Prashant Gulati says that TechCrunch should be banned in the Middle East. That’s not because he isn’t a big fan of the site, but because he says it “puts some naïve and green young ones at a disadvantage”. The Dubai-based technologist and angel investor funded a startup recently. Soon after he made the investment, he learned that the majority of the money had been withdrawn from the bank. The young company founder—who previously had been unable to make ends meet—was seen driving around in a fancy red Corvette. When confronted, the founder retorted that he hadn’t started his business to live the life of a hermit; he needed to keep his girlfriend happy and enjoy life. Since he had achieved success by raising capital and was now famous, he was entitled to live the high life like all the people that he reads about—on TechCrunch.
Prashant had no choice but to bear the loss and to coach the founder.
I know that many Silicon Valley investors will be able to relate to Prashant’s frustration. With the attention that new investments receive and the fanfare for business-plan contests, it is easy to believe that once you’ve raised capital, you’ve made it. So fledgling entrepreneurs often spend the majority of their time developing sexy PowerPoint presentations and pitching to investors rather than building their business.
I attended the NASSCOM Product Enclave in Bangalore, this week, and gave several talks to the 1000+ entrepreneurs in attendance. I was surprised at the changes that are powering the new transition: its tech workers are leaving high-paying jobs in IT services, and kids out of school are ignoring social taboos against failure and defying marriage customs to become entrepreneurs. A few Americans are also joining the fray, starting their ventures in India rather than in Silicon Valley. Though in China, returnees from the U.S. are fuelling the entrepreneurship boom, they aren’t as important in India. Sadly for my Indian friends in Silicon Valley who are looking to return home, returnees—formerly in high demand and treated like rock stars—are out of vogue and now treated like rocks.
I’ve written a lot about America’s flawed immigration policies: how the unavailability of permanent-resident visas and the growing xenophobia in the U.S., combined with expanding economic opportunities abroad, are causing a reverse brain drain. Skilled immigrants are returning home to countries like China and India in record numbers. America’s leaders are accelerating the trend by pandering to uninformed and misguided segments of their electorate who demand that the country close its doors for fear that foreigners will take their jobs away.
The result is that America is giving an unintended gift to countries like China and India, where returnees are teaching locals how to build world-class companies and how to innovate. In almost every high-growth tech company in China, you find returnees in senior management positions. The New York Times reported that it’s the same in scientific research—top research labs have returnees in lead positions, which may give China the edge it has desperately been seeking. China is a long way from challenging America in innovation ability, and if it does make some breakthroughs in cleantech, health care, and science, this is not a bad thing. As I concluded in this piece about China’s entrepreneurship boom, we benefit from innovation no matter where it happens. The problem is that the American economy is stagnant and we’re exporting the people who can help boost it. And we are creating long-term competition for our tech industry.
Bob Compton and I finally have something to agree about.
The Washington, D.C.–based venture capitalist produced a provocative documentary, 2 Million Minutes, which tracked six students—two each in the U.S., India, and China—during their senior year of high school. It showed the Indian and Chinese students slogging to learn mathematics and science, and the Americans partying and playing video games. Bob concluded that the Indians and Chinese will eat our children’s lunch since they are better educated. I was featured in the documentary and agreed that Indian and Chinese children do indeed work much harder than American children; that they are brought up to believe that education is everything and will make the difference between success and starvation; and that most of their childhood is spent memorizing books on advanced subjects. I argued, however, that things aren’t nearly as dire for U.S. competitiveness as they might appear to be in the documentary. My team’s research into global engineering education showed that more than 95% of Indians and Chinese do not receive a good education, and even those that do receive one take much longer to develop crucial real-world skills than do Americans. Yes, U.S. teens work part-time, socialize, and party. But the independence and social skills they develop give them a big advantage when they join the workforce. They learn to experiment, challenge norms, and take risks. They innovate from the get-go.
At the Security Innovation Network (SINET) Showcase at The National Press Club in Washington, D.C., this week, Michael Chertoff, former Secretary of the Department of Homeland Security, presented a dire assessment of the cyber-security threat facing our nation. He discussed how rogue governments and hackers are quietly infiltrating our computer systems and the disasters that can be perpetuated—like those you see on the TV show “24”. Chertoff worries that these risks haven’t yet gripped the public imagination; that it may take a “digital 9-11” to get businesses, consumers, and governments to fortify their defenses.
The most troublesome thing I learned by talking with a who’s who of our nation’s security community was that our government doesn’t believe it has the ability to defend us from the rapidly evolving threats. Yes, the National Security Agency and some branches of government have brilliant computer scientists working for them and can defend their own systems; but the rest of us are our own. The Government simply can’t innovate fast enough to keep pace with the pervasive threats and dynamics of the internet or Silicon Valley’s rapidly changing technologies. Indeed, as George Hoyem, a partner at the CIA-backed venture fund In-Q-Tel, noted, there has been a 571 percent growth in malware since 2006; today, 60 percent of all websites are infected.
Seeing a need to help 60 million Americans manage their $4 trillion dollars in retirement accounts, Mike and Ryan Alfred launched BrightScope in 2008. They headed to Washington, DC, to obtain electronic data on 401K plans from the Department of Labor. They assumed that since every employer is required to provide the government with this information, it would be readily available to any citizen.
But the brothers were wrong. Labor Department officials first said that they didn’t have these data; and when challenged, they offered to provide millions of pages of printed reports—at a cost of five cents a page. The entire data set would have cost a fortune, filled 1400 boxes, and been impossible to use. Undeterred, Mike and Ryan started a lobbying campaign. With the help of several Senators, they caused the government to relent and give them electronic copies of the reports they needed.
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.
In any debate, it is easy to revert to anecdote and highlight examples that exemplify one point of view. Recent TechCrunch posts about women in tech have done just that. The latest of these claimed that women don’t want to run startups, because they’d rather have children. I can understand why: TechCrunch and its editors focus on the Silicon Valley/Web 2.0 world. In this world, most startups—or at least those that get attention— are founded by young white males; aggression and arrogance are considered positive traits; companies need to be grown very fast—even recklessly—because markets change rapidly; and venture capitalists pay promising students to drop out of school to start companies that will likely fail and wreck their careers. So if you’re debating this tiny slice of the tech universe, it is fair to say that women and minorities can’t—or don’t want to—compete. But this isn’t representative of the larger tech world; and it certainly isn’t representative of American industry.
Take the issue of whether the desire to have kids or just run lifestyle businesses makes women averse to running startups. This is an accurate description of some women: they just aren’t cut out for the rough-and-tumble world of entrepreneurship—which requires extremely hard work and in which most startups fail. But it’s the same with men: men too avoid entrepreneurship because they fear risk and aren’t ready to put in the long hours. There is no black or white: many women with children have succeeded with startups, while other successful women entrepreneurs have chosen not to have children.
One of the most interesting discussions at TechCrunch’s Disrupt conference was the debate between the “super angels” and VCs. No, I’m not referring to “AngelGate” or the question of which investor group squeezes entrepreneurs the most. Despite what they say, all investors are in the game for personal financial gain; it’s not about nurturing entrepreneurs or doing good for the world. The most interesting discussion—for entrepreneurs—was about whether a startup should raise lots of venture capital and go for the billion-dollar exit, or raise less money and be happy with a few million.
This issue is much more important than it seems: it affects the way you grow your company, and the focus you place on products and customers. When you go for the billion-dollar exit, you have to start with a master plan for owning a significant slice of a multi-billion-dollar market. You need to develop grand products for grand markets. This is good—you need a vision and a long-term focus. The problems begin when you start raising capital and racing to grow at all costs. And that is where the real chasm between the “super angels” and VCs is developing.
Instead of another boring lecture, last week my students at UC-Berkeley got quite a treat: a lively discussion with TechCrunch founder Mike Arrington. I once described Mike as a cross between Oprah Winfrey and Howard Stern; so I was ready for a little controversy. But he ended up lighting such a big fire, that I’ve been bombarded with questions from students about their education and careers. The questions aren’t just coming from Berkeley; after the discussion was posted on TechCrunch, students at Duke asked me to discuss this at a keynote I am giving at their entrepreneurship symposium on Wednesday; and students at other schools, from as far as India and Singapore, have asked for advice. So I’ll just respond here in the hope of quenching this fire.
This week, I participated in a fascinating series of discussions at The Economist magazine’s summit called “The Ideas Economy: Human Potential – When the world grows up”. I came away with the realization that we’re not tapping into even a tiny fraction of the potential that human beings have. Additionally, we have a unique opportunity, today, to leverage the entire world’s talent. In Silicon Valley, in particular, ideas are the currency that matter, and these are the keys to innovation and economic success. Knowledge creation has globalized and there is a fierce race underway for talent. We can fear this all we want, but we have a choice: raise protectionist barriers and lose the race, or recognize the new reality and take advantage of the opportunities for collaboration and innovation.
At the event, Kauffman Foundation senior fellow Ben Wildavsky discussed key findings from his book, The Great Brain Race. He documented that student mobility is now taking place to a degree never been seen in history. More than three million students travel outside their home countries to study—a 57 percent increase in just the past decade. What’s more, those extraordinary numbers are projected to nearly triple, to 8 million, by 2025. In a competitive global marketplace, student recruiting is fierce. (New Zealand even resorted to a viral video showing two students making out in the corner of a hot tub; the camera pulls back to show a pair of disapproving adults in the other corner followed by the caption “Get further away from your parents”.)
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 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, tax payers 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—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 if 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.
When I was ready to transition from computer programmer to project manager, my employer, Xerox Corporation, sent me to its huge training center in Leesburg, Virginia. Over two weeks, the people there taught me some of the skills I needed in order to succeed in my new role: managing projects, motivating people, complying with employment regulations, and preparing status reports and presentations. The company also encouraged me to complete an MBA, on a part-time basis, at New York University. It gave me lots of time off and paid for the tuition.
Tech companies in the internet era offer their employees some great perks. But do you think that Facebook, Groupon, or Zynga provide budding professionals with any serious management training? Not at all. Given the way tech companies grow and the HR challenges they face, management training and career development are more important than ever. But few have the time—they are too busy surviving.
An interesting paradox in the technology world is that there is both a shortage and a surplus of engineers in the United States. Talk to those working at any Silicon Valley company, and they will tell you how hard it is to find qualified talent. But listen to the heart-wrenching stories of unemployed engineers, and you will realize that there are tens of thousands who can’t get jobs. What gives?
The harsh reality is that in the tech world, companies prefer to hire young, inexperienced, engineers. And engineering is an “up or out” profession: you either move up the ladder or face unemployment. This is not something that tech executives publicly admit, because they fear being sued for age discrimination, but everyone knows that this is the way things are. Why would any company hire a computer programmer with the wrong skills for a salary of $150,000, when it can hire a fresh graduate—with no skills—for around $60,000? Even if it spends a month training the younger worker, the company is still far ahead. The young understand new technologies better than the old do, and are like a clean slate: they will rapidly learn the latest coding methods and techniques, and they don’t carry any “technology baggage”. As well, the older worker likely has a family and needs to leave by 6 pm, whereas the young can pull all-nighters.
Silicon Valley’s vitality depends on a constant influx of bright people who challenge its inhabitants to work harder and think smarter. And, as I noted in my last post, America’s economy depends on startups to create jobs and innovation. Skilled immigrants have provided both. So, given the miserable state of the economy, we should be laying out the welcome mat for the world’s best and brightest. Yet they’re doing the exact opposite. Meanwhile other countries have figured out the secret of the Valley’s success and are laying out their red carpets and welcome mats, not only for the foreign skilled workers we’re turning away but also for our techies.
Fifty-two percent of Silicon Valley’s startups from 1995 to 2005 were founded by foreign-born workers. And in 2006, 26% of America’s global patents—including 40% of those filed by the U.S. government, 72% of Qualcomm’s, 65% of Merck & Co.’s, and 64% of General Electric’s—were invented wholly or partly by foreign nationals residing in the U.S. You would think that we would develop policies to bring in more of these people. Yet, sadly, the only immigration legislation our political leaders have been able to agree on, unanimously, is to hire 1000 more border-patrol agents and to fly drones on the Mexico border—like the ones we use to kill terrorists in Pakistan—to keep the nannies, gardeners, and farm workers out. Ironically, to pay for all this, the new border-security law levies taxes on companies that the bill’s sponsor, Senator Schumer (D-NY), calls “chop shops”—because they bring in tech workers who compete with Americans and supposedly “take their jobs away”. These “chop shops” are Indian companies such as Infosys, Tata Consulting Services, and Wipro—which have the best employee-training and -development programs, and are amongst the best-managed companies, in the world. They compete head to head with American “chop shops” such as IBM Global Services and Accenture, and increasingly with management consultants such as McKinsey & Co and The Boston Consulting Group. (In the U.S., the term “chop shop” is typically used to describe an illegal business which disassembles stolen cars for selling off the parts.)
I knew I would be touching a raw nerve with my last two posts, on patents. But I was really surprised at the divergence of opinion. Entrepreneurs overwhelmingly supported my stance that software patents hamper innovation and need to be abolished, but friends in Microsoft, IBM, and Google were outraged at my recommendation. The big companies’ executives argued that abolishing patents would hurt their ability to innovate and thus hamper the nation’s economic growth. (They believe that companies like theirs create the majority of jobs and innovations, and they claim that without patents they cannot defend their innovations.) I am not convinced that software patents give Google any advantage over Microsoft and Yahoo, or make IBM’s databases any better than Oracle’s. But I do know one thing for sure: it isn’t the big companies that create the jobs or the revolutionary technology innovations: it is startups. So if we need to pick sides, I vote for the startups.
Let’s start with the question of who creates the jobs. This is one of the issues that I recently took Intel co-founder Andy Grove to task for, in BusinessWeek. Grove wrote a profound essay lamenting the loss of American manufacturing jobs. I share his concerns about jobs. But Andy’s protectionist recommendations for restoring America’s competitiveness were largely based on his flawed premise that companies like Intel create all the jobs—not the startups. I also discussed the tradeoff between bailing out companies like General Motors, AIG, and Citibank and nurturing startups in this BusinessWeek piece. This question is more important than it may seem.
During my tech days, I co-authored four software patents. Each cost my startup about $15,000—which seemed like a fortune in those days. I didn’t really expect these to give me any advantage; after all if my competitors had half a brain, they would simply learn all they could from my patent filing and do things better. But I needed to raise financing, and VCs wouldn’t give me the time of day unless I could tell a convincing story about how we, alone, owned the intellectual property for our secret sauce. We got the financing, and the plaques of the patents looked great in our reception area, so the expense was worth it. But there was definitely no competitive advantage.
Patents make a lot of sense in many industries; they are needed to protect the designs of industrial equipment, pharmaceutical formulations, biotechnology products and methods, biomedical devices, consumer products (toothpaste, shampoo, contact lenses, etc.), advanced materials & composites, and of course, widgets (lighting fixtures & elements, batteries, toys, tools, etc.). But in software these are just nuclear weapons in an arms race. They don’t foster innovation, they inhibit it. That’s because things change rapidly in this industry. Speed and technological obsolescence are the only protections that matter. Fledgling startups have to worry more about some big player or patent troll pulling out a big gun and bankrupting them with a frivolous lawsuit than they do about someone stealing their ideas.
China may overtake Japan to become the world’s second-largest economy this year. On its heels is India, and countries such as Brazil and Russia are not far behind. What does this mean for entrepreneurs? That, increasingly, the big opportunities lie outside the U.S. Most people aren’t aware of another advantage in emerging markets: you can freely leverage the wealth of proven intellectual property that has already been created in developed economies. Most countries outside the U.S. and Europe lie in a Patent Free Zone—where companies have not filed patents because they believe there is no market for their goods. So this intellectual property is available to anyone in those nations that can find a use for it.
Take the iPhone as an example: it has over 1000 patents; yet Apple does not apply for patent protection in countries like Peru, Ghana, or Ecuador, or, for that matter, in most of the developing world. So entrepreneurs could use these patent filings to gain information to make an iPhone-like device that solves the unique problems of these countries. Apple has so far received 3287 U.S.-issued patents and has 1767 applications pending: a total of 5054. Yet it has filed for only about 300 patents in China and has been issued 19. In India, it filed only 38 patent applications and has received four patents. In Mexico it has filed for 109 and received 59 patents (for all of its patents). So even India, China, and Mexico are wide-open fields.
You can definitely call me an Apple fanboy: I’ve bought practically every device that Steve Jobs has made since 1985—when I got my first Macintosh. I own an Apple TV, several iPods, a Macbook Pro, a Macbook Air, an iMac, two iPhones, and two iPads (one was a gift). For various reasons, I need to use Microsoft Outlook and Windows, so I run these in a virtual machine on my Mac. But this fanboy is listing his iPads for sale on Craigslist. Why? Because they’ve become like the paperweights on his desk. I just don’t use them.
When the iPad was first announced, I predicted that it would be a game changer. I touted, to my Twitter followers, that grandma would soon be able to tell her cable company to take back its cable modem. She would no longer have to deal with the complexities of configuring Wi-Fi connections on her router. All she would need in order to surf the web and check email is the $15/month AT&T 3G service. Junior would soon be able to traverse new virtual worlds and learn world history while playing games on this slick new device. I also expected that I wouldn’t need to carry around my bulky laptop; instead I would have a device that provided almost the same features as my laptop, but had the elegance and simplicity of an iPhone. I really believed that this cool new device would solve the world’s technology problems and reduce the number of electronic gadgets I had to carry around.
Most of the entrepreneurs I know fancy themselves to be like Jobs. They think they know—better than their customers—what the customers want, and what they need. Or they believe, as in the movie Field of Dreams, that if you “build it, they will come”. But it just doesn’t work this way in real life. The vast majority of technology startups fail because no one buys or uses their products.
In a speech at the American University last Thursday, President Obama highlighted the incredible economic rewards that America has gained from its immigrants. He spoke of new waves of immigrants—from places like Ireland, Italy, Poland, and China—challenging the generations before them, and consequently being subjected to “rank discrimination and ugly stereotypes”. Yet they kept coming to America. That’s because it was the only land of opportunity. The President wants lawmakers to fix the immigration system so that America can remain globally competitive. But I don’t think it’s that simple: America is no longer the only magnet for the world’s best and brightest. Fixing immigration policy is an important start, but it won’t be enough to stop the brain drain of highly educated and skilled workers that the U.S. is presently experiencing.
Just last week, there were two notable visitors to Silicon Valley—Russian President, Dimitry Medvedev, and Chile’s minister of Economy, Juan Andres Fontaine. President Medvedev wanted the brilliant Russian-born and -educated programmers who write some of the Valley’s most sophisticated software to know that they are welcome back home and that he is setting up a science park for them. Minister Fontaine wants to turn Chile into a tech hub and is following my advice on how to make this happen: by attracting immigrants; building a diverse culture that encourages risk-taking and openness; and creating networks of mentors. Over drinks (some excellent Chilean wine), the minister told me of a new program that Chile is piloting to lure bootstrappers. Chile will grant $40,000 and provide some really cheap office space and accommodation to budding entrepreneurs from anywhere in the world. All they have to do is to build their products in one of the most beautiful locations on the planet. Chile is betting that once these entrepreneurs get there, they will never want to leave.
Meena wants to become a computer engineer. She believes that if she works hard enough, she can build her own “big business”—maybe a Google. So she is determined to complete her schooling and earn an engineering degree. Young girls like Meena, just 16 years old but with the ambition and confidence to enter the tech world, are a rare commodity even in Silicon Valley; but Meena lives in a slum in New Delhi. Her father works as a day laborer. He used to spend half his income on alcohol, and would come home drunk every night and make so much noise that Meena could not do her homework. He considered Meena a liability, saw no value in her education, and had nothing to be optimistic about.
Sana Azmi too lives in a Delhi slum. She is determined to become a lawyer. Sana has long had this ambition, but her unemployed father had made the decision to withdraw her from school this year, when she turned 16. His plan was to get her married as soon as possible, and he believed that if Sana received too much education, it would be difficult to find a suitable groom in their socioeconomic community. Moreover, they simply couldn’t afford to educate her. Sana begged her Dad to find a way; she told him that without higher education she would be like an “empty room”.
David Park and Eric Bahn are earning more at their startup, called Beat The GMAT, than they ever did in the corporate world. Every penny of profit from the business goes directly into their bank accounts. They enjoy being their own bosses; have become experts in sales, marketing, customer support, computer programming and graphic design; feel good about helping students gain admission to business school; and are grateful that they can spend their time doing things rather than discussing things—because they don’t answer to anyone. Why should they sell their business and be back to working for companies like Intuit or McKinsey & Co., they ask?
Ryan Sit, who runs a website called Picclick.com, feels the same way. His visual sales site attracts 300,000 unique visitors per month and generates millions in product sales for eBay and Etsy sellers—netting him a healthy six-figure income. He works from home and spends as much time as he wants to with his two small children and wife. Ryan cherishes the freedom to do anything he wants—like experimenting with new website ideas. The last thing he wants to do is to raise capital or merge with a bigger company. “You become a slave when you are funded, and having lots of employees is just a pain”, Ryan says.
Raising millions of dollars from VCs is still the tech entrepreneurs’ dream. Entrepreneurs believe that a hoard of cash in the bank will give them the luxury of developing better products, marketing the heck out of them, and reaping the rewards with big sales and an eventual IPO. But more often than not, the money is a curse. When a company is running on a tight budget, it will usually perform far better than a company that is well capitalized. In my experience, having too much money always leads to bad habits.
First, the CEO will feel pressure from investors to upgrade the management team and bring in “grown up” supervision. This doesn’t always work out as planned. Seasoned managers want bigger salaries and larger chunks of equity. VCs usually expect a portfolio company to use a preferred headhunter to find the rockstar VP of sales. Naturally, the headhunter also wants an equity stake, on top of a finder’s fee in the neighborhood of six figures.
The H-1B visa has become the beachhead in the battle against the legal immigration of skilled workers. This visa allows highly educated and skilled workers from abroad to take employment in the U.S. and eventually become citizens. Anti-immigrant groups believe that they can close the door to foreigners by restricting or abolishing it. So they have been trying to convince lawmakers that H-1Bs depress wages and take jobs away from American workers. To prove their point, they highlight examples of unscrupulous body shops that underpay their workers, and they cite questionable research published by other anti-immigrants. But a new peer-reviewed study, published in Management Science, a top academic journal, challenges these claims. This research finds that foreign-born I.T. professionals on temporary work visas actually earn more than their American counterparts; and that limits on H-1B visas cause the salaries of foreign workers—not Americans—to increase. This, along with research completed by my colleagues at UC-Berkeley, Duke and Harvard, confirms what most people in Silicon Valley already know: that foreign-born I.T. workers complement American professionals and make the pie bigger; they don’t take jobs away.
This new study was completed by University of Maryland professors Hank Lucas and Sunil Mithas, using data from a survey of 50,000 I.T. professionals that InformationWeek and Hewitt Associates conducted from 2000 to 2005. After adjusting for educational qualifications, work experience, and other individual characteristics, the researchers found that I.T. professionals without U.S. citizenship earned 8.9% more than U.S. citizens. Tech workers on temporary visas were paid 6.8% more than those with U.S. citizenship; green card holders took home 12.9% more than their American-born counterparts. In years when Congress increased the numbers of visas available, salaries of foreign workers dropped.
While grandma flips through photo albums on her sleek iPad, government agencies (and most corporations) process mission-critical transactions on cumbersome web-based front ends that function by tricking mainframes into thinking that they are connected to CRT terminals. These systems are written in computer languages like Assembler and COBOL, and cost a fortune to maintain. I’ve written about California’s legacy systems and the billions of dollars that are wasted on maintaining these. Given the short tenure of government officials, lobbying by entrenched government contractors, and slow pace of change in the enterprise-computing world, I’m not optimistic that much will change – even in the next decade. But there is hope on another front: the Open Government Initiative. This provides entrepreneurs with the data and with the APIs they need to solve problems themselves. They don’t need to wait for the government to modernize its legacy systems; they can simply build their own apps.
The federal government’s open data initiative, data.gov, was launched exactly one year ago with 47 datasets of government information, by Federal CIO, Vivek Kundra. This has grown to more than 250,000 datasets. Hundreds of applications have already been built to harness this information. A few states and localities have also followed the lead, the most notable of which is San Francisco City.
I am quite used to controversy—unsurprisingly, given the topics that I have been exploring with my academic research. But what has really been a surprise is the hornet’s nest that I seem to have stirred up with my two TechCrunch posts and BusinessWeek column on the dearth of women entrepreneurs. At every event I’ve been to recently, women have come up to me to say thanks for raising awareness of this issue and for providing them with encouragement; the New York Times ran a big feature story echoing my words; and several VC friends sent me emails congratulating me for “having the courage to speak up”. On the flip side, I’ve also taken fire from some VCs. One woman VC wrote a TechCrunch post chiding me for being “patronizing”; others declared on Twitter that all my posts are “garbage”; and I received some really nasty e-mails questioning “my agenda”. So I know that I’ve touched a nerve, and that this is a really important topic.
May 8, 2010
A long time ago, I had to make a really tough choice: invest in an MBA from New York University, or make do with my bachelors. I was newly married, had a child on the way, and didn’t have much in savings. The degree would set me back tens of thousands of dollars and take years to complete—especially if I did it part time. And I couldn’t imagine doing anything but programming computers for a living. So why learn finance, marketing, and operations management, I wondered? Well, I decided to enroll because my understanding of the business world lacked depth, and I harbored a deep-rooted desire to get the best education possible. My wife and I moved into a small one-bedroom apartment in North Bergen, NJ, and we made do with what we had.
For a couple of years after getting my degree, I wondered whether I had made the right choice. Even though I scored a great job at CS First Boston in its IT department, I was just writing code and designing systems. Yes, I started to enjoy reading BusinessWeek and the Wall Street Journal; but had the financial sacrifice and time away from my family been worth it? It didn’t seem to have been.
May 1, 2010
In my last post, I discussed why the odds of a rookie entrepreneur getting seed financing from a VC are very slim. The reality is that less than 5% of venture money goes to seed-stage startups; VCs typically invest when a company has a working product, a tested business model, and a strong management team. It’s the entrepreneurs who take the risk; not the VCs. They beg and borrow money from friends and family, max out their credit cards, and sometimes make do by living at home with their parents. Yet, very often, it’s the VCs who get the glory. I don’t think that’s fair. So in this post, I’m going to highlight three bootstrapped companies, and share the advice of their founders. In my books, entrepreneurs are the real heroes—those who make the innovation happen. They are the ones you should be following on Twitter and learning from, not boastful VCs.
April 24, 2010
Hardly a day goes by when I don’t have a rookie entrepreneur ask for advice on raising money from VCs. They usually have a fancy-looking business plan with detailed spreadsheets showing how their company will be worth billions by capturing just 1% of a market. All they need is some financing, and they’ll take the world by storm. My advice is always the same: ditch the business plan, and buy a lottery ticket. Your odds are better, and you’ll suffer less stress.
Most of the young entrepreneurs I meet have grown up reading stories about how, during the dot-com days, all you needed was a PowerPoint and a geeky smile to get a venture capitalist to throw millions your way. True, some really dumb companies were funded during those days, but nearly all of these companies (and their investors) went down in flames. It was just the few, random, successes that reaped the fortunes. Investors have grown much wiser since then (and will probably stay this way until the next bubble).
April 17, 2010
When startups ask me whether they should outsource product development, I usually advise against it. If they’re desperate to save money, they should outsource some testing or ancillary-product development, not core products. That’s because the developers of innovative technologies need to interact with each other and be close to customers and markets. In my book, outsourcing is for corporate I.T. departments and for large companies with global operations, not for small tech companies. I said this in my BusinessWeek column, three years ago. I also cited research that showed that the tech industry has never constituted more than 15% of the outsourcing market (banking, finance, and insurance accounted for 40%; telecom, 17%; and manufacturing, 12%)—and this includes the product development that companies such as Microsoft, Adobe, and Cisco perform in their offshore locations.
When I wrote that BusinessWeek piece, Peter Harrison, CEO of outsourcing services provider GlobalLogic—who happens to be a good friend and someone I have mentored over the years – tore into me. He insisted that I was wrong and offered to prove it by introducing me to his customers. I ignored him (as I often do). But Peter is persistent. Last week, he roped me into his customer conference to have dinner with Mike Moritz of Sequoia Capital, who is a GlobalLogic investor. Peter also had me meet some of his customers.
April 10, 2010
In my last post, I wrote about how education can boost workforce productivity and lead to greater corporate success. But there is actually an even more potent ingredient for boosting productivity: happiness. According to author and business coach Alexander Kjerulf, the Danes have a word for happiness at work: arbejdsglæde (and if you want to stay happy, don’t try pronouncing that). Kjerulf says that this concept is deeply ingrained in the Scandinavian work culture. It’s about enjoying what you do; feeling proud of your work; knowing that what you do is important and being recognized for it; having fun; and being energized.
When workers achieve arbejdsglæd, the business benefits from higher productivity, because happy people achieve better results; higher quality, because happy employees care about quality; lower absenteeism, because people actually want to go to work, and less stress and burnout, because happy people are less susceptible to stress. Not surprisingly, all of this leads to higher sales, better customer satisfaction, more creativity, and higher profits for the business.
Sounds like some kind of Nirvana or Disneyland, doesn’t it? After all, who doesn’t want to be happy? And how can one be happy at work when the boss is a jerk, the company doesn’t care for its employees, and the job simply sucks?
March 27, 2010
Ask any old-time IBMer, and you will hear stories of IBM’s legendary workforce-development practices. When a manager identified a manufacturing worker with promise, the company would teach him how to dress, how to speak to clients, and how to service products. These technicians would then be trained to be computer programmers, sales reps, or product managers. IBM president Thomas Watson, Sr., considered education so important that, in 1932, he started a mini-university for employees, the Endicott schoolhouse.
That was until the ’70s. IBM still provides good training, but try getting a job there today: unless you have just the right skills, you won’t even score an interview. New recruits don’t receive the year or so of training that was common; they get a few days of orientation, after which they’re expected to be productive. It’s the same at Microsoft, Google, Apple, and almost every tech company. Unless you have the alphabet soup of technologies on your resume, you’ll get nothing more than an auto-response to your job application. If you do get hired, it’s up to you to stay current or get booted out with the first dip in sales. American corporations consider their workforce to be disposable — like ball-point pens and cigarette lighters. Gone are the days when a company would train a factory worker to become a computer programmer or offer lifelong employment. It’s all about quarterly revenue and profits now.
March 20, 2010
When I came to the U.S. in 1980, I was young and naïve. I used to think that corruption and ethical lapses were just a third-world ill. Eventually, I became a tech CEO and learned the harsh realities of American business. Yes, standards are much higher, and breaches are punished, but the temptations are just the same here as they are in any other country. Ethical lapses (which are a form of corruption) are quite common. You watch stories about these on TV every other day and read about them on TechCrunch. It was the ethical lapses of our financial institutions that threw our economy into a tailspin, and for which we are paying the price, after all.
It is best to be aware of the temptations and to prevent the lapses from occurring. As Enron, Bernie Madoff, and Lehman Brothers have shown, it’s a slippery slope. Once you start compromising your values for short-term gains, there is no turning back. Business ethics are not something you need to start worrying about when your company reaches a certain size; they need to be sewn into the fabric of your startup from the get-go. The lessons are the same for tech businesses as they are for investment banks and for third-world economies.
Mar 14, 2010
Editor’s note: The most valuable employees of any technology company are the engineers and scientists, which is why everyone in Silicon Valley does whatever they can to ensure the continuous supply to this talent pool. The size of the talent pool is ultimately determined by the number of people who graduate from colleges and universities with science, technology, engineering, or mathematics degrees. The U.S. is graduating fewer and fewer scientists and engineers, causing concern in many quarters.
While many people agree this is a problem, not everyone agrees on what should be done about it. Former Intel chairman and CEO Craig Barrett is a strong proponent of priming the pump with more undergraduate science, engineering, and math students. Duke/UC-Berkeley professor (and regular TechCrunch columnist) Vivek Wadhwa thinks that better rewards for people who pursue engineering and science degrees is the right approach. So we asked Barrett and Wadhwa to debate the issue of how best to fix technology education in the U.S. Their exchange is below:
Craig Barrett is someone who I hold in the highest regard. Ever since he retired as Intel’s CEO, Dr. Barrett has made it his life’s mission to improve U.S. competitiveness. He believes that the way to do this is to teach more math and science. And he believes we need to graduate more PhDs in science and engineering.
I wholeheartedly support improvements in education and know the value that math and science skills provide. But the problems I see in U.S. competitiveness aren’t related to the numbers of engineering PhDs or scientists that we graduate. American companies are shifting R&D abroad because it makes economic sense for them to be near growth markets, and they can hire talented workers at a lower cost. It isn’t about deficiencies in American workers or a weakness of U.S. math and science education.
Read more: http://techcrunch.com/2010/03/14/craig-barrett-takes-on-vivek-wadhwa-in-the-tech-education-debate/#ixzz0nOgsWXbX
March 6, 2010
My last post triggered some interesting debates in the blogosphere about whether entrepreneurs were a product of nature or could be nurtured. It’s not black or white. People are a product of their upbringing and education. Average humans can achieve extraordinary feats when they really try. I’ll concede that, like some great athletes, some great entrepreneurs may have something different about them that gives them a special advantage (this is a topic that I am presently researching). But not every entrepreneur needs to reap the same fortune as Bill Gates or Mark Zuckerberg to qualify as a success. You can build a good lifestyle business that pays the bills, or that does good for the world, and be considered a successful entrepreneur. (And you’ll probably be happier and gain more respect than most billionaires do.) Entrepreneurship isn’t all about the IPO.
February 27, 2010
Silicon Valley investors often have a picture in their heads of the type of person who is worthy of funding: young, brash, stubborn, and arrogant. They believe that successful entrepreneurs come from entrepreneurial families and that they start their entrepreneurial journey by selling lemonade while in grade school. Angel investor and entrepreneur, Jason Calacanis said as much in his recent talk to Penn State students. And after meeting Wharton students, VC Fred Wilson expressed shock when a professor told him that you could teach people to be entrepreneurs. Wilson wrote, “I’ve been working with entrepreneurs for almost 25 years now and it is ingrained in my mind that someone is either born an entrepreneur or is not.”
Jason, Fred, and Silicon Valley VCs, I’ve got news for you: you’ve got it all wrong. Entrepreneurs aren’t born, they’re made. And they aren’t anything like you think they are.
February 21, 2010
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.
Running on just sugar and caffeine, 32 teams of students worked non-stop for 18 hours to develop applications that they hoped would blow the judges’ socks off. This was at the UC-Berkeley Hackathon, last weekend. Indeed, many teams succeed in their mission. They built some amazing software: to provide server-side rendering of games, convert website mockups to HTML/CSS, create sophisticated playlists for Youtube videos, and to analyze Twitter streams. One team even built a gaming interface for a neural headset.
There were so many cool tools that the seven judges, who included representatives from Zynga, Facebook, and Y-Combinator (and me), had a hard time picking a winner in each category. The exception was the “social good” category. There was only one team was worthy of receiving this prize. The team built a system to enable villagers in developing countries to send SMSs to volunteers across the globe who provide emergency medical advice. But the Silicon Valley judges couldn’t see the value of this technology. One commented, “If the villager has a cell-phone, why doesn’t he just call 911? This is really dumb”. (Most of the judges didn’t understand that 911 services don’t exist in most places in the world, and that SMSs have become the internet of the developing world). Instead, the panel awarded the prize to a team that developed a polling technology for university classrooms and for conferences. The rationale for this decision? “Helping universities is a social good.”
February 7, 2010
“People in technology businesses are drawn to places known for diversity of thought and open-mindedness”, is what Professor Richard Florida concluded after studying the growth and success of 50 metropolitan areas in the U.S. The most successful regions were those with the most gays, bohemians, and immigrants. These groups flourish in Silicon Valley, and its diversity has undoubtedly provided it with great advantage. But after attending the recent Crunchies Awards, I realized that something important is still missing — women entrepreneurs. I was shocked that the only woman CEO on stage during the entire event was TechCrunch’s own Heather Harde. Nearly all the companies that competed in the event (other than the PR firms) had males at the helm. This dearth may be one of the reasons for which the Venture Capital community is in such sharp decline, and why the Valley isn’t achieving even more success.
An analysis of Dunn and Bradstreet data shows that of the 237,843 firms founded in 2004, only 19% had women as primary owners. And only 3% of tech firms and 1% of high-tech firms (as in Silicon Valley) were founded by women. Look at the executive teams of any of the Valley’s tech firms – minus a couple of exceptions like Padmasree Warrior of Cisco, you won’t find any women CTOs. Look at the management teams of companies like Apple – not even one woman. It’s the same with the VC firms – male dominated. You’ll find some CFOs and HR heads, but women VCs are a rare commodity in venture capital. And with the recent venture bloodbath, the proportion of women in the VC numbers is declining further. It’s no coincidence that only one of the 84 VCs on the 2009 TheFunded list of top VCs was a woman.
January 30, 2010
In the State of the Union Address last Wednesday, President Obama said “the nation that leads the clean energy economy will be the nation that leads the global economy and America must be that nation.” At the same time, on the other coast, 75 clean energy investors, entrepreneurs, and researchers were debating whether the U.S. can gain this leadership position. They agreed that even though Silicon Valley leads the world in technology, it is not clear if it will ever lead in Cleantech. The Valley may develop some breakthrough technologies, but without government help these are unlikely to translate into global leadership. The technology world is rightfully allergic to government assistance and intervention. Cleantech is different, however, and we aren’t dealing with a level global playing field.
January 26, 2010
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.
Bringing Silicon Valley to Sacramento: Why Entrepreneurs Need to Help Rebuild California’s IT Systems
January 24, 2010
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 which 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 which 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 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 70’s and 80’s in antiquated computer languages like COBOL, Adabas Natural, Assembler and PL/1. They run under operating systems like CICS and IMS.
January 16, 2010
Free speech is a basic human right and is essential to creativity and innovation. But every society places limits on this, particularly when it transgresses into “hate speech” – which disparages someone or some group on the basis of race, gender, age, ethnicity, nationality, religion, sexual orientation, and so on. Calls to violence are tolerated even less. These often lead to jail terms.
The Electronic Frontier Foundation (EFF) has been the tech world’s champion of free speech since its inception in 1990. I have always admired this group for defending the oppressed. But when organizations achieve too much success, they often develop a sense of confidence and arrogance that, when unchecked, leads to their downfall. They begin to believe they can “do no evil”. A recent statement by EFF makes me wonder whether it has reached this stage and needs to have its “Google China” moment. Michael Arrington wrote in 2007 that “EFF may be getting a tad overzealous in its desire to defend our right to violate copyright and other intellectual property laws, and needs to take a step back and consider if the oppressed are now becoming the oppressor”. I’m beginning to believe that Michael was right.
Let me explain the background of a case which EFF has just passed judgment on so that you can decide for yourself whether this is indeed the situation.
January 9, 2010
In my recent post on how stealth mode is a bad idea, I advised entrepreneurs to come out of their shells. To build marketable products, you need feedback from customers, potential investors/partners and business advisers. And the veil of secrecy which comes with being in stealth mode blocks this feedback. But there is a flip-side that I want to make entrepreneurs more aware of: It is a tough world out there and some big and small competitors will deliberately or accidentally steal your ideas. A few of these players are predators much like the beasts of Pandora. So there needs to be a balance. You need to air your ideas, but use every available mechanism to protect yourself. When you do come under attack, run as fast as you can or fight like hell.
I’m going to explain all this through three examples. But first, I’ll cover the basics about patents.
January 1, 2010
With all the excitement about the Crunchies awards, I thought I should cast my ballot: Twitter. No, not because it’s the best product (I think Android is), but because it has impacted me the most. To young TechCrunch readers, this post will seem pretty lame. An old professor trying to seem hip by writing about social networking. Yawn. But I’ve never been a fan of social media. I have more than 500 connections on LinkedIn, but have never invited anyone to network with me. I’ve never used LinkedIn to ask anyone for an introduction. I never had a blog (I find it much more effective to write for BusinessWeek and TechCrunch). I never had a Myspace account (does anyone still use Myspace?). Even when I signed up for Facebook, I did it reluctantly because I kept getting friend requests and wanted to see what all the fuss was about.
But Twitter is a different. I get a stream of concise notes from people who want to bring things to my attention and from news outlets. I can follow anyone who seems extraordinarily interesting (and doesn’t tweet about brushing their teeth every morning). And I can read up about people I’m not following any time I want. And I get immediate feedback to my ideas.
I didn’t feel this way a few months ago. To me, Twitter seemed like another silly tool for kids to tell each other how much alcohol they had just consumed.
When Preetam Mukherjee started Marcellus.tv in March 2007, his company was one of the very few players in the professional online video hosting space. He believed he was building a killer product that would become a blockbuster and would compete handily with the one established player in the space, Brightcove. To ensure that he wouldn’t tip off any potential competitors, he went into “stealth mode”. Secrecy was the key to success. He would not even tell his close friends what he was building until his product was complete (after all, who can you trust these days?). Then he would send Mike Arrington an email, get a TechCrunch feature and watch fame and fortune beat a path to his door.
But as happens to nearly all secretive startups like Marcellus, the blockbuster never materialized, and the attention never came. When Marcellus did come out of stealth in September 2008, there were many online video platforms available, most of which had better features than Marcellus. Preetam got his TechCrunch mention and experienced a huge spike in traffic for a few days. But when the dust settled, he found himself back in obscurity. Moreover, it was like having a really bad hangover—his product didn’t entirely meet customer needs and no one seemed to care.
As I’ll tell you later, Preetam’s story does have a happier ending, but that’s not how it is for most startups. That’s the problem with stealth. Startup guru, Eric Ries says one or two of every 10 companies he meets have what he calls a “stealth-disease”. They are too afraid to show something imperfect to the world or are afraid that a competitor will steal their idea. And they think that when they launch their product will make front-page news and grant them blockbuster success. Wasn’t it Ralph Waldo Emerson who wrote, “Build a better mousetrap and the world will beat a path to your door”?
Well, Emerson was wrong.
The one skill which entrepreneurs need is something they don’t teach in business school—selling. Yes, I know that “selling” conjures up negative images of used-car salesmen peddling clunkers. But the ability to persuade people to believe in you is a necessity. That’s because sales is not just about selling things for money. Selling is about life. Convincing the perfect soulmate to go out on a date is a sales job. Enticing your children to eat their vegetables is a sales job. Negotiating a raise with your boss is a sales job. And, yes, selling your company to Google is definitely a sales job. A sales job in that you are listening to others, finding out what they want or need, and giving it to them in a form that they appreciate. And guess who the best salespeople in tech companies are? Your developers.
Let me explain why I believe this.
December 5, 2009
Every time I publish a research paper on immigration or write an article for BusinessWeek or TechCrunch, the xenophobes rush out of their caves to launch mindless attacks. They fill the comment sections with bile, send me nasty emails and sometimes threaten to do me harm. I was convinced that my last BusinessWeek column on the Startup visa presented such a compelling argument that even these poor souls would support it. After all, this visa is about creating American jobs and moving innovation here which would otherwise happen in other countries. We can boost the economy without any cost to taxpayers. It’s not about admitting H-1B visa holders who sometimes make Americans compete for high-paying jobs, but bringing in entrepreneurs who expand the pie for everyone. Not only do the Democrats support this, but so do the Republicans (their thought leader, Newt Gingrich blogged about my previous TechCrunch post on immigration and his staff told me that he was a supporter of the startup visa). So this seems like a no-brainer.
But, no, logic doesn’t prevail with this crowd. I got the same stream of hate mail that I’m used to, and the xenophobes hijacked the BusinessWeek reader feedback section again. Most of their statements are illogical and uneducated. But there are two potentially meaningful arguments which opponents of the startup visa make, which are worth discussing: that the founders we are bringing in aren’t always the “best and brightest” and that there is already a visa category for geniuses called the O-1 visa.
November 28, 2009
One of the best things about being an academic is being able to mold young minds and guide them to success. When one of my students, Andrew Leblanc told me he was entering the Duke Startup Challenge Elevator Pitch Competition, I told him to come and see me and do a practice run. After all, I had judged several of these contests at Duke and other universities. I thought I knew what worked.
After the eleventh iteration, Andrew got it right. He wasn’t trying to pack his presentation with unnecessary details. He had slowed down his pitch, added a personal touch and was now exuding confidence. Andrew even researched the background of the judges and tailored his message to their interests. So after two hours of intense preparation, I had little doubt that Andrew would win.
Andrew lost. I was surprised. But what I told him afterward is that it really doesn’t matter. Contrary to what the organizers of these competitions will tell you, university business plan contests don’t produce winning companies. Yes, a number of companies have emerged from business plan bake-offs that have been moderate or small successes. But not a single home-run has emerged from this now-omnipresent practice.
November 21, 2009
When pitching to VC’s, entrepreneurs hype the heck out of their ideas, years of experience and management teams. But I’ve never heard of anyone touting their luck or connection to God. After reading the posts on TechCrunch, one could easily get the impression that God doesn’t play much of role in Silicon Valley. But ask any successful entrepreneur in private what made them successful, and you might just hear a different story. In a research project my team just completed, the majority of 549 company founders told us that their most important success factor, after “experience” and “management team”, was “good fortune”. Many respondents wrote in comments stressing the extreme importance of faith and God.
You didn’t think that successful entrepreneurs were this pious did you? Neither did I. After all, what did God have to do with Google aside from Jeff Jarvis stealing his book title from fans of Jesus and their much copied meme? Did God build the Internet? Did he build the microchip? I’ve never been religious myself and have always believed that with hard work and determination, you can surmount just about any obstacles. But I also learned the hard way that you can do everything right and fail. Sometimes you do just about everything wrong and make it big. My belief: success is 51% luck and 49% execution. You need to execute with precision, but a little luck goes a long way. It is always good to have God on your side. So it was interesting and illuminating (pun intended) to see what other entrepreneurs thought about this.
November 14, 2009
When Americans think of the Indian technology sector, they still perceive a nation of call center workers and low-level computer programmers administering databases and updating websites. But while the West was sleeping, Indian IT morphed into a giant R&D machine. Indian companies that started out doing call center and low-level IT work have climbed the value chain to become outsourced providers of critical R&D in sophisticated areas such as semiconductor design, aerospace, automotive, network equipment and medical devices.
This is happening as multi-nationals set up their own R&D operations in India and partner with local shops. Both the Palm Pre smart phone and the Amazon Kindle, two of the hottest consumer electronics devices on the market, have key components designed in India. Intel designed its six-core Xeon processor in India. IBM has over 100,000 employees in India. A large number of these are building Big Blue’s most sophisticated software products. Cisco is developing cutting edge networking technologies for futuristic “intelligent cities” in Bangalore. Adobe, Cadence, Oracle, Microsoft and most of the large software companies are developing mainstream products in India.
Equally important are the arrival of Indian multi-nationals who are tackling global markets, such as Tata with its dirt cheap Nano car that the company is now positioning for a European market entry and Reva, which recently announced it was planning to build an electric car factory in New York state to address the U.S. market for electric vehicles.
What has been missing to date in India, however, is early stage venture activity and the type of grass-roots entrepreneurism that is the hallmark of American capitalism and Silicon Valley.
November 7, 2009
I’m in India this weekend with fellow TechCrunch/BusinessWeek writer Sarah Lacy. After we’re done with the elephant rides in Jaipur, we’re going to be meeting local tech startups. Then we head back to New Delhi to meet more aspiring entrepreneurs. Sarah is writing a book on how startup culture has gone global and I’m researching how R&D has globalized. It never ceases to amaze me how you can find brilliant entrepreneurs everywhere—whether in the middle of the Thar Desert in Rajasthan or Santiago Chile (where local entrepreneurs showed me life-sized holographic images projected through some hardware connected to their laptops, and software which can help monitor the operational efficiencies of department stores in California). The promise of these early ventures is always amazing and their enthusiasm infectious. Which brings me to Global Entrepreneurship Week. And Snoop Dogg.
You are probably asking yourself, what the heck does the controversial and highly successful rapper have to do with entrepreneurship?
October 31, 2009
No one disputes that Silicon Valley is the global capital of the tech world. But this wasn’t always so. It is the Valley’s dynamism and networks which have given it an unassailable advantage. Silicon Valley has simply left rivals like Boston’s Route 128 in the dust.
I mentioned a little bit about my first Columbus Day in California in a previous column. But I didn’t tell you the whole story. I was invited to three amazing events on the night of October 12. Venture capital firm Alsop-Louie—known as one of the wackier and unconventional VC firms—invited me to their legendary Columbus Day party. On that same evening I had an invite from Henry Chesbrough, Executive Director of the Center for Open Innovation at the University of California-Berkeley to attend a dinner party for his forum. Down in Silicon Valley I also had an invite to speak at an event with India’s former Minister of Disinvestment, Arun Shorie—the guy who was once in charge of privatizing the country’s moribund nationalized firms and who is as close as you can get to financial royalty in India.
It was a really hard decision which one to pick. And I found myself wondering, where else in the world would I have to face such a decision? The answer is nowhere. Silicon Valley, which has expanded to embrace the entire Bay Area as an engine of entrepreneurship and innovation, is a unique place of powerful and concurrent overlapping networks. As a new arrival to Silicon Valley and San Francisco, I had read about this and did believe it. But it was hard to understand to what degree these types of concentric circles of connections were pervasive in the Valley. I am now studying how some of these networks develop and their influence on success rates in entrepreneurship.
October 24, 2009
An Ivy League degree may get you a job as an investment banker or VC, but it won’t increase your odds of becoming a successful entrepreneur.
So you couldn’t get into Stanford, Berkeley or Harvard, huh? Don’t sweat it. You can still make it big. Some people might believe that an Ivy League education provides a huge advantage in entrepreneurship. But after researching this over and over again, I’ve found no such correlation. To the contrary, it seems that those who are born without the silver spoons in their mouths are more motivated to succeed. And those who aren’t members of elite alum societies develop the skills needed to hustle in the rough and tough business world. The Ivy-Leaguers may be able to get their buddies from Sequoia and Kleiner to return emails, but they aren’t going to be any more successful at building companies.
October 17, 2009
I spent Columbus Day in Sunnyvale, fittingly, meeting with a roomful of new arrivals. Well, relatively new. They were Indians living in Silicon Valley. The event was organized by the Think India Foundation, a think-tank that seeks to solve problems which Indians face. When introducing the topic of skilled immigration, the discussion moderator, Sand Hill Group founder M.R. Rangaswami asked the obvious question. How many planned to return to India? I was shocked to see more than three-quarters of the audience raise their hands.
October 10, 2009
Are you an immigrant who is fed up with waiting for years for a green card which you may never get? Or a tech entrepreneur looking to dramatically cut costs? I’ve got a suggestion for you. Move South. No, I don’t mean to Los Angeles or San Diego, I’m taking about way down South in Chile. They’ll welcome you with open arms and offer you incentives which will cut your burn rate more than half. And you’ll get to live in a land which makes even California look drab.
September 30, 2009
In my last post, I explained the motherlode of innovation hidden in the huge stacks of patents and discoveries backlogged at our universities and research labs. While entrepreneurs in Silicon Valley trip over each other to create the next iPhone app, they ignore the early-stage discoveries which could lead to the next Internet, a revolutionary memory device, or a cure for infectious diseases. Researchers in university labs find vast numbers of breakthroughs which can better the world. Most of their work never sees the light of day. Hardly 0.1% of all funded basic science research results in a commercial venture.
September 29, 2009
Everyone seems to be waiting for the next great discovery which will change the world. But, believe it or not, the next Internet, semiconductor, or breakthrough in MRI technology may already have been discovered. It’s just languishing on the shelves of the university research labs you drive by on your way to work every day. University researchers don’t know how to commercialize their discoveries and smart, hungry entrepreneurs looking to meet the next Larry or Sergey don’t know how to find them. These parallel universes rarely meet (well, except sometimes at Stanford).
In 2007, U.S. universities performed $48.8 billion of research and filed 17,589 U.S. patent applications. In that same year universities received back revenues for licensing and royalties on patents of less than $2 billion. Those revenues include ongoing royalties from all of the research licensed over the past 40 years. The implication is clear. An astonishing amount of promising research is left in the lab.
When I say this to university administrators, they get incredibly defensive (almost like the VC’s I pissed off with my last post.) They rightfully argue that the role of the university is to teach and to add to the world’s knowledge base. The real benefit comes from the students who universities educate, who go and start the Apples and Microsoft’s. No argument there. But we have a goldmine of knowledge and potential innovation locked in our research universities. This goldmine could fuel the next two decades of economic growth. It is time to mine this goldmine.
September 20, 2009
Back in 1986, when Bill Gates was still making sales calls, he pitched my group at First Boston on why we should bet the farm on Windows. Despite the risk involved, we gave his fledgling startup the deal. This wasn’t because of his financial backers (he didn’t even drop any names), but because we believed in his vision and nerdiness. In the same way, Google became a huge success long before the deep pocketed VC’s arrived to ride Larry and Sergey’s coattails. They simply had a great technology and winning strategy.
So I’m miffed by the National Venture Capital Association’s (NVCA) claim that companies like Microsoft and Google “…would not exist today without the funding and guidance provided during their early stages by venture capitalists.”
by Vivek Wadhwa on September 7, 2009
I’ve got a message for all the Silicon Valley venture capitalists who think a CEO is over the hill after age 40. Old guys rule. And they are far more likely to be the founder of a successful technology company than most of you understand. How do I know this? Research that my team conducted, based on a survey of 549 entrepreneurs in high-growth industries, showed that the average founder of a high-growth company launched his venture at age 40. We also learned that these founders are likely to be married and have two or more kids. They typically have six to ten years of work experience and real-world ideas. They simply got tired of working for others and wanted to rise above their middle-class heritage.
These clearly aren’t the talented 20-somethings who have “great passion” minus the “distractions like families and children…that get in the way of business” which Sequoia Venture’s Michael Moritz raves about (also in this Building 43 video). Or the ”very low paid” young entrepreneurs who, according to Google’s Eric Schmidt, make “all the right things happen” by “working themselves to death”. But these are the companies which Silicon Valley VC’s seem to flock to. And maybe that’s one reason why the failure rates of VC investments are so high.
August 30, 2009
I have a suggestion for our President on how to boost economic growth without spending a penny: Free the H-1B’s.
More than a million doctors, engineers, scientists, researchers, and other skilled workers in the U.S. are stuck in “immigration limbo.” They entered the country legally and have contributed disproportionately to our nation’s competitiveness. They paid our high taxes and have been model citizens. All they want to do is to share the American dream and help us grow our economy.
They could be starting companies, buying houses, building community centers, and splurging like Americans. But because we don’t have enough permanent-resident visas (green cards) for them, they’re stuck in the same old jobs they had maybe a decade ago when they entered this country. They are getting really frustrated and many are returning to their home countries to become unwilling competitors. And they are taking our economic recovery with them.