Flattening the Global Innovation Landscape – Part II: Scaling-up Globally

Reflecting on the optimal time for foreign start-up’s to come to Silicon Valley

If the world were truly flat, many innovation centers would already be developed around the globe and each one would be distinguished by a unique competitive advantage given its location, industry addressed, type of venture, participants, level of funding available, government incentives, connection to trading partners, market access, etc. However, this Global Valley is still a work in progress. In the meantime, high potential entrepreneurs with fast growing ventures are probably well advised to test their mettle in the “World Olympics of Entrepreneurship” and come to Silicon Valley (SV)[1]. I am reminded of Frank Sinatra’s song, New York, New York, only exchanging SV instead of the Big Apple.

 “…If I can make it there 
I’ll make it anywhere 
It’s up to you 
New York, New York…”
 

Former USA president John F. Kennedy in his visionary Man-to-the-Moon speech at Rice University Stadium (Houston, September 12, 1962 – (http://www.youtube.com/watch?v=kwFvJog2dMw ), also glorified the idea of striving for seemingly unattainable goals—emphasizing that this was intrinsically valuable, not foolish:

“…But why, some say, the moon? Why choose this as our goal? And they may well ask why climb the highest mountains? Why, 35 years ago, fly the Atlantic?…We choose to go to the moon in this decade… not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win…”

Coming to Silicon Valley is a decision that cannot be taken lightly. This is a great challenge that will require many sacrifices for entrepreneurs (and their families), as they parachute into a foreign territory with different customs.  They  will be pushed to compete and perform at the highest level, in a different language, surrounded by some of the smartest innovators on the planet, and challenged by very sophisticated investors and experienced partners. To commit to Silicon Valley means that the entrepreneur will have to invest months and possibly years, spending tens of thousands of dollars just in living expenses, and for what purpose? This is a question that requires a thorough answer.

Often successful entrepreneurs bring their start-ups to Silicon Valley to benefit from the extraordinary resources of this leading ecosystem.

Often successful entrepreneurs bring their start-ups to Silicon Valley to benefit from the extraordinary resources of this leading ecosystem.

My personal experiences, and those of my colleagues—suggests that less than 10% of those foreign entrepreneurs arriving here are prepared to perform and take advantage from the Valley resources upon arrival. Over half of the remainder, 90+%, has no business of coming here other than for techno-touristic reasons. The rest have probably arrived prematurely, as they have not yet prepared for this challenge.

But as with any successful journey, it is best if started with the end in mind. So why come to the San Francisco Bay Area? In short, the answer is to play with and learn from the masters. Specifically, the foreign entrepreneurs will benefit because of the opportunity:

  • To share experiences, compare and learn from others,
  • To practice pitching in a variety of forums and receive feedback,
  • To explore potential clients and channel partners,
  • To find technology partners and identify the technology trends,
  • To learn about different business models and market trends,
  • To meet investors: angels and VCs,
  • To find mentors and advisors,
  • To obtain legal, financial or management guidance,
  • To explore partnerships with established or young ventures,
  • etc.

Contrary to conventional wisdom, obtaining funding is just one of the (many) reasons to come to the Bay Area and the one least likely to provide positive outcomes. Hence, if this is the primary motive of your visit, it is probable that you will be disappointed. What is really important is the concentration and density of all these actors, who are often only a short drive across town away, or in the same neighborhood, or even the same building! Furthermore, referrals are extraordinarily easy to obtain and most entrepreneurs here will give you thoughtful recommendations based on your venture’s needs. Therefore, all you have to do is ask and explain your needs based on the state-of-development for your venture. In other words, just a different type of pitching focused on networking.

Some of the main reasons why a large number of start-ups are ill advised to come are:

  1. The value proposition does not apply outside the home country/region where the entrepreneur lives and/or the local market where the venture was originally conceived (i.e. a unique market friction, regulatory mandate, etc.),
  2. The business concept and/or technology are still immature or not proven,
  3. The venture has not received funding from local angels/VCs,
  4. No demonstrable business traction in the local/regional market,
  5. The entrepreneur(s) do not speak English or they are highly uncomfortable outside their own home environment,
  6. The entrepreneur is secretive or unable to engage in win/win relationships,
  7. Insufficient funds to cover living expenses beyond a couple of weeks,
  8. And many others,

For entrepreneurs that are in this category, there is nothing wrong with coming to the Bay Area for techno-touristic reasons. Typically a one/two-week visit, if well planned, can provide a “taste-of-the-valley,” allowing entrepreneurs to attend lectures, networking events, visit some of the co-working spaces, meet with other members of his/her own diaspora, etc. Some organizations and institutions offer a variety of programs of varying lengths, prices and characteristics, similar to the immersion programs I created at the University of San Francisco. An experience of this sort, all costs included, ranges from $3K to $10K US dollars for a 1 to 2 week visit, depending on many factors, in particular whether you decide to rely on an organization to plan your trip for you or make the arrangements yourself. Guess which one I would recommend? As a touristic experience you will be visiting one of the places ranked in the top ten spots in the world and likely will not disappoint you.

Some entrepreneurs rush to come to San Francisco. Even if their young venture presents enormous potential, it is often advised to delay coming to SV until such a time when a number of conditions are met to maximize the venture’s chances of success as well minimize the cost and time invested. Below I have outlined some of the key reasons why many start-ups come here prematurely:

 

Start-up Issue in moving to SV

 

Rationale

 

Failure to do as much preparation as possible while still in the home country It is of vital importance to do the maximum preparation possible while still in the home country. It is cheaper in cost and avoids burning introductions or unwisely using key meetings due to being unprepared.
Entrepreneur is ill-prepared to start pitching from day one, either because has not mastered the complexity or is able to communicate with the simplicity and clarity required. Pitching in SV is a way of life. One needs to be ready to pitch, compare, and contrast your venture with other similar or less similar models. Be ready to pitch for many different audiences, starting with those who you will need favors from and introductions to other key contacts.
Lack of clarity on the purpose/ reason to be here? There are multiple reasons to come to the San Francisco Bay Area: Probably the first is to validate the product concept with potential customers, peers (other product or technology developers in the same space), technology partners and investors. Obtaining market intelligence and trends (including the competitive landscape) is initially the single most important activity to validate the product.
Failure to obtain funding from local angels or VCs Even if local funding is one order of magnitude less than what typically is obtained here, it will provide credibility and referrals from your local investors. As we often call early investor “smart money”, the smart part is the contacts they may provide here in the Bay Area, among other things. Furthermore, this funding will be very much needed to cover the expenses incurred while accelerating the venture in the Bay Area.
Failure to obtain a meaningful level of local/regional sales Domestic sales will be an additional proof of market acceptance, revenue generation and customer feedback, even if they are relatively small to the venture potential.
Unwilling to make the time and cost commitment to move here for several months and more To really benefit from the ecosystem of the Valley, it takes time, even if you arrive prepared to hit the ground running.Furthermore, the cost of living in the Bay Area is high and continues increasing. Therefore entrepreneurs are well advised to start preparing several months (3 to 6 months) before coming here.

The true benefits/opportunities that result from becoming a part of the SV ecosystem are:

  1. Access to the latest innovations and technologies and, more importantly, the talent behind these.
  2. Experience in connecting these innovations to markets and customers
  3. Being able to explore the “right” business model(s) to maximize the short, medium and long-term value creation of your young venture.
  4. Access to funding: Angels and VCs
  5. Becoming part of the global conversation by just being here: “…In 2011, nearly two thirds of Silicon Valley professionals with higher education  working in the science and engineering fields were born outside of the United States…” from the 2013 Silicon Valley Index
  6. The “address benefit”. While some clients would be concerned with purchasing products or services from a young company located in Lima, Peru; a San Francisco or Palo Alto address can make the difference!
  7. And more!…

In any case, before coming to SV, make sure your pitching abilities is world class. Ideally your pitch must be adaptable to a timespan anywhere between 15” (seconds) or as long as 300”, must be customizable to any audience, purpose and context. You must be able to pitch with slides or without, standing or sitting, in quiet conference rooms or in noisy bars. Your ability to synthesize what you do, your track record, your value proposition, your mastery of complexity and why you will succeed with clarity and passion will be the currency for acquiring higher access in the Valley circles. Level of access highly correlates with pitch quality (and of course a compelling value proposition), and as we all know, good first impressions are very helpful. And while you are developing your pitch develop your venture’s one-pager as well. In fact, that one-pager is far more important than your business card, to leave behind at a meeting.

Finally, this blog subject will have three parts instead of the two I initially promised. Stay tuned for the next one, in which I’ll propose a novel structure to make a step towards flattening the global innovation landscape.

Until then – Carlos B.


[1] The terms Silicon Valley (SV), San Francisco Bay Area (SFBA), the Valley and the Bay Area are all used interchangeably.
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About Carlos S. Baradello

Investor, thought leader, and advisor in areas of corporate innovation, born global entrepreneurship and global scaling.
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