Twenty years ago when I entered the high tech industry, every aspiring young entrepreneur dreamed of building the next Microsoft and being the “next Bill Gates.” News articles told us that the next Bill Gates would probably come from Eastern Europe rather than from Silicon Valley (or Seattle where Microsoft is located). Ten years ago when Google got big and went public, every new entrepreneur wanted to be the “next Larry Page.” News articles told us that the next Larry Page would probably come from India or China rather than from Silicon Valley. As Facebook eyes its IPO next month, today young entrepreneurs hope to be the “next Mark Zuckerberg”. News articles now tell us that the next Mark Zuckerberg will come from Brazil, rather than from Silicon Valley.
While I am generally optimistic that the environment for entrepreneurship will only get better all over the world in the coming decades, it is important to realize that there are a number of things that make Silicon Valley unique and for that reason, it is more likely that the next Gates/Page/Zuckerberg will come from the Valley.
There are many things that a location needs in order to support entrepreneurship and its startups: access to capital, awesome infrastructure, a large talent pool, a world class education system, rule of law, contract enforcement and property rights, transparency/free media, tax structure, modern labor laws, and an underlying geopolitical system that supports all of the above. You can’t have a successful startup if the local government is going to tax you too high, can’t enforce a contract, or is unstable and about to be overthrown in a revolution (though a revolution is probably good for entrepreneurship in the longer term!)
Most of the places in the world today are moving in the right direction. Some developing nations support all the items above in my list. Unfortunately, that is only the entrance ticket to a startup culture.
Many places that meet the above criteria have a startup community, but lack a startup culture. A startup community is just that, a community of lots of startups who help each other, have regular meet-ups, co-work spaces, pitch nights, and even attract capital. What is lacking is the startup culture.
What is a startup culture? A culture that celebrates failure, a culture that encourages people to take risks, an ecosystem of startup support that will work on equity only or super reduced rates that range from office space, legal services, accounting services, design, advertising, PR, and so on.
Most importantly, you need a talent pool that has had several generations of people who have been through an “exit” or acquisition or IPO. These people serve as both the inspiration for new local startups (“I can’t believe that Bob from the neighborhood made it big at that local startup!”) but also as their mentors and even Angel Investors. The second and third generation folks are willing to work for equity/reduced wages and inspire others who have not had an exit to do so too. This includes not just the founders and developers, but every position in the company. The more people in your location that has been through an exit, the easier it is to build a new company.
My beloved home town of New York and my adopted home town of Hong Kong both have vibrant startup communities, but are years away from building a proper startup culture. Why? They are both very expensive cities to live in and all the money is in the finance or real estate industries. So if you are starting a new business in New York or Hong Kong you are competing with the banks for not only your developers and marketing people, but also for office space, accountants, and lawyers, etc. Only after several generations of startups reaching the exit will the floodgates open and the ecosystem will form.
Silicon Valley is one of the few places in the world where this ecosystem exits. I am watching as other locations are trying to build this ecosystem prematurely. Unfortunately, it will take time, potentially decades in some places.
Will the next Mark Zuckerberg come from Silicon Valley or somewhere else? I hope that he or she will come from somewhere else, however, my money is on Silicon Valley. Does this mean you should move, that your startup is doomed unless you are in Silicon Valley? No! All it means is that the odds are stacked against you, but with entrepreneurship the odds are always stacked against you anyway.
The company where I work, Telerik, started almost 10 years ago in Sofia, Bulgaria. At the time (sorry guys!) Sofia was an European backwater that was known more for its corruption and mafia than high-tech entrepreneurship. Telerik has defied the odds and has “made it” and has been selected as a Red Herring Global 100 company. How? By changing the culture and consistently earning the best place to work in Bulgaria award. The odds were stacked against Telerik too.