From Bogota to Moscow to Milan, cities around the world aspire to be the next Silicon Valley. This is both a noble aspiration and a near-impossible dream.
The catalyst that turned the valley into what it is today is one that nobody should want: World War II. In the 1940s, the best and brightest engineers were tasked with inventing technologies that can help the United States win the war. Stanford was a hub for tech talents and over the decades transformed the valley into an ecosystem for countless electronic and software companies.
So what keeps the rest of the world from catching up to Silicon Valley? From the entrepreneur perspective: Not enough mentors, talents and far too few risk-taking investors in early-stage startups.
Where are the mentors?
Outside of Silicon Valley, there are far too few startup founders who serve as role models. It’s hard to walk down University Avenue in Palo Alto, for example, without literally bumping into a handful of successful founders or early employees who’ve enjoyed the thrills, rewards and learning that comes with building a great company.
Startup founders, regardless of age, can’t possibly know enough to turn even a great product idea into a great company. Nobody told this story better than Steve Jobs himself, who at about age 13 simply looked up Bill Hewlett’s home number in the phone book and reportedly got back scores of hours of mentoring — and more — with no compensation or equity… just by asking for wisdom from a highly qualified mentor.
In Walter Isaacson’s biography, Jobs said, “and he picked up the phone, and I talked to him and I asked him if he’d give me some spare parts for something I was building….and he did. But in addition to that, he gave me something way more important, he gave me a job that summer … at Hewlett-Packard.”
There aren’t enough Bill Hewlett’s in the world to provide wise coaching, guidance and experience, whether for compensation or not.
Great startup mentors are generous, treasured resources in Silicon Valley. In emerging markets, the most successful startup founders are usually too busy building their own companies and don’t have the time or inclination to “pay it forward” to the next generation. The world needs more of these people to offer guidance and ideas.
Engineering talent isn’t enough
There are thousands of skilled, ambitious engineers in Russia, Bulgaria and Latin America. But every successful engineer or “hacker” needs a marketeer or “hustler” as a co-founder—someone focused on the customer with as much talent and fervor as the engineer focuses on building a great product. Sadly, in most foreign markets there just isn’t enough marketing talent to find customers — the lifeblood of any startup.
Universities in these countries are only now awakening to the importance of digital marketing, social media and “sales funnel” optimization. When they do, they often teach it at the most basic level. They’re still teaching the old business plan method of “write it and do it” instead of the proven “test-and-iterate” method that have turned product and marketing innovation upside down in the United States for more than a decade.
It’s a rare foreign university that teaches even basic courses in some of the simplest digital marketing techniques like search engine optimization, viral marketing, A/B testing and the like. Worse, the number of seasoned experts are hard to find, since they’re too busy making money getting customers for their companies.
The money risk
In emerging markets, high-risk early-stage startup money is difficult to find. Governments in Colombia, Brazil and Chile are known to offer modest startup stipends, but the challenge runs far deeper than government handouts. Latin American investors in particular are overwhelmingly averse to the obvious risks of early-stage startup investing. They’d almost always rather own 2% of an empty office building than 2% of a startup, since at least you can touch your real estate investment, and it’s unlikely to vanish into thin air.
Not enough foreign investors take the “portfolio” approach, investing in 5 or 10 startups more or less simultaneously — the only way to mitigate risk and hopefully pick a winner or two in the pack, the way seed and angel funds do in the United States.
It’s partly a cultural problem, and partly a lack of experience. There aren’t enough screeners to sort startup wheat from chaff, and too few professionals to guide the wealthy in this relatively new alternative investment class. Success and time will cure this eventually, but for now it’s perhaps the most significant challenge for startups in emerging markets.
There’s no magic bullet
As cities in Latin America and Europe dream of catching up to Silicon Valley, what they must do is build the ecosystem that will foster entrepreneurship and innovation.
It takes time, trial, failure and more time until some of the more exciting emerging markets to emerge.
In the meantime, let’s hope the mentors, hustlers and risk-taking investors stand up and raise their hands.
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