What It Will Take to Create the Next Great Silicon Valleys (Plural)

Photo: Patrick Nouhailler/ Flickr

BY MARC ANDREESSEN

The popular recipe for creating the “next” Silicon Valley goes something like this:

*Build a big, beautiful, fully equipped technology park;
*Mix in R&D labs and university centers;
*Provide incentives to attract scientists, firms, and users;
*Interconnect the industry through consortia and specialized suppliers;
*Protect intellectual property and tech transfer; and
*Establish a favorable business environment and regulations.

Except … this approach to innovation clusters hasn’t really worked. Some have even dismissed these government-driven efforts as “modern-day snake oil.” Yet policymakers are always searching for the next Silicon Valley because of the critical link between tech innovation, economic growth, and social opportunity.

Previous efforts at such clusters failed for a variety of reasons, but one big reason is that government efforts alone simply don’t draw people. That’s why a recent crop of experiments has focused more on building entrepreneurial communities, urban hubs and districts, and hacker spaces. Still, we’re “splitting the logic” on how to create an innovation ecosystem, according to MIT expert Fiona Murray in Technology Review: We’re either going top-down by focusing primarily on infrastructure — plunking down an office park next to a university — or bottom-up by focusing on just the networks. None of these efforts successfully pursue both paths at once, with government, academia and entrepreneurial communities proceeding together in lockstep … as was the case in the development of Silicon Valley.

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But policymakers shouldn’t be trying to copy Silicon Valley. Instead, they should be figuring out what domain is (or could be) specific to their region — and then removing the regulatory hurdles for that particular domain. Because we don’t want 50 Silicon Valleys; we want 50 different variations of Silicon Valley, all unique from each other and all focusing on different domains.

Imagine a Bitcoin Valley, for instance, where some country fully legalizes cryptocurrencies for all financial functions. Or a Drone Valley, where a particular region removes all legal barriers to flying unmanned aerial vehicles locally. A Driverless Car Valley in a city that allows experimentation with different autonomous car designs, redesigned roadways and safety laws. A Stem Cell Valley. And so on.

There’s a key difference from the if-you-build-it-they-will-come argument of yore. Here, the focus is more on driving regulatory competition between city, state, and national governments. There are many new categories of innovation out there and entrepreneurs eager to go after opportunities within each of them. Rethinking the regulatory barriers in specific industries would better draw the startups, researchers and divisions of big companies that want to innovate in the vanguard of a particular domain — while also exploring and addressing many of the difficult regulatory issues along the way.

Why this approach? Compared with previous innovation-cluster efforts where governments contrived to do something unnatural, this proposal flows from what governments naturally do best: create, or rather, relax laws.

Another advantage of this approach is that it’s a way for clusters to differentiate from each other and successfully compete for resources. Think of it as a sort of “global arbitrage” around permissionless innovation – the freedom to create new technologies without having to ask the powers that be for their blessing. Entrepreneurs can take advantage of the difference between opportunities in different regions, where innovation in a particular domain of interest may be restricted in one region, allowed and encouraged in another, or completely legal in still another.For example, the laws and guidelines for using drones or taxing bitcoin already vary widely across the globe, just as they do for ride-sharing services across different cities in the U.S.

But the biggest advantage of the 50-different-Silicon Valleys approach isn’t just in what it affords isolated regions or entrepreneurs — it’s in accelerating innovation everywhere. Removing regulations across different regions allows multiple innovation categories to advance together at once, in parallel, without being bottlenecked by time or place.

So what are the risks? Well, there’s a real possibility that advanced regions will essentially outsource or “regulate away” their own risk at the expense of less advanced ones. To get ahead, poorer countries may become more tempted to take on the very things wealthier countries are fencing out of their borders. But as long as the innovations aren’t life-threatening — and many of the restricted domains aren’t (the restrictions are often protecting incumbent interests) — a model like this one provides a much faster and more feasible way for developing regions to catch up. Especially when you consider the advantage that previous innovation clusters didn’t have: mobile.

With 5.9 billion smartphone users coming online in five years — largely due to the developing world — mobile acts not just as a leveler, but as a multiplier. As Tim Worstall argues:

One way of thinking about economic growth…is that it’s all about the adoption of new technologies of production. We could say that the introduction of electricity was itself economic growth, or that the adoption of smartphones will be. However, they’re both multiplying technologies: electricity allows more work to be done by replacing muscle power and, through light, enables work or study to be done for more hours of the day. The smartphone opens up the books of human knowledge to those who have never had access to it before. And that is seriously going to accelerate economic growth in just about every other field as well. That peasant farmer trying to manage his acre of maize using nothing but a hoe and a machete: sure, he’s not going to be the world’s greatest user of Facebook…but he will benefit massively from information about weather, market prices, and better farming practices.

Because of mobile, removing regulatory hurdles goes from being a potentially vicious cycle to a more virtuous one that can help millions of people climb out of poverty. And the next big companies wouldn’t be built in the U.S., but elsewhere in the world instead. For example, as mobile payment systems like M-Pesa create opportunities in banking, risk-sharing, and more, they’ve expanded to areas outside of Africa as well —including Europe.

Meanwhile, allowing more experimentation in financial services could help those in countries that don’t have stable currencies (let alone banks) to more easily save and move their money across borders; some of these places would leapfrog, innovation-wise, through something like bitcoin. As for other domains, if we think of airspace as the next Internet-like platform, lifting restrictions on drones is one way to give other regions a chance to become the next significant locus of innovation.

In fact, this kind of competition is probably the only way to create successful innovation clusters that can compete with the huge advantage Silicon Valley already has. In the United States, the “death of distance” due to improvements in communications technologies has historically benefited only ideas-producing places like New York, but not goods-producing ones like Detroit. That’s why turning Detroit into a commercial Drone Valley could draw the innovative people who in turn want to be near other innovative people around that domain.

It’s already happening in places like Brazil, which are becoming known for being commercial drone-regulation friendly. It’s also happening in other domains, as genetic reporting companies like 23andme are forced to explore opportunities abroad, athletes go to places like Germany for biologic medicine, and even Japan considers slashing regulatory red tape to attract more drug R&D. But these examples are more reactive than proactive; I’m arguing for cities, states and countries to more systematically consider and create their regulatory competitive advantage. (If you don’t know what that advantage is, the best place to start is with local universities. Have a special competency in materials science? Then begin there.)

This kind of regulatory arbitrage is already happening in the United States, too, through innovations like Google Fiber. Instead of the traditional model where telecoms competed to be in a particular city neighborhood, cities are the ones competing to get Google Fiber. And the ones most willing to relax their oft-arbitrary regulations and fees are the ones getting it.

That’s another advantage of the regulatory arbitrage approach: It helps shake upregulatory capture altogether. The best defense of regulation is its use in protecting consumer interests, but the reality is that agencies and incumbents tend to watch out for their own entrenched interests and extract rents instead.

* * *

There are cultural factors at play here, of course. After all, Silicon Valley isn’t just a place — it’s a state of mind.

But instead of arguing about whether the Silicon Valley mindset cannot or should be copied, we need to shift our attention to an approach that addresses what Silicon Valley alone can’t do, while also creating opportunities for a broader set of people. To do that we need 50 different Silicon Valleys, not 50 failed clones.


Business Intelligence Solutions for Manufacturers - LAEDC ft. D. Lavinsky

LAEDC is hosting a webinar session featuring our president Dave Lavinsky!

Details:

June 26, 2014

12:00pm - 1:00pm (PST)

Free Webinar  

RSVP

Join us on June 26 for a discussion with Dave Lavinsky, President with Growthink. Guiding Metrics provides real-time business intelligence to help manufacturers move past cost cutting and lean manufacturing methods to become even more efficient, more competitive and more profitable.

The webinar provides a step by step walk through of the major metrics and systems Guiding Metrics has found in most clients and how the dashboard can be relevant to growing manufacturing businesses.The session will then be followed by Q & A.


This webinar is part of LAEDC's new Better Business Webinar Series.  

There is no cost to attend this webinar.   

Register to attend here.

Learn more about how the LAEDC can assist your company in coming to, expanding in, and staying within Los Angeles County.  

Here are the apps teens actually love, in 5 charts

June 19, 2014 11:20 AM 
Gregory Ferenstein
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Teens. Since the beginning of humanity, they’ve always represented what the future of humanity would look like. Now, thanks to a new survey, we have an idea of what kinds of websites, apps, and online services the future of humanity will enjoy– at least for the next few years of existence. Then, an entirely new crop of startups replaces the upstarts that recently rose to power.

Curator startup Niche conducted a sizable survey of 7,000 teens, and this is what it found:

Popularity in general

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Facebook and Youtube reign supreme, with 61 percent and 55 percent of daily active users, respectively. Instagram and the Facebook-nemesis team over at Snapchat are neck-and-neck in the race for photo sharing apps (around 50 percent).

Signs are good for the beleaguered micro-messaging app, Twitter, with 35 percent, a trend that has seen dramatic growth over the past two years.

The sad panda award goes to Foursquare, with a self-reported zero-percent daily active userbase among teens (3 percent overall). Of course, there are certainly teens that use Foursquare daily, but not enough to be picked up in a pretty large survey.

Finally, no shocker: The largely unemployed slice of teens legally required to attend high school do not spend much time polishing their Linkedin Profiles (2 percent daily use) — this in spite of LinkedIn’sefforts to court college applicants.

The Atlantic’s Derek Thompson has a nice graph ranking all of the popular websites/services by daily use.

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News

Teens must love listicles and sideboob stories: 15 percent report reading Buzzfeed occasionally, and 21 percent visit the Huffington Post. The Onion and Reddit are tied for the semi-serious news gold medal, at about 10 percent of occasional users.

news

Entertainment

YouTube dominates video with 55 percent daily users. The fact that Hulu is at around 23 percent of daily users is more evidence that teens aren’t just watching TV online — they are watching traditional TV programming much less.

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Pandora leads the pack on music (37 percent), meaning that discovery could be more important than random access(14 percent report using Spotify, and 32 percent, iTunes).

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Story here

You can see the full survey here.

The Data Behind the CNBC Disruptor 50

Kleiner Perkins Caufield & Byers has invested in 20% of companies on the CNBC Disruptor 50. The companies on the list have raised a whopping $3.75B in 2014 already.

CNBC recently released its second annual Disruptor 50 list – a list of 50 private companies nominated by venture capital firms and accelerators that ranges from household consumer mobile apps like Uber and Snapchat to green tech firms including Cool Planet andChargepoint. Given interest around the list, we used CB Insights data to crunch the numbers behind the financing trends, most well-funded cos and top investors of CNBC’s selected private companies.

The data below.

It must be the money

CNBC’s list of companies includes a number of well-funded startups – with some, includingAirBnB and Pinterest, having raised war chests well into the hundreds of millions to date. The chart below highlights the deal and dollar fundraising trend by the CNBC Disruptor 50 from 2009 through 2014 year-to-date. Yes, companies on the list have increasingly raised huge sums of cash – already topping $3.75 billion (with a B) in 2014 alone behind mega rounds toUber, AirBnB and Dropbox.

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Kleiner Perkins is top investor in CNBC 50 companies

Kleiner Perkins Caufield & Byers is the most represented venture capital firm on the list of CNBC 50 companies, with 10 of the startups in its portfolio including Shape Security,AngelList and Quirky. We’d earlier highlighted Kleiner’s robust list of Tech IPO Pipeline companies. SV Angel and Founders Fund round out the top 3 with 9 and 8 companies on the list, respectively. Interestingly, active tech mutual fund investor T. Rowe Price is tied for fourth most companies with late-stage investments including ApptioPure Storage andRedfin.

A list of all the investors with five or more companies on the CNBC Disruptor 50 is below.

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Most well-funded – Uber on top

The chart below highlights the range of funding totals behind the 50 companies from under $20M (Kickstarter) to over $1B (Uber). 72% of companies on the list have raised between $20M and $150M, with 15 companies on the list raising between $50M-$100M and another 11 raising between $20M-$50M.

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See below for the list of the CNBC 50 ranked by total funding raised (credit/debt, secondary transactions not included).
Uber
Palantir Technologies
AirBnB
Pinterest
Dropbox
Spotify
Pure Storage
MongoDB
Lending Club
10 DocuSign
11 SpaceX
12 Quirky
13 Moderna
14 Oscar Health Insurance Co.
15 Cool Planet Energy Systems
16 Apptio
17 Snapchat
18 Zuora
19 Stripe
20 Warby Parker
21 Yext
22 Twilio
23 Chargepoint
24 GitHub
25 Aereo
26 Redfin
27 Etsy
28 Skybox Imaging
29 Motif Investing
30 Bill.com
31 Birchbox
32 Fon
33 Shape Security
34 Wealthfront
35 Kymeta
36 EcoMotors
37 Personal Capital
38 Rent the Runway
39 Dataminr
40 BrightRoll
41 Betterment
42 Fullscreen
43 TransferWise
44 Coinbase
45 Hampton Creek Foods
46 Kumu Networks
46 Nebula
48 AngelList
49 Nexmo
50 KickStarter

Growthink president on the power of real-time BI

Two weeks ago we had the honor of having Growthink president, Dave Lavinsky, in our Los Angeles office for a lunch presentation on the power of business intelligence and real-time dashboards.

Participants from various sectors had the opportunity to interact with Dave and walk through key metrics that should be more effectively tracked to contribute to better company success.

Thank you Dave for your time and look forward to many more of these sessions in the future!


Having big data is important but understanding the data is crucial to success

BIG DATA SUCCESS: the sweet spot between uptime and bottom line

"It's not exactly breaking news that data analytics is a rapidly exploding field within Australian businesses, with different organisations and industries across the country at different stages of maturity. ADMA estimate that around 30% of Australian businesses are currently at some point on the big data continuum between data discovery and data commercialisation.

The potential value of all of the data available to enterprises and SME’s cannot be underestimated; fact is, in our Information Age the competitive advantage will rest with those businesses who are best able to harness their data in order to make real-time decisions that protect their customer base and grow market share. With this in mind, why is it then that only 30% of businesses are taking action with their data?"

For the rest of the article please visit: https://www.linkedin.com/today/post/article/20140617222618-21497568-big-data-success-the-sweet-spot-between-uptime-and-bottom-line?trk=tod-home-art-list-large_0

Though the article itself centers around the Australian market, the same concerns are readily observed across the globe.

Congratulations to Growthink client DNT Express on their recent approval for financing!

Congratulations DNT Express on being approved for a $2.25 million loan! Excited to see what the future holds and how you'll continue to grow.

DNT Express is a wine distribution company located at the Capital District Regional Market in Menands, NY.  The company was founded in July, 2003 by brothers Dan and Tim Nickels.  Early on, DNT hauled a variety of products, from pharmaceuticals to auto parts. Now the Company provides wine delivery services from Rockland County to the Canadian border.  It currently serves over 100 distributors by transporting their wines to over 3,000 wine retailers and restaurants.


New insights on how to use Twitter for your business

From the Twitter blog

One of the best ways to learn about marketing on Twitter is through real examples from small and medium-sized businesses (SMBs). Recently, we spoke with a group of these companies about how they use Twitter as a business tool, the results they’ve seen, and their tips for success.

We partnered with research firm DB5 to survey 1100 SMB owners and employees in the U.S. Those surveyed work on their company’s digital marketing strategy, and are active Twitter users and advertisers. Visual.ly helped us create an infographic to detail the full survey results, which revealed that SMBs see Twitter as an effective marketing tool that enables them to accomplish their advertising goals.

Interestingly, two-thirds (66%) of respondents believe that they have not yet fully maximized their Twitter presence.