There’s a general assumption that Silicon Valley is the centre of innovation in the world. It’s more complex than that.
In many places I travel, I often hear influential people tell me they want to build up their tech communities. They want to grow their economy, help young people create their own jobs, and tap into the unlimited potential that a truly innovative society can achieve. And they want to do so by being the next Silicon Valley.
Copying everything that’s done in SV is not going to lead to this success that the government, aspiring entrepreneurs and industry magnates dream of.
While there are some patterns that are well worth copying and mimicking, blindly following what goes on in Silicon Valley in the hope it will work for you is a costly mistake that can be avoided.
Financing
Venture capital is a market like any other. There are places where you raise money and places where you deploy money. It’s clear that the largest amount of venture capital for technology is in the Bay Area.
This abundance of capital makes for a very unique set of behaviours in the market. These patterns and behaviours are known worldwide: seeping into the culture of startups globally, revered on the Internet, and even referred to in pop culture.
Some of it is obviously very beneficial to tech investing and the startup world, but by blindly trying to reproduce these behaviours is where a lot of people – both companies and investors – make mistakes. The patterns of behaviour you’re following and looking up to don’t work outside of the Bay Area.
Let’s say I was an investor outside of the Bay Area that wanted to invest the way a Valley VC does. I would be offering high valuations and deploying a huge amount of money for a few early stage companies, I would exhaust my available funds very quickly.
A Valley VC can pass that high value up an established chain of well-funded later stage investors who can make a company successful by virtue of buying the emerging market. The community of investors around me couldn’t sustain the investments. We would run out of money before the companies could succeed. Instead of fostering a few good companies that can grow and contribute to the community, we would be out of cash with little to show for it.
Funds here in Canada, internationally, and the rest of the U.S. that are trying to foster technological success in their local market and have to look more carefully and be more discriminatory about what they choose to copy and what they should absolutely not copy.
Ideas worth spreading
Being a longtime investor with Wesley Clover, which has a history of successful investments, has shown me two specific approaches that people across all borders should take from the Silicon Valley: the perspectives on failure and pushing boundaries.
The way in which we approach failure at Wesley Clover is that failure exists only in the absence of trying. In other words, you’ve only failed if you’ve given up. To us, trying something that doesn’t work is all just a part of learning. Your idea didn’t work. Maybe you were too early or too late. Doesn’t matter. You dust yourself off and try a new investment or startup.
To be in the business of innovation inherently implies that you support risk taking behaviour, and you’re not taking risk if you’re not bumping your nose occasionally.
If you’re culturally aggressive by punishing failure, you’re dramatically stifling…