Silicon Valley: A big bright heat lamp for startup incubation

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This is the fifth article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.

By Francis Moran and Leo Valiquette

In his book, The Way Ahead: Meeting Canada’s Productivity Challenge, Tom Brzustowski, RBC professor for the commercialization of innovation at the University of Ottawa’s Telfer School of Management, talks about the “social contract between science and society in the U.S.” that arose in the late 1940s and gave rise to that unique ecosystem we know today as Silicon Valley.

The basis of this contract is found in Science: The Endless Frontier, a 1945 report to U.S. President Harry Truman by visionary Vannevar Bush that outlined a U.S. post-war science and technology policy that would ultimately result in the creation of the National Science Foundation. In the years that followed, military-funded unclassified R&D in the private sector, driven by the pressures of the Cold War and the space race, laid the foundation for Silicon Valley and made Bush’s vision a reality.

The story of Silicon Valley’s evolution, which is obviously far beyond the confines of this series, continues to support the misconception that the U.S. is somehow better at producing successful entrepreneurs and multinational technology enterprises than other countries. As if the “right stuff” is somehow genetically encoded as result of being born on American soil.

But as Duke University adjunct professor Vivek Wadhwa observed in a column published in the March 2009 issue of BusinessWeek, the success of Silicon Valley in fact refutes this stereotype.

“Despite the fact that they constitute only 12 percent of the American population, immigrants have started 52 percent of Silicon Valley’s technology companies and contributed to more than 25 percent of our global patents. They make up 24 percent of the American science and engineering workforce holding bachelor’s degrees and 47 percent of science and engineering workers who have PhDs,” Wadhwa wrote.

A multinational ecosystem that is bigger than any one country

What has been created in Silicon Valley is an ecosystem with the critical mass to attract the top people from around the world and provide them with the varied resources they need to build success. There are also cultural elements here that bear noting; namely, an appetite for risk and an acceptance that failure is a fundamental building block of business success. But again, one can argue these characteristics define the multinational culture of Silicon Valley itself, as opposed to the U.S. in general.

“It is very easy to go down the road of confirming stereotype,” said Anthony Lee, general partner at Altos Ventures, co-founder of the C100 and an ex-pat Canadian who has been south of the border since 1988.

“What Silicon Valley has done is create an ecosystem and a brand, a model, that allows anyone from anywhere in the world to come and execute.”

Simply put, for startup entrepreneurs of whatever origin, Silicon Valley is where it’s at.

Chris Albinson, managing partner of Panorama Capital and co-founder of the C100, is another ex-pat Canadian immersed in the U.S. VC and startup scene. From his view, Silicon Valley offers the broad cluster innovation, professional services and veteran expertise needed to support risk-taking, along with “a level of global customer intimacy that one just doesn’t see anywhere else on the planet.”

The tens of thousands of talented individuals who have been drawn to Silicon Valley represent a rich resource for startups from almost any country in search of the counsel, capital and resources they need to bring technology to market. India and Israel are two outstanding examples of countries that have leveraged the large ex-pat communities they have in the Valley.

In Canada’s case, there are 300,000 ex-pats living in the orbit of California’s technology sector.

“We must find out how to tap into all these Canadians and ask their help,” said Iain Klugman, president and CEO of Waterloo’s Communitech.

Incubation from the grass roots: The C100

In March 2010, a number of Canadian ex-pats decided to make that task easier. They pooled their resources to create the C100.

C100 is a non-profit, member-driven organization dedicated to supporting Canadian technology entrepreneurship and investment, comprised of a select group of Canadians based primarily in the Valley, including executives of leading technology companies, experienced startup entrepreneurs and venture capital investors.

“We’re trying to give Canadians as much of an unfair advantage as we can,” said Lee. “We are trying to leverage the talent pool down here to provide that success path, to provide mentors, connections and access to funding.”

Within its first five months, the C100 earned the support and sponsorship of government, economic development agencies and technology incubators across Canada, from EDC and DFAIT, to OCRI, MaRS and Communitech. Seventy Canadian companies were introduced in the Valley and five secured VC investment — a total of US$45 million. And that was just the start.

“We’re still small and still growing,” said Lee.

And this is important to a new or growing tech venture because…

Jeff Campbell is CEO of PerspecSys, a Waterloo startup that is among the scores of companies to date that have been introduced in the Valley by the C100. To him, the C100 is a “business mentoring program on steroids” that can help a startup “go beyond becoming a company to becoming a globally competitive company that can scale.”

Achieving this global perspective it critical in two ways.

First, to bring technology to market, startup entrepreneurs must think globally in terms of which markets they should target. Second, they must also think globally in terms of how far afield they should look for the help and resources they need to reach those markets.

As the C100 demonstrates, there is an overwhelming array of resources out there for company incubation and growth. The only way for a startup to tap into this is to realize that the value chain for bringing technology to market transcends borders. Entrepreneurs must look beyond their own backyards and connect with as many people as possible.

What is your view on the value of “plugging into the Valley?” What do you consider to be the essential ingredients for, as Campbell put it, going “beyond becoming a company to becoming a globally competitive company that can scale?” Please share your thoughts through the comment section below.

In our next instalment, we will discuss startup incubation from the perspective of how economic development is best handled at the community and regional level.

/// COMMENTS

4 Comments »
  • David French

    March 02, 2011 3:08 pm

    David French writes:

    Once again Leo and Francis have produced a very well-written commentary. Every CEO is concerned to engender a “passion for performance” within their organization. The theme of this article is that it is advantageous to establish: “an ecosystem with the critical mass” to provide “A big bright heat lamp for startup incubation”.
    The essence is: synergism. Being present where it’s “at” inspires people to perform.

    So as C100 grows, it should be stimulating the inter-firm and interdisciplinary context that lead to hybrid vigor. That’s why a critical message is: “Entrepreneurs must look beyond their own backyards and connect with as many people as possible.”

  • Scott Annan

    March 02, 2011 7:43 pm

    Great article guys.

    As a participant of one of the first C100 programs, I can vouch for their (continued) support of Canadian entrepreneurs. I hope they continue to get recognition for their efforts at expanding the Valley to entrepreneurs across Canada.

    Very well written – thanks!

  • Leo

    March 03, 2011 5:52 pm

    Scott and David:

    Thanks for your comments. For me the key thing here is that, of all the various and sundry characteristics that define being “entrepreneurial,” the most important is that, if something you need to make a go of it isn’t close at hand, then go find it and don’t be daunted by how afield that search may take you.

  • Best of: Culture of risk: Are you willing to bet the farm? | Francis Moran & AssociatesFrancis Moran & Associates

    October 15, 2013 12:28 pm

    [...] companies and account for about one third of its CEOs. As C100 co-founder Anthony Lee said in a past post, “What Silicon Valley has done is create an eco-system and a brand, a model, that allows anyone [...]

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