An outsider’s perspective on the Silicon Valley bubble: 5 key observations

Silicon Valley’s reputation for being at the forefront of tech innovation is fairly well known, and it is regarded by many as the epicentre of engineering+product brilliance. So it’s perhaps not a surprise that a ‘ bubble’ has formed around the Valley, perpetually reinforced by the positive feedback loop of a certain way of looking at things.

But what, exactly, is in this bubble? As a group of 20 aspiring entrepreneurs and Rhodes Scholars (some of us running cash flow-positive start-ups, others gearing up to raise a seed round), we were extremely eager to find out. So, for seven days, we immersed ourselves in the bubble — we visited start-ups, investors, incubators, and academics, spread across the Oakland, San Francisco, and Palo Alto areas. Our goal was to expose ourselves to as many of the exciting thought-leaders in the Valley as possible, and gain a better understanding of what makes the whole machine tick.

Part of our group connecting with alumni working in a downtown SF start-up.

What follows are some of our impressions from the trip. Naturally, seven days is a very short amount of time to spend in a place, so this can be thought of as a “what immediately stood out about the bubble” summary. It’s important to note that our group was not only entrepreneurially diverse; in addition to having close to a 50/50 male:female ratio, we also represented numerous countries spread across several continents. Some of us had never been to the Valley, others have lived in it. So, with that in mind, here are some of our observations.

Observation 1: An undeniable comfort with risk

“I quit my job and then realized ‘f**k, I don’t know what to do now…’” is not an uncommon thing to hear in the Valley, especially from (now successful) entrepreneurs. A common thread throughout our various meetings and discussions was this comfort with, or even appetite for, risk and risk-taking. Most of these founders could easily have landed cushy jobs at a number of well-established firms, organizations, etc. but instead chose to roll the dice and go down a far bumpier road. While it’s important to remember that for every success story there are dozens of failures, the Valley definitely embraces the “you miss 100% of the shots you don’t take” mentality and reaps the benefits of cultivating such a community.

Observation 2: A lack of checks and balances

There was a concerning lack of awareness of the ethical implications of investments — a tendency towards “the business of business is business”. Even investors who paid notional interest to anything beyond shareholder profits came across as superficial at best. There also didn’t seem to be any apparent internal review processes for decision making. Often, firms seemed reliant on trust in senior management as “honest, ethical individuals” which was taken to be the same thing as “they will always make ethical decisions”. Moreover, the opportunity cost of investing in X (often for the umpteenth time) instead of Y tends to be ignored beyond return-on-investment; you’d think that, with so much money at hand, an investment in something tackling poverty alleviation, education in developing countries, or basic medicines/science might be worth a shot from time to time.

Observation 3: Mind-boggling scale

We quickly picked up on why being situated in the Valley is so exciting for a start-up: there is no shortage of enthusiastic and experienced investors with the capital to back an idea. These investors focus on different technical niches and stages, and have differing approaches to interacting with ventures. This means that founders have plenty of options when it comes to choosing the right investor for them, which is a critical element when raising money. However, a more sobering realization for many of us on the trip: some firms’ assets-under-management are the same size as the GDPs of large African countries. When coupled with Observation 2 above, this was a difficult thing to wrap our heads around. What are the implications of having individuals in control of such large sums of money, with no mechanism for citizenry to give input as to how “problems”/investment opportunities are prioritized, who is funded, which parts of the world get capital investments, etc.? Despite all the talk of “making the world a better place”, the concentration of power/profits/wealth in the Valley was glaring, with no real sense of shared humanity or shared responsibility with respect to solving truly global challenges.

Observation 4: ‘Global’ is not so global

While China and India have been added to the list of countries deemed worthy of investment (and came up numerous times as evidence that firms were ‘global’), what about the rest of the world? Apart from one firm, there was no mention whatsoever of South America in any of the conversations. While there were one or two nods to Nigeria, there was no mention or even interest in the growing investment potential in Nairobi, Accra, Addis Ababa or Johannesburg. Eastern Europe, the Middle East, and Central Asia were all noticeably absent as well. While we acknowledge that there are, of course, a number of reasons why investment in these geographies is complex or slow-moving, the ever-recurring answer of “but there’s just so much opportunity here in the Valley” didn’t seem like a good one to us (and what about things closer to home, like Middle America?).

Observation 5: Gender balance is still far, far away

Where are the women? We know that this realization isn’t new — the criticism of the Valley’s male-dominated culture has undoubtedly been louder and more common over the past several years. But we’re not really sure that this has yet resulted in much meaningful change in the management of the largest firms. In our meetings with investors, for example, we had anywhere from one to several firm partners sit down with us; we were lucky if there was even one woman present. In a particular case, we were welcomed by no less than six investment advisors, managers, and partners, at one of the largest firms in the Valley — all were male.

You may have the impression that we came out of our trip with a negative outlook on the Valley, or with a lack of appreciation for what the region has accomplished. This is far from the truth. If anything, we got home with a sense of excitement and energy. What the Valley has managed to achieve over the last few decades is astounding and inspirational, and is, in many ways, still hard to fully grasp. A lot can be learned from the lead-up to the present-day behemoth that is Silicon Valley. For some of us, the trip showcased the potential that a vibrant entrepreneurial ecosystem can unlock. For others, a renewed sense of purpose to use dialogue to help move the needle on the issues we identified and are passionate about.

Views over the hills of the surrounding San Francisco area.