments, Wildfire, had sold to Google for $350MM. Prior to that he wrote two widely talked about blog posts, one on Techcrunch about women in tech investing more, and another where he talked candidly about his entrepreneurial journey and struggle. In April he raised a fresh $50MM fund adding two new partners, and Forbes named 500 Startups one of the top-10 Startup Incubators and Accelerators in the world. It’s been a good few months. The Journey To 500 Startups Dave grew up in West Virginia and Maryland where his father was an elementary school music teacher. After slugging through classes and graduating with an engineering and computer science degree at John Hopkins University, he took various programming roles, which led him to the West Coast where he founded his own consulting company called Aslan Computing. It was eventually acquired for under $1MM in what Dave described as, “spending 5-7 years doing a ton of work, for not very much money. It was more like a paid MBA and I wish I’d had that 5-7 years compressed to 1-2 years.” He adds, “There were a lot of things I learned that I would not have gotten as employee 300 at Paypal.” He joined Paypal in 2001 as a Marketing Director rubbing shoulders with future founders of Valley staples like LinkedIn, Yammer, YouTube, and Yelp. As Dave put it, he’s been ”a witness to genius.” Following stints working with Mint, SimplyHired, and Stanford as

March 04 2011

17:01

My Ordeal—and the Firestorm—in Boston

As TechCrunch readers know by now, I speak my mind and don’t shy away from controversy. I am even more provocative when I talk to students. My goal is to make them think outside the box. I encourage students not only to challenge authority, but also to challenge me. I tell them that with my research on globalization, entrepreneurship, and U.S. competitiveness, I am learning as I go; no one has all the answers; I could be wrong. In some talks, I present the available data; in others I just discuss what I have learned.

Over the last ten days, I have lectured at four universities: Columbia, Emory, MIT, and UC-Berkeley. The discussions were all lively, and I received very positive feedback from students.

But my talk at MIT, last Monday, seems to have set off a firestorm.

When MIT Entrepreneurship Club co-president Slava Menn invited me to speak at the Sloan School of Management, he said that students would be very interested in learning about the differences between Silicon Valley and Boston and why Silicon Valley is so far ahead of Boston in tech entrepreneurship. I suggested we make this more constructive, and focus on how Boston’s entrepreneurs can help it catch up. Since this was a lunchtime talk and not a for-credit class, I thought I would make it a Q&A-type session—without boring PowerPoint slides. And I assumed that, just as everyone knows that Boston’s weather doesn’t compare favorably to Palo Alto’s, everyone also knows that Boston lost the race to Silicon Valley—20 years ago.

I started with an informal discussion of my background—a tech entrepreneur who became an academic and researcher. I discussed the myths my research has been shattering, and how surprised I am that, with the data we have gathered, I can challenge governments on their innovation strategies. I said I had spent 18 months in Silicon Valley researching the success of its immigrant groups (they start 52% of its tech companies). I explained that there are valuable lessons that can be learned from these successes and that these lessons can be applied to fixing some of the Valley’s problems—such as its dearth of women and minorities.

I also discussed my experiences in Silicon Valley and what it is that, in my opinion, makes the Valley what it is.

In Silicon Valley, sharing information is the norm—unlike most places in the world, including Boston. In the Valley, techies are far less secretive and are generally helpful to one another. Silicon Valley cherishes failure—because people understand that building a technology company requires experimentation; that it takes trial and error to perfect a technology and business model; and that you learn from failure.  Many entrepreneurs who achieve success, such as Jeff Clavier and Mike Maples, stay in or move to Silicon Valley and become  angel investors and mentors.  Students stay in the area after they graduate, and they move here from all over the U.S. Silicon Valley is one giant network with dozens of networking events happening every week.

I also said that the most important characteristic of Silicon Valley is its ability to reinvent itself: it readily accepts new ideas and tries new things. Yes, it sometimes drinks its own Kool-Aid and obsesses with the latest fad, but it also discards dated concepts and ideas very fast. I gave the example of the business plan, which, as any entrepreneur will tell you, is the greatest piece of fiction that a startup creates. Whilst the market research and planning that go into creating them are very valuable, the financial projections and five-year plans never bear resemblance to reality. Silicon Valley’s thought leaders, such as Steve Blank and Eric Ries, are now advocating the concept of the lean startup—which takes small steps and iterates.

MIT is known for its $100K business-plan competition. I said that it was time to rethink it. I discussed a TechCrunch post in which I’d said that very few contest winners made it big.  Even the company that MIT boasts about—Akamai—lost the contest; and the products and business model that Akamai eventually developed bore no resemblance to what it had entered in the contest. And I said that I didn’t know of any other big successes that have resulted from MIT business plan contest. (The students corrected me on this and said one company, SmartCells, was recently acquired for $500m. And there were a few others from the ‘90s—the good old dot com days.)

I really enjoyed the session.  And many students told me that they’d learned a lot from it. So I was very surprised to see the spate of criticism that followed.

In the audience was Scott Kirsner, a columnist for the Boston Globe—who had been very upset at an article that I’d written, last year, about how Silicon Valley had left Rt. 128 (Boston) in the dust. I noted his smirks, grins, and distraction during the class. But he didn’t challenge my assertion that Silicon Valley was ahead of Boston—despite his Tweets demanding data. And then Kirsner descended into the mud with a series of unprofessional, nasty, personal attacks against me on Twitter. He dug up some old material on battles that I’d fought—and won— during my recovery from a heart attack in 2002.

In every community you have immature, opinionated loudmouths. These are usually outliers whom people tolerate but ignore. That is what I thought Kirsner was—until dozens of other Bostonians, including some tech CEOs, chimed in with him and demanded data. Then the MIT Entrepreneurship Center posted a disrespectful blog on its website: Why the MIT Ecosystem and the $100K are important (or why @vwadhwa has no clue what he is talking about). (This missed the point—I hadn’t said that MIT hasn’t made a major impact. Of course it has; it is one of the greatest universities in the world.) And then the Boston Globe published this silly piece by Kirsner (I say “silly” because it distorts the conversation).

To be fair, a number of Bostonians have written to me to apologize and say that this group does not represent the larger community. One of Boston’s most respected VCs, Fred Destin, wrote a post discussing The ridiculous Vivek Wadhwa furore and the new Boston Tea Party. Even European tech journalist Milo Yiannopoulos came to my defense (‘Over the hill’ Boston tech community lashes out at academic).

Still, many people have demanded that I present data that validate my views. Instead of cluttering up TechCrunch with these data—which will seem obvious to most people—I have included some highlights below and posted far more on my personal website. In my talk, I had also commented that Boston is at a disadvantage because its “weather sucks”. Here are some data that prove this.  And here is an academic paper by University of Michigan Prof. David Albouy which shows that the quality of life is far better in Silicon Valley than in Boston.

The two people whom I have learnt the most from about regional competitiveness are the UC-Berkeley School of Information’s dean, AnnaLee Saxenian (who is my sponsor at Berkeley and a coauthor on several papers), and Director of the Martin Prosperity Institute at University of Toronto, Prof. Richard Florida. They have both published books that explain why Silicon Valley triumphed over Boston and what it takes to build a successful tech center. I have included summaries below. I suggest that all Bostonians read these. They explain the issues far better than I can. And they contain lots of data.

Why is it that business in California’s Silicon Valley flourished while along Route 128 in Massachusetts declined in the 90s? The answer, Saxenian suggests, has to do with the fact that despite similar histories and technologies, Silicon Valley developed a decentralized but cooperative industrial system while Route 128 came to be dominated by independent, self-sufficient corporations. The result of more than one hundred interviews, this compelling analysis highlights the importance of local sources of competitive advantage in a volatile world economy.

Florida, an academic whose field is regional economic development, explains the rise of a new social class that he labels the creative class. Members include scientists, engineers, architects, educators, writers, artists, and entertainers. He defines this class as those whose economic function is to create new ideas, new technology, and new creative content. In general this group shares common characteristics, such as creativity, individuality, diversity, and merit. The author estimates that this group has 38 million members, constitutes more than 30 percent of the U.S. workforce, and profoundly influences work and lifestyle issues. The purpose of this book is to examine how and why we value creativity more highly than ever and cultivate it more intensely. He concludes that it is time for the creative class to grow up–boomers and Xers, liberals and conservatives, urbanites and suburbanites–and evolve from an amorphous group of self-directed while high-achieving individuals into a responsible, more cohesive group interested in the common good.

Here are some of the data that you can find on my personal website

The Silicon Valley Advantage – Some Benchmarks Pop 2006 Silicon Valley has more people 

San Jose-Sunnyvale-Santa Clara, CA

4,391,344 Boston-Cambridge-Quincy, MA-NH  Metro Area 1,735,819 GDP per Capita It has substantially more economic output per head 

San Jose-Sunnyvale-Santa Clara, CA

$86,069.13 Boston-Cambridge-Quincy, MA-NH  Metro Area $73,656.90 The creative class makes up a larger percentage of its workforce PctCR San Jose-Sunnyvale-Santa Clara, CA 44.09% Boston-Cambridge-Quincy, MA-NH  Metro Area 40.61% It has a higher level of human capital (measured as share of adults with a BA and above PctTalent San Jose-Sunnyvale-Santa Clara, CA 43.43% Boston-Cambridge-Quincy, MA-NH  Metro Area 40.56%

*Source: Richard Florida, Martin Prosperity Institute, University of Toronto

Editor’s note: Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School, Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University, and Distinguished Visiting Scholar at The Halle Institute for Global Learning at Emory University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.



December 12 2010

19:54

Maybe There is Hope for Silicon Valley (and the World) After All

Living in Silicon Valley, one gets used to meeting people who are optimistic and who talk about changing the world. But as I lamented in this piece about the Valley’s obsession with Facebook and Twitter apps, most of its entrepreneurs either think too small or are focused on the wrong things. So, even though I am enthusiastic about its ability to take risks and innovate, I’ve been skeptical about whether Silicon Valley can really think big enough to solve global problems.

That was until I visited Singularity University, located on NASA’s Ames Research Center in Mountain View, California, this week.

To say that I was blown away with what I learned and saw in just a few hours would be an understatement. I left Singularity’s campus with the same excitement that I used to feel as a child about how engineering and science will, one day, save the world. The experience recalled childhood fantasies of technologies that connect the human brain to a central computer to share knowledge; bionic organs that give people superhuman strength; and nano-organisms that monitor and repair the body and cure disease.  And I was reminded of my childhood fears of cyborgs becoming smarter than humans and taking over the world. All the great stuff from sci-fi movies.

Singularity University was founded by futurist Ray Kurzweil and X Prize founder Peter Diamandis, in 2009. It has a who’s who of the scientific community on its board and notable backers like Google.

The name of the university comes from a Ray Kurzweil book, The Singularity Is Near: When Humans Transcend Biology. In 2005, Kurzweil postulated that technology is hurtling humanity toward the next great evolutionary leap. By 2029, according to Kurzweil, computers will achieve human intelligence, and by 2045 we’ll be able to upload our consciousness into what, today, is called the cloud.  So even if our bodies don’t live forever, our minds will.

No, the school doesn’t teach science fiction.  It aims to solve the grand challenges that humanity faces—such as poverty, famine, disease, global warming, and dwindling energy supplies—by teaching select groups of business executives, technologists, and government leaders the advances that are occurring in “exponential technologies”.  It challenges its students to think about radical new innovations that will affect the lives of a billion people within 10 years. “Exponential technologies” are those technologies that don’t grow gradually, but at light speeds—in fields like robotics, artificial intelligence (AI), computational neuroscience, and nanotech.

The university runs a 10-week graduate studies program and shorter executive programs. Classes are taught by the foremost experts in each field—like Dan Barry, three-time NASA astronaut; Vint Cerf, internet pioneer and Google executive; Daniel M. Kammen, UC Berkerley energy resources professor and Nobel Peace Prize winner; and Daniel Kraft, Stanford professor of stem-cell biology.  Students learn about disruptive innovations and their implications and brainstorm on the sequences in which the next technology revolutions will happen.

During my visit to Singularity University, I attended Dan Barry’s class on robotics and AI, Daniel Kraft’s lecture on advances in stem-cell biology and genome testing, and a demonstration of a new device being developed by Berkeley Bionics.

I don’t know why, but I had long believed that AI was a legacy of the 70s and was a failed technology. I was surprised to learn that AI techniques are actually becoming commonplace today: in cyber-warfare, in Google’s new car, and even in new generations of toys. And a genome test—which would have cost over a billion dollars two decades ago—will soon cost less than $100. Advances in genome testing, it is postulated, may make it possible to create personalized drug formulations. In other words, rather than standard medicines that are formulated for everyone, it may be possible to create personal prescriptions based on a person’s DNA. Medicines that can’t be brought to market because they cause an adverse reaction in a tiny proportion of the population can be prescribed to those who benefit. I was also delighted to learn how Berkeley Bionics will soon make it possible for people who are paralyzed and confined to wheelchairs to start walking again. I saw one person who already is.

The university is hardly two years old, and I didn’t expect it to have enjoyed any successes. But its executive director, Salim Ismail, says that the school has already inspired many. It had four team projects start companies last summer, and 15 this summer.  These startups include Acasa, which constructs houses through 3D printing; www.getaround.com, which provides peer-to-peer car sharing; and one that is looking to use beamed power to launch spacecraft. One student even returned to Israel and caused the country to change its energy policy to focus more on solar rather than nuclear sources (and as a result, solar-energy use is going exponential).

So there is lots of hope for Silicon Valley and the world. But we need to get our top technologists, academics, and political leaders to spend a few days at Singularity University so that they start thinking big again. We also need to get American children excited again about studying engineering and science. And we need to reignite the passion in graduates of engineering programs at schools like Duke, Berkeley, and Stanford.  Too often, they choose to become management consultants and investment bankers.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.





October 18 2010

01:27

Japan: To Fix Your Economy, Honor Your Failed Entrepreneurs

After visiting Okinawa, Japan, and meeting with global experts on innovation, I’ve come to the conclusion that Silicon Valley’s greatest advantage isn’t its diversity; it is the fact that it accepts and glorifies failure. Like many other countries, Japan has tried replicating Silicon Valley. It built fancy tech parks, provided subsidies for R&D, and even created a magnificent new research university. Yet there are few tech startups, and there is little innovation; Japan’s economy is stagnant.

There is a reason for this stagnation.

In any country, innovation and economic growth come from startup ventures.  But most Japanese don’t want to take the risk of starting a business.  Indeed, the social stigma and financial repercussion of failure are so great that the founders of failed businesses become social outcasts; no one will work with them again or fund them; and all too often they end up committing suicide.

Jeff Char, who is a serial entrepreneur and CEO of Tokyo-based incubator J-Seed Ventures, told me that he sees huge opportunities for startups in Japan, and that there is almost no competition there. One of his new ventures, Piku Media, is a Groupon clone that has been able to rapidly create a new market.  In the Japanese tech industry, the playing field is wide open.  There is also no shortage of experienced engineering talent. But, because society doesn’t tolerate failure or respect entrepreneurs, Char can’t get engineers to leave their industry jobs to join his startups. He also can’t find any experienced entrepreneurs to lead his companies: once entrepreneurs fail, they are out of the game. Hence most ventures in Japan are managed by first-time entrepreneurs.  And of course they make the same mistakes as their predecessors—because there is no one for them to learn from.

In the old days, most businesses were in manufacturing, services, or retail. A business failure was associated with unethical practices or mismanagement. Things moved slowly. But the tech world is very different. Even though the basics of building a business are always the same, technology changes rapidly and so requires the creation of new business models. New technologies and business models are developed through experimentation. Entrepreneurs start risky ventures to test their ideas and raise financing from others who have been down the path before—and achieved success. And they learn from one another.  Innovation is a by-product of this synergy and experimentation.

This is something that Silicon Valley figured out long ago, and that is how it left other tech centers in the dust.  Failure is regarded as a badge of honor, not as an object of shame. When you meet tech entrepreneurs in Palo Alto or Berkeley and ask them what they do, they typically tell you about their current startup; then they start showing off about all of their previous failures—because to have failed means to have gained experience and to have learned.

Japan is an extreme, but things aren’t that different in other parts of the world. In Germany, for example, company founders are held personally liable for unpaid debt for up to 30 years—even after they declare bankruptcy. So if the business fails, they lose their house; their savings; practically everything they have. What’s worse: the Japanese and German entrepreneurs may also face criminal penalties and go to jail. So they try to avoid business exit at any cost—even if this means personally absorbing business losses. The result is that you see very few business startups, and those companies that are started take few risks.

The lesson that other regions need to learn from Silicon Valley is to glorify and embrace their failed entrepreneurs. Countries such as Germany, Japan, France, and India need to change their laws to allow high-tech companies to be started and shut down more easily. Their leaders need to work toward removing the stigma associated with failure. Their public needs to be educated to understand that, in the high-tech world at least, experimentation and risk-taking are the paths to success; that success is often preceded by one or more failures. This must be discussed frequently by political leaders and taught in schools. They should establish venture funds for entrepreneurs who are starting their second or third businesses after failing.

Innovation and growth result from courage, risk-taking, and opportunity.  Japan, and countries offering similar discouragement to their potential entrepreneurs, won’t see significant innovation and economic growth until they appreciate entrepreneurs’ human qualities and build on them.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.



September 26 2010

19:54

Silicon Valley Just Ain’t What It Used To Be—And That’s a Good Thing

Dan Lyons raises a provocative question in his latest Newsweek article: Is Silicon Valley still solving hard problems? After all, the “silicon” in Silicon Valley comes from its being the birthplace of the microprocessor. The magic of shrinking circuits gave rise to the computer industry, the Internet, and all of its offspring. In contrast, Lyons suggests that today’s Silicon Valley companies are not tackling big enough challenges that could fundamentally alter the economy and or how people live. He points to Facebook, Twitter, and Zynga, “the three hottest tech companies today,” as proof that Silicon Valley is nothing more than Silly Valley.

There are so many things wrong with Lyons’ argument that I don’t know where to start. For one thing, he hangs the entire thing on quotes from Nathan Myrhvold, the former Microsoft CTO who is now best known as a patent extortionist. So I guess it’s Myrhvold’s argument. But using a patent troll’s complaints about the lack of “real” innovation in Silicon Valley as your main example is flawed.

Let’s separate the argument from its source. The question on its own is still important, and should not be rejected out of hand. Well, there are still plenty of companies in Silicon Valley trying to solve hard engineering problems. For instance, Lyons conveniently fails to mention Google, which is arguably tackling many of the hard engineering problems he laments are no longer being tackled. He also forgets that there are still tons of hardware companies in Silicon Valley designing computers, phones, tablets, communications and data storage equipment, to name a few. He also leaves out the entire budding industry of hundreds of greentech startups, many in Silicon Valley, which are trying to re-engineer how we produce and consume energy.

But let’s focus on his argument as it pertains to the newer crop of tech startups: the Facebooks, Twitters, and Zyngas. Lyons warns:

The risk is that by focusing an entire generation of bright young entrepreneurs on such silly things, we’ll fall behind in creating the fundamental building blocks of our economy. The transistor and the integrated circuit gave rise to the last half century of prosperity. But what comes next?

It is not an unreasonable question. The answer, I suspect, will not be a better microchip, although we still do need those. Innovation (and economic value) in Silicon Valley long ago shifted over to software. Even companies that build hardware, like Apple or Cisco, create world-changing products by blending in better software. And the most important software being built today, is arguably on the Internet.

The hardware companies realize this. Cisco has been buying Internet software collaboration companies left and right for a while now. And even Intel is trying to diversify into software with its recent $7.7 billion purchase of McAfee.

As Josh Elman, a product manger at Twitter, notes:

Whining about the technical “depth” of social sounds like hardware eng complaining about rise of software in 80s

Are Facebook, Twitter, Zynga, and all the Silicon Valley startups following in their wake fundamentally silly companies? They each face their own technical challenges, which are far from trivial given the number of people who use their services. Facebook is trying to become the social glue across the Internet. Twitter is building a realtime communications platform that is exponentially more complex than, say, the telephone system (which is a one-to-one system, as opposed to many-to-many). Zynga also must deal with millions of concurrent users. The things people do on these systems may be silly, but that has nothing to do with their technical underpinnings.

Finally, the whole notion that only hard things are worth doing if you want to have a big impact misses the disruptive power of simpler technologies. Yes, building chips may be “harder” than building software, and building Internet software may be easier still. I really don’t know. Certainly, there are more people who can do it. But that is a good thing. Today’s startups stand on the shoulders of older technologies. Simpler technologies can reach more people.

Does the ability to connect with more people on a constant basis make your life richer or poorer? The answer to that question depends more on you and who you choose to connect with than on Facebook or Twitter. Whether or not any of today’s Silicon Valley companies will alter our world as fundamentally as those which brought us the microchip remains to be seen. And I do agree with Lyons that those which solve the hardest problems will have the biggest impact. But dismissing these platforms as silly diversions would be as foolish as describing the telephone a hundred years ago as nothing more than an “electrical toy”.

Photo credit: flickr/Wonderlane.



September 12 2010

19:15

Can Russia Build A Silicon Valley?

A few months ago, I wrote about why I believed that Russia’s planned “science city” was destined for failure, in my BusinessWeek column. I predicted that it would follow the path of the hundreds of cluster development projects before it. Political leaders would hold press conferences to claim credit for advancing science and technology; management consultants would earn hefty fees; real-estate barons would reap fortunes; and as always happens, taxpayers would be left holding the bag. You don’t read about the failures of tech clusters all over the world, in countries like Japan, Egypt, Malaysia, and in many regions of the United States. But that’s because they die slow, silent deaths. But that is the way nearly all government-sponsored innovation efforts go.

Given my scathing criticism, I had expected the Russian Federation to declare me persona non grata. Instead, I got an urgent call from Ellis Rubinstein, president of the New York Academy of Sciences.  He said that the Honorable Ilya Ponomarev, head of the high-tech subcommittee of the Russian State Duma (Russia’s parliament) had asked the academy to prepare a detailed report on this subject. And they wanted my input. Ellis also asked whether I would accompany his team to Russia to discuss the issue.  I wasn’t sure if this was an elaborate scheme to have me locked up in a Russian gulag, but I hold Ellis in such high regard that I agreed.

The Academy prepared an excellent report that explained how Israel, Finland, Taiwan, India, and the United States achieved success in building their technology industries.  The report also made high-level recommendations on how Russia could achieve similar success. Earlier this week, I accompanied the authors of the report to Yaroslavl, Russia, to an event called the Global Policy Forum. This event, billed as the “Russian Davos”, was hosted by President Medvedev himself.

To my relief, the Russians didn’t have a dark cell in a labor camp waiting for me. But they did spring a terrifying surprise: at the last minute, Ponomarev asked me to give a talk—in the plenary session—on how Russia can build a Silicon Valley.  The 500+ attendees included seven heads of state (including Silvio Berlusconi of Italy and Lee Myung-bak of Korea), two former Presidents, several finance ministers, some Russian Governors and Duma members, and, from the U.S., our Chief Technology Officer and our Ambassador to Russia. If that were’nt enough, they told me that the session was being broadcast live on two TV stations. And seated directly behind the podium where I was to deliver the speech were Presidents Mbeki of South Africa and Abdul Kalam of India, and a former vice-premier of China.

I started my talk by stating, quite bluntly, that I don’t believe that there is any way that Russia will ever be able to build a Silicon Valley: it lacks the requisite networks and culture of entrepreneurship, risk-taking, and openness. But Russia isn’t alone—even Boston’s Route 128, which was once a rival to Silicon Valley, lacked these ingredients and so bit the dust. And no other region in the world has been able to replicate Silicon Valley’s success.

Is there hope for Russia to build a different type of innovation/R&D hub? Yes, definitely. But Russia will need to start leveraging its own strengths to build a unique capability. It is home to some of the best engineers and scientists in the world. Unlike in the U.S., where they are called geeks and nerds, in Russia engineers and scientists are often considered national heroes. And Russian parents still encourage their children to study mathematics and science. That’s why Russians routinely win global science and engineering contests such as the recent challenge that NASA posted on Innocentive.

I know from my own experience the quality of Russian engineering talent. In 1991, right after the collapse of the Soviet Union, I hired 48 engineers in St. Petersburg and Novosibirsk, to help solve a problem that the most expensive consultants on Wall Street couldn’t—to reengineer legacy systems. The Russians were creative, able to think outside the box, and willing to challenge authority—the key characteristics needed to achieve innovation (read this piece for details of how I built a technology company based on Russian-designed technology).

But Russia has many challenges. Foreign investors are discouraged by rules of law that fail to match countries such as the U.S. and Western Europe; bureaucracies are confusing and cumbersome; corruption is rampant and is even seeping into the education system; powerful oligarchs dominate key industries; and secrecy in R&D is the norm. Until these problems are fixed, tech entrepreneurship simply can’t flourish.

Even when these problems are fixed, building a science park and adding some venture capital won’t lead to innovation. A lot more is needed. Here is my advice to Russia:

  1. Teach entrepreneurship, not just to university students, but also to experienced workers. Like their American counterparts, Russian entrepreneurs primarily come from the workforce: they have ideas for technologies that can be built, and when they get tired of working for others and want to build wealth, they develop the motivation to start companies. What stop them is the lack of knowledge on how to do it and fear of failure.  Programs like Kauffman Foundation’s Fasttrac can teach the fundamentals of starting companies.
  2. Have President Medvedev provide a vision for the grand challenges that Russian society faces and ask entrepreneurs to help solve them. Let the entrepreneurs know that they should expect to fail at least two or three times before they achieve success; or very simply: that  it’s okay to fail.
  3. Open the doors. From 1995 to 2005, 52% of Silicon Valley tech companies were founded by immigrants.  These foreign-born workers brought diversity and new ideas with them. They caused Americans to work harder and think smarter. And they helped give the U.S. its huge global advantage. But because of flawed immigration policies, future generations of entrepreneurs are now leaving the U.S. in droves. Take a page from Chile’s book—invite them over and offer some incentives. Russia doesn’t have the proximity to the U.S. or the climate advantage that Chile does, so this will be harder. But it may be able to attract some of the graduating students and skilled workers who are returning to Eastern Europe and South Asia.
  4. Take advantage of the Patent-Free Zone. Over previous decades, very few western companies have bothered to file patents in Russia or in the other countries whose economies are now growing rapidly. As I explained in this piece, there is a huge opportunity to freely use the wealth of proven intellectual property that has already been created. Russian engineers and scientists can be solving problems for most of the world—in fields such as solar power; electric cars; mobile technologies for the poor; disease eradication; medical devices; and food processing. They can combine all sorts of technologies to produce solutions that patent restrictions prevent from being ’t easily being created in the U.S. Any breakthroughs will ultimately benefit the patent owners when licenses are obtained for use in the West.
  5. Connect Russia’s engineers with their counterparts in the U.S. The Russian government should create the resources needed for American tech companies to find and hire the right Russian talent. It may even want to subsidize salaries for the first year or set up a fund that invests in Silicon Valley startups that hire Russians. This is a win—win: startups here get desperately needed seed funding and talent, and Russians gain experience and knowledge of markets and establish valuable contacts.
  6. Invest in capacity-building networks such as those being developed by The New York Academy of Sciences. The academy has created an alliance of research universities and academic medical centers which are linked to industry. It has enrolled more than 6000 doctoral students and post-docs and built about 25 multi-institutional communities of researchers and students in multi-disciplinary fields. These could be linked to similar Russian networks.

Imagine the good that can come from stronger ties between the engineers and scientists of all nations: new innovations, solutions to world problems, and more jobs and economic growth.

Editor’s note: Guest writer Vivek Wadhwa  is an entrepreneur turned academic. He is a Visiting Scholar at the School of Information at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwaand find his research at www.wadhwa.com.



February 21 2010

15:00

A Fix for Discrimination: Follow the Indian Trails


Women, Hispanics and blacks have always been underrepresented in the ranks of the Valley’s tech companies.  A new analysis by the Mercury News shows that from 2000 to 2008, the proportion of women tech workers in Silicon Valley dropped from 25.3% to 23.8%, and that the national numbers dropped from 30% to 27.4%.  In 2008, blacks and Hispanics constituted only 1.5% and 4.7% respectively of the Valley’s tech population — well below national tech-population averages of 7.1% and 5.3%. It seems that the problem I highlighted in my last post on the dearth of tech women is actually getting worse, particularly in Silicon Valley.  And it’s not just the women who are being left out, but also important minority groups.

Is the Valley deliberately keeping these groups out?  I don’t think so.  Silicon Valley is, without doubt, a meritocracy.  In this land, only the fittest survive.  That is exactly the way it should be.  For the Valley’s innovation system to achieve peak performance, new technologies need to constantly obsolete the old, and the world’s best techies need to keep making the Valley’s top guns compete for their jobs.  There is no room for government mandated affirmative action, and our tech companies shouldn’t have to apologize for hiring the people they need.  But at the same time, without realizing it, the Valley may be excluding a significant part of the American population that could be making it even more competitive.  False stereotypes may be getting in the way of greater innovation and prosperity.

Consider the data that I highlighted in my earlier post.  It wasn’t always like this, but girls are now matching boys in mathematical achievement.  In the U.S., 140 women enroll in higher education for every 100 men.  Women earn more than 50% of all bachelor’s and master’s degrees, and nearly 50% of all doctorates.  The companies they start are more capital-efficient, produce higher revenue, and have lower failure rates than those led by men.  Yet women are still a rare commodity in the ranks of tech CEOs and CTOs.

How do we fix the “hidden biases” and discrimination?  The experts I’ve spoken to have many great ideas.  They suggest we create role models, provide mentorship and financing, and teach entrepreneurship. Foundry group’s Brad Feld says that simple acts of encouragement from parents, teachers, and peers would make a big difference.  Cindy Padnos, of Illuminate Ventures suggested a solution that particularly resonated with me.  She says that women should follow the trail mapped by Indian entrepreneurs (no, not the American natives, but my kind: the immigrants).

Thirty years ago, there were hardly any Silicon Valley firms with Indian-born founders.  UC-Berkeley’s AnnaLee Saxenian documented that 7% of tech companies started in 1980–1998 had an Indian founder.  A survey conducted by my research team at Duke University found that this proportion had increased to 15.5% from 1995 to 2005. My team also determined that in this period, Indians started 6.7% of the nation’s tech and engineering firms.  These are pretty astonishing numbers considering that according to the U.S. census, in 2000 less than 0.7% of the U.S. population and only 6% of the Silicon Valley high-tech workforce was born in India.

I know from personal experience that Indian immigrants didn’t have it easy.  They suffered from the same types of stereotypes as women, blacks, and Hispanics.  Despite having co-founded a software company that we took from startup to $120m in revenue; profitability; and IPO in a record five years, I couldn’t get Research Triangle Park (RTP) VCs to even return my phone calls when I was ready to start my second venture.  I later found out why: “my people” were great at mathematics and made great engineers, but didn’t make great CEOs — “we” didn’t have the necessary management skills, didn’t like diluting our equity ownership by raising venture capital, and couldn’t “fit” into the rough-and-tough American business-management culture.  That’s what one RTP VC told me over lunch, to explain why his firm wasn’t inviting me to pitch my business plan.  They were very busy and had to be selective in who they met.

So how did “my people” rise above ignorance and bigotry?  When the first generation of Indians in Silicon Valley succeeded in shattering the glass ceiling, they decided to help others follow their path.  They realized that they had all surmounted the same obstacles.  And they could reduce the barriers to entry for others behind them by sharing their experiences and opening some doors.

In 1992, a number of highly successful Indian business executives formed a group called The Indus Entrepreneurs (which is now called TiE). Their mission was to give back to the community by fostering entrepreneurship.  They would hold monthly events, teach entrepreneurship, and provide mentoring and support.  And they would facilitate Indian-style matchmaking between entrepreneurs themselves and with investors and corporate partners.  They created two categories of members: a charter member, who took the role of guru, and a regular member, who would be a disciple.  The Guru had to donate time and money (minimum $1500/year) and was not allowed to gain any personal financial benefit.  When disciples achieved success, they would be expected to pass it forward by becoming charter members and helping others behind them.

One of my current research projects is to document and quantify the accomplishments of TiE. But I already know the impact TiE has made. After my lunch with the RTP VC, I cold-called TiE co-founder, Kanwal Rekhi. He told me that my experience was no different from what he and others in Silicon Valley had endured.  Rekhi advised me to look outside the region and to recruit a white male as president of my company.  TiE Charter Member Vinod Khosla advised me to contact VCs in Boston and gave me several introductions. After I followed Rehki’s and Khosla’s advice, it didn’t take long for me to get a term sheet from Greylock Partners (of Boston).  When the word of this got out, the RTP VCs came begging that I take their money.  (I didn’t take their money and after I achieved success, I became founding President of TiE-Carolinas and would usually spend five to seven hours weekly — even when I was really busy — mentoring fledgling entrepreneurs.)

Telle Whitney, President of the Anita Borg Institute for Women and Technology, says that TiE has done an amazing job and that its work is a great example of a mobilizing, formidable force in making change through networks.  But all networks are not created equal.  To achieve systemic change and have more women and minority-group members as entrepreneurs, we need to involve corporate leaders.  They need to personally be mentoring, proselytizing, and demonstrating by example a different model of investing in women and minority-group entrepreneurs.  There is nothing more powerful within an organization than having its own CTO talk about the importance of, for example, promoting women.

I agree with Telle. Neither Rekhi nor Khosla knew me from Adam, but both readily gave me invaluable advice.  That is the type of mentoring that women, blacks and Hispanics need. In addition to establishing stronger networks for these groups, we need to have the CEOs and CTOs of all of our top companies volunteer their own time to help others follow in their footsteps. They need to do this because this is the best path to diversity and this diversity will enrich their organizations. And we need to have VCs mentor the women and minorities they typically ignore. They need to do this not only for social good, but also for their own survival.

_____________________________________________________________________________________________________________________

Here are some links to women and minority networking groups which readers may find useful (If you know of others, please detail these in your comments).

Anita Borg Institute for Women and Technology

Astia

Forum for Women Entrepreneurs and Executives

National Center for Women & Information Technology

Silicon Valley Black Professionals

Silicon Valley Hispanic Professionals

Society of Hispanic Professional Engineers

Springboard Enterprises

The African Network

Women 2.0

Young Women Social Entrepreneurs

_____________________________________________________________________________________________________________________

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.


January 26 2010

15:01

Calling All Entrepreneurs: California Needs You

In my last post, I discussed how the gap between the web and enterprise-computing worlds has narrowed. Some of the Valley’s developers are now building web-based systems that make old-world transaction processing seem like child’s play. After all, Twitter processes more transactions per day (in the form of messages) than the systems of many large corporations process in a month. Applications that would take years to design and develop can now be built in weeks.

I called on Silicon Valley entrepreneurs to rescue the California government—to help rebuild its legacy systems. I also went out on a limb and “bet” that an unemployment check-processing system that California State had budgeted $50 million to upgrade could be rebuilt from scratch for a tenth of the cost, in a fraction of the time.

To my surprise, Joanne Moretti, Senior Vice President of Product Marketing at software giant Computer Associates, posted comments saying I was naïve and clueless. Her demand: “don’t kick something you know absolutely squat about”. It was clear that my post had angered her. But what I think was behind these comments was the need for her to defend her aging product stream. She claimed that CICS/IMS (tele-processing monitors developed in the ’60s), “are two of the fastest transaction engines in the world, and could very well be valuable pieces of a well designed well integrated environment”. (Joanne, no hard feelings, but I don’t think that you’re going to sell any CICS/IMS systems in the Valley. And please ask your CEO, John Swainson, about my background. During his days at IBM, he licensed my technology to provide the backbone for IBM’s large-scale client–server systems-development tools).

But on the flip side, two entrepreneurs agreed to step up to the challenge. Jeff Whitehead, CEO of Real Time Matrix (who I had mentioned in my post), wrote:

We accept the challenge.

Real Time Matrix will make a $5 million bid to produce a 100% non-proprietary system to process California’s unemployment checks upon receipt of detailed specifications, and we’ll deliver the solution in less than a year.

I invite the State to reach out so we can help to free you from the strangle hold that companies like CA [Computer Associates] have been exerting. We’re here, able and willing to help.

Disclosure: Jeff worked at both of my startups. He has a reputation for delivering more than he promises. So I take his words very seriously.

Another entrepreneur who agreed to take the challenge is Scott Broomfield, CEO of Veeple, which provides cloud-based online video support. Here is part of what he wrote:

I will also rise to the challenge (along with Jeff) of delivering a solution to process CA’s unemployment checks, subject to seeing the detailed specification for $5M within one year of the sign-off of the system spec or FRD.

Note the qualifier in my acceptance of the challenge; that we could do it within 1 year of the time the FRD (Functional Requirements Doc) is signed-off. We would build it using COTS tools and databases and deliver the solution securely in the ‘Cloud.’ As some have noted in this amazing thread, often the issue with time and cost has more to do with government processes and regulations than with the technology. That said, as long as we have access to the State’s databases and as long as we can read AND write to those databases, we will do it for $5 million.

Scott is rightfully nervous about government bureaucracy. But he and his CTO, Craig Sproule, too have a solid track record of building large-scale enterprise systems. I believe they too can deliver what they promise.

To be clear, we’re talking about a system that processes payments for fewer than 1 million individuals. One reader wrote that he believes he could run the entire system from his laptop (and fit the database on a 32GB flash drive). I’m sure the system is much more complex than this. But I have little doubt that a new, stand-alone system could be developed for less than $5 million. I suspect that Jeff and Scott see this as a good alternative to raising venture capital and that that’s why they’re throwing their hat in the ring.

Does anyone else want to bid? Do I hear $4 million? ….

I also wanted to reach out to California State CIO, Teri Takai, and CTO, P.K. Agarwal. Teri/P.K.: I know you’re doing your best to modernize the legacy you inherited and that you have made great progress. How can we balance the scales so that entrepreneurs like Jeff and Scott have a chance to take on the giant state contractors who win all the bids and reap the fortunes? I think you’ll agree that we can save taxpayers many hundreds of millions of dollars and greatly improve public services if we get this one right.

Photo credit: Flickr/Matthew Smith.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.


January 24 2010

15:00

Bringing Silicon Valley to Sacramento: Why Entrepreneurs Need to Help Rebuild California’s IT Systems

Mainframe

Most people don’t realize this, but Northern California actually has two giant technology centers: Silicon Valley and Sacramento. Silicon Valley is the world’s entrepreneurship capital, and Sacramento is California’s State capital. They are less than 100 miles away from each other.  But technologically, they’re light-years apart. While Silicon Valley’s workers conceive the next revolution in technology, Sacramento’s workers toil away at maintaining computer systems that were built in the tech equivalent of the Mesozoic era. Both depend on each other: Sacramento workers maintain the State’s infrastructure and public services, and the Valley’s workers generate the revenue to pay Sacramento salaries. The irony is that while the valley entrepreneurs desperately look for problems to solve, Sacramento has problems aplenty and no saviors in sight.

Witness the problems that the state experienced last November when it couldn’t issue checks to unemployed workers whose benefits had run out before Congress authorized a payment extension. Workers had to wait for up to two months to receive their checks, because the Employment Development Department couldn’t make timely changes to its computer systems. Like most of the State’s systems, these were built in the ’70s and ’80s in now antiquated computer languages like COBOL, Adabas Natural, Assembler, and PL/1. They run under operating systems like CICS and IMS.

This is the tip of the iceberg. California has roughly 130 agencies and departments. Each has its own IT staff and its own systems. Each collects its own information and maintains its own databases. These systems are not usually integrated with each other. When they do share data, it is usually through file transfer in batch mode. This is a nightmare for citizens and businesses. Take the simple task of changing a business address. The business owner has to inform multiple agencies, such as Employment Development Department, Board of Equalization, Franchise Tax Board, Secretary of State, and various licensing and certification departments. Believe it or not, the State has more than 40 separate computer applications to collect the same personal and demographic information about citizens. Even for mundane things like email, the State maintains more than 100 separate systems.

California isn’t alone in having such legacy systems and challenges. Its systems are probably better than those of any other State, and it is making the investments in reducing costs and improving infrastructure.  Most large corporations run their operations on systems that were built decades ago.  This is a ticking time-bomb for industry as well as for government.

There was a time when there was a big difference between these enterprise systems and the PC and Web applications that Silicon Valley entrepreneurs build. Enterprise systems require large-scale transaction-processing capabilities, have stringent security requirements, and need to have high availability. But that is not different from what Twitter, Facebook, and Zynga require.

Even fledgling startups in the Valley are building systems that make some enterprise systems seem like child’s play. For example, Real Time Matrix has built a facility to create Twitter groups. This requires sophisticated real-time analytics and integration with multiple sources such as Twitter, blogs, and live feeds in order to process information “as it happens”.  The Web systems that Real Time Matrix has built process tens of thousands of transactions per second and rebroadcast the results to numerous and varied clients accurately and in real time.

Cearadactylus atroxAt a talk I gave at California’s Executive Institute on Jan 21, I discussed these issues with the 200 IT managers in attendance; with State CIO, Teri Takai; and with CTO, P.K. Agarwal. Most were in agreement that new thinking was needed. IT managers seemed eager to be using the same technologies as their Silicon Valley brethren. Takai and Agarwal described how feverishly they are working to consolidate and integrate departments and move their systems into a more modern era. They are also working on streamlining the procurement processes for funding IT projects. Not long ago, it used to take an average of three years to obtain approval for a project. Today, they can do this in a year (that’s a lifetime in Silicon Valley, but considered fast in the government world). They claim they saved the State $400 million through all these efforts. Despite this, Takai and Agarwal have big challenges: they need to figure out how to make a dinosaur fly. Perhaps what is needed is to let the dinosaurs become extinct and be replaced by swift birds and mammals.

What I suggest that the State do as a top priority is to engage Silicon Valley entrepreneurs to rebuild its systems infrastructure. These entrepreneurs can create new systems for a fraction of the cost of patching up old systems. Take the system that processes unemployment checks. The State has budgeted $50 million to upgrade it. At the end of the day, it will simply have a more maintainable COBOL system if it does business the old way. Instead of the big state contractors who typically bid on and win such contracts, the State should reach out to the Valley’s entrepreneurs to rebuild this. Give them the detailed specifications and let them compete for this business (this requires streamlining the bidding process even further – even VC’s don’t take a year to make decisions). I’ll bet that the Valley’s entrepreneurs could build this system from scratch in less than a year for less than $5 million. That’s right: for less than a tenth of the cost. You can build sophisticated systems in the Web world for a tiny fraction of the cost and in a fraction of the time required for maintaining those old monsters. The new systems will be far easier to use, and cost relatively nothing to maintain. And we’d be boosting the local economy rather than the coffers of big state contractors with strong political connections.

I know that some systems are really complex and intertwined with others and can’t be fixed or replaced easily. The vast majority, however, aren’t like this. Most systems simply perform reporting and analysis – and these can be rebuilt in months, not years. I know because I started my career writing COBOL/CICS transaction-processing systems. Later I developed software to automate the process of developing large enterprise systems and co-founded a company to market it. My second startup built technology to automate the process of modernizing legacy systems. I’ve seen the technology world evolve and develop and know that what I am suggesting isn’t rocket science.

What is needed is to turn the Valley’s entrepreneurs loose on these problems and let them do their magic. The net benefit to California could be enormous. The modern world now runs on Web-based technology. So can California — and it can reduce its costs in the process. Sacramento has the advantage of having the world’s top-gun techies just a short drive away. They’re itching to help (and they can use the money).

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. Follow him on Twitter at @vwadhwa.


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