For a place that’s all about the cutting edge, about imagining and then creating products that we didn’t realize we needed until we saw them, Silicon Valley itself doesn’t change much. In many ways it is still very similar to the place that I first started visiting with our Executive MBAs more than 10 years ago. Yes, now people are finding their way around using the GPS on their Google Android or playing with the latest apps on their iPhone rather than tapping their Palm III’s screen with a stylus, but the fundamentals are the same: Silicon Valley still draws the most energetic, educated and entrepreneurial people from across the world and they create something from nothing.
It’s this concentration of creativity, innovation and optimism that makes Silicon Valley one of the best places in the world to learn about what it means to be an entrepreneur. You can find entrepreneurs anywhere on earth; perhaps in some places they might even be stronger in one or two aspects of entrepreneurialism. But Silicon Valley is where it all comes together, which is what makes it a perfect place for our EMBAs to visit. They simply can’t escape from seeing innovation happen, because it’s not just one business or a handful of people involved – it’s everyone, everywhere. This immersion in the world of the entrepreneur means that they can’t avoid learning how entrepreneurs think and, in turn, how that thinking can be brought into many different aspects of business. That’s why we make sure that they see the whole panoply of business, from stealth-mode start-ups of three people who can’t yet tell us what their product is through to companies with 50 employees who are on their third round of funding.
Interestingly, funding is one of the areas that has changed somewhat in recent years. Four or five years ago there was a clear financial food chain: entrepreneurs in search of capital turned first to friends and family, then to business angels. Venture capital funds generally didn’t get a look in until larger sums of money were needed. Now, however, VCs are worrying that they might be missing out and are thus jumping into deals earlier and urging entrepreneurs to take money sooner. That is not necessarily a good thing for those entrepreneurs, though, because when start-ups are given too much money too early in the day they can do some very stupid things. Angel investors tend to be a bit tighter with the cash, which is good for both parties.
Speaking of money, is there another bubble forming? The boom and bust we saw in 1999-2000 was extreme, so it makes sense that questions are being asked now. I don’t think that we are necessarily in another bubble, but we are definitely seeing a frothy period, not least because people are funding things at higher prices than they should. The up side of this, of course, is that there is plenty of activity in the market.
One big area that I believe needs a more skeptical look is cleantech. It’s undoubtedly sexy, but just because something is green, does not mean that it’s a worthwhile investment. The market is being distorted at the moment because the government has thrown so much money at it. Green projects are getting plenty of cash from Washington, which wants to create jobs, but too often this government intervention can reward inefficient incumbents over exciting new technologies.
Then again the other big issue with any cleantech project is that it may not even work. Much of the technology being developed in the Valley is right at the cutting edge, not simply of business, but of science. Research in this area is incredibly capital-intensive – you will need $500 million to get your thin-film technology manufactured, and once that’s done you will still have to compete with the Chinese on pricing.
The EMBAs we bring here may not end up starting their own cleantech businesses or working in other emerging technologies, but wherever they work they will need to understand what it means to be an entrepreneur. This will help them with internal innovation and will help to ensure that they don’t quash entrepreneurial behavior when they come across it. It will mean that, if their big business buys a small enterprise, they will know how the entrepreneurs behind it think and how they need to be led. It will also help them to realize that every person should be able to be an entrepreneur within his or her own company.
And what will they see if they return to Silicon Valley 15 or even 50 years later? My guess is that, underneath everything, very little will have changed. It will still be the home to entrepreneurs and technologists from around the world; it will still be a place where curiosity and possibility shape people’s thinking. Whether its major industry by then is green energy or personal spaceships, you can be sure that it will be coming up with ideas for things that we want to use.
Jim Pulcrano is an Executive Director at IMD. He is a member of the Executive MBA teaching team.
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