This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.

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Over the past couple weeks in this space, I’ve recapped some of the history of the region and reconsidered the wisdom of attempts to reproduce the Silicon Valley model elsewhere.

I submit that trying to imitate Silicon Valley is futile. However, Japan’s government and business community can derive inspiration from the factors that rendered Silicon Valley a success. Regions finding the most success in creating clusters of innovation have been those that do it on their own terms and play to their own unique strengths, where the government facilitates an environment that doesn’t penalize failure and then gets out of the way. New York City comes to mind as one prominent example. A local innovator there whom I had the pleasure of meeting a while ago pointed out that it was only once New York ditched its Silicon Alley moniker that the city’s tech entrepreneurial ecosystem really began to take off.

So how can Japan derive inspiration from the Silicon Valley model?

This is a tough question for two reasons. First, nobody can identify with certainty all of the factors made Silicon Valley such a success. There exists a certain degree of chance and cognitive dissonance rendering attempts to copy Silicon Valley impossible.

Secondly, one key ingredient to SV’s success – its excessive proportion of people with crazy ambition – cannot be so easily exported. According to an analysis of LinkedIn profiles, residents of Silicon Valley dream bigger than the rest of the world. People who include the keywords “change the world” in their LinkedIn profiles are far more common in the San Francisco Bay Area than anywhere else (source: Venture Capital Dispatch).

Perhaps a better question would be: which ingredients of Silicon Valley’s secret sauce might be transferable here?

Two prominent factors come to mind which might be relevant for Japan to carefully consider: i) proximity, and ii) immigration.

Proximity

By proximity, I mean the proximity of educational institutions, businesses, and the design community. Proximity of this diverse group is important because when talented people of multi-disciplinary expertise come together, the odds increase exponentially for serendipitous encounters that spawn innovation. Subsequent to the traitorous eight’s creation of Fairchild Semiconductor, two of the most familiar names (Robert Noyce and Gordon Moore) went on to found Intel right down the street. Not far away in Menlo Park, a third founding father by the name of Eugene Kleiner teamed up with a veteran from HP in nearby Palo Alto, Tom Perkins, to give birth to one of the world’s most renowned venture capital funds.

A more recent example and arguably one of the most successful entrepreneurial endeavors in history, Google’s ascendancy stemmed from the chance encounter at Palo Alto’s Stanford University of Sergey Brin and Larry Page. The proximity of institutions like Stanford and UC Berkeley facilitated the recruitment of high-caliber engineers and managers as the company grew, including for example, Stanford graduate Marissa Mayer, who conceived the Google home page’s elegantly simplistic design.

The design element cannot be underestimated either, especially in innovation today. Thanks to the proliferation of open source code bases, cloud infrastructures, open standards like html etc., creating a new high-tech offering is remarkably accessible. The innovation of a product or service lies not in the complexity of the underlying technology, but rather in its user experience. Design, or its more evolved form as creative intelligence, forms the heart of user experience, and Silicon Valley has always been rife with artists, designers, and creative conceivers.

Immigration

Immigration is a less obvious but equally important ingredient. Brad Templeton, Director of the Electronic Frontier Foundation, wrote an excellent piece in Forbes magazine, The Real Secret Behind Silicon Valley’s Success, in which he recounts his epiphany during a high-end conference for PC and internet executives in the late 90s. A speaker wanted to make a point about immigration to the room, which was full of founders and top executives from high-tech companies, instructing, “If you were born outside the United States, please stand up.” And more than half of those in the room stood up.

Researchers from Duke University concluded in a report that immigrant-founded companies created over 450,000 jobs in 2005, and that 52% of startup founders in the U.S. were immigrants. Most of these people gave up a life somewhere else to come to Silicon Valley in order to live the entrepreneurial dream.

There is something in an immigrant’s DNA that lends itself to entrepreneurship. Perhaps it’s an absence of fear of new adventures, an ability to operate on the fringe of society, unconstrained by social norms and conventional thinking, the sink-or-swim pressure of starting over, or some combination of all of these factors plus others.

So what are the lessons for Japan?

I submit that one lesson is to establish a smarter policy on immigration that doesn’t hamper the retention of talented entrepreneurial individuals, regardless of their familial attachments to the archipelago. The recent Startup Visa system is undoubtedly a step in the right direction, and I applaud the government for it. I think the challenge will be to find the right balance between preventing abuse while granting the entrepreneur residency for a period commensurate with the time horizon needed to build a business.

Another is to think carefully about the gravitational importance of proximity. Sometimes I get the impression that the various hubs of innovation in Tokyo, for example, are driven less by organic creativity than by real estate developers (e.g. Shin Marunouchi driven by Mitsubishi; Roppongi/Akasaka by Mori; Shibuya by Tokyu). Japan’s first-rate transportation infrastructure shortens distances, but let’s not underestimate the importance those chance encounters play in triggering creativity.

I marvel at the calibre of entrepreneurs I continue to meet in Japan’s burgeoning startup ecosystem, and I’m excited to begin investing here.

This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.” He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.

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This is Part 2 of a 3-part series on Silicon Valley for aspiring innovation ecosystems.

In part 1 of this series, I provided a very succinct recap of the Silicon Valley narrative. For a more in-depth review, A History of Silicon Valley by Piero Scaruffi and Arun Rao might well be the most comprehensive, and Robert Cringely’s Accidental Empires focuses on the pc industry empire-building during the pre-web era. Understanding the Silicon Valley story is important for those who are striving to replicate the Silicon Valley model in their own communities, such as what various government entities from Europe to Asia aspire to do.

Witnessing these government efforts ebb and flow over the years, I submit that two fundamental questions should be addressed:

• Should governments even try to copy Silicon Valley?
• What is the secret sauce that makes Silicon Valley such a bastion of entrepreneurship and innovation?

Regarding the first question, my opinion is that the answer should generally be no. Silicon Valley today encompasses such a unique confluence of factors — some planned, most serendipitous, and many even difficult to identify — that government attempts to create a replica of Silicon Valley in their home market will inevitably end in futility.

For the Silicon Valley model is one that has evolved over decades. No government in an open market economy has demonstrated an ability to cultivate a 30-year project. Furthermore, Silicon Valley is not the result of a centrally-planned state endeavor. The government, more specifically the State of California, created an environment that fostered the emergence of Silicon Valley, in large part by trying to do no evil. But it was predominantly the private sector and an abundance of rugged individuals that built the foundation for today’s Silicon Valley.

An experienced European VC that I respect a lot reminded me of The Netherlands’ misplaced ambition to replicate Silicon Valley in 1997:

In 1997 the Dutch Government thought of stimulating IT entrepreneurship by setting up a Government supported VC fund called Twinning. All those hype days….. Anyway, like so many other initiatives of governments also this idea ended in a mass failure. In my opinion there is no way of just copying the Silicon valley concept. That is a unique situation, the environment, the infrastructure, the knowledge, experience, but also the heritage, the long experience and history. No way of copying it in 5 years. No way of copying it anyway!

My intention by citing The Netherlands here is not to single them out. On the contrary, The Netherlands learned its lesson and I would submit that today represents a role model for promoting export-driven entrepreneurship and innovation (more on that in a future piece).

Don’t try to copy. Think different.

None of this wisdom has prevented numerous regions from trying. Silicon Alley, Silicon Prairie, Silicon Roundabout, Silicon Gulf, Silicon Welly, Silicon Beach, Silicon Border, Silicon Desert, Silicon Glen, etc. and those are just the ones beginning with the word Silicon, the list is actually quite ridiculous.

Yet the areas with the most success in creating clusters of innovation have been those that do it on their own terms and play to their own unique strengths, where the government facilitates an environment that doesn’t penalize failure, and then gets out of the way.

New York City has emerged as the world’s second largest market of VC-backed digital media startups thanks largely to the area’s fashion and media sectors (and ironically, the Silicon Alley term has fallen out of fashion). Mayor-emeritus Bloomberg’s policies ushered in a vibrant ecosystem of lifestyle and design.

Los Angeles is now gaining status as fertile ground for gaming startups, its proximity to the Hollywood film studios undoubtedly playing a key role.

Israel boasts the highest concentration of high-tech firms per capita in the world, often companies developing cutting-edge communications and security technologies for export worldwide.

I submit that governments should not seek to copy Silicon Valley, but rather should take inspiration from the factors that rendered Silicon Valley a success. In the third and final post of this series on Silicon Valley, we’ll look at the most relevant ingredients of the region’s secret sauce which might inspire Japan in its goal to spur innovation.