In their constant quest to build the “next Silicon Valley” or the “Silicon Valley of X”, many government officials and journalists ask my opinion about what they should do.
Almost exactly five years ago, I wrote a quite detailed article on TechCrunch called “Ecosystem 101: The Six Categories That Define Silicon Valley”. It got quite popular, with lots of subsequent input about other geographies I had not looked into.
I thought then and still think it provides a valuable method to quickly evaluate startup ecosystems (I am not a big believer in surveys and other methods for this).
Yet, something was amiss: this approach was useful to evaluate an ecosystem, but didn’t really recommend what to do next.
The categories I had were: market, capital, people, culture, infrastructure, regulations. Most would take a very long time to change. Yet, one seemed more elusive: culture.
Culture Is The #1 Safety Net
What I came to realize, rather recently, is that the #1 reason Silicon Valley works is that people can find jobs after they fail.
Compare that to what the ex-Chairman of Hitachi told me in Tokyo recently: I asked him if an employee could return if he left to start a company or else. His answer: 許されない (we would not forgive).
It’s not even failure that is penalized, but what is seen as betrayal. And other companies would probably hesitate to hire such person too.
Basically, the penalty for venturing out is severe way beyond the time and money invested in a startup: it might ruin your career and your life.
That situation might have evolved now, but probably not quite enough. In short, there might be as many potential entrepreneurs in Japan, but if you fail, you have much more to lose. You too would be “risk averse” in such environment. Startups are 90% failures, and failure is career suicide.
Other Safety Nets
There are a few others nets I mentioned in a Forbes article before, but I believe are of lower importance:
- Social benefits for entrepreneurs until their new income matches what they are entitled to,
- Ability to take an unpaid sabbatical and go back to a job,
- Ability to have limited liability (some countries don’t make it easy)
Silicon Valley does well without those so I don’t think they are overly important if the job market is fluid.
So there you have it. If you want a better startup ecosystem, large companies have to start hiring startup people. France actually started to do this and the ecosystem is now thriving. Why does it make sense? Because:
- Startup people are motivated
- They see the plus and minus of corporates
- They can help bridge with the outside innovation.
The world’s largest startup campus, StationF, even opened recently in Paris, funded by $270M from local tech mogul Xavier Niel. It can host 1,000 startups and 4,000 people.
France was also the third largest startup contingent at CES in Vegas this year, behind U.S. and China, ahead of… well, all others and by a long shot.
So if you want to build a Silicon Valley, look at how France changed and learn from it!
Add-On: Why Pushing People To Startups Is Irresponsible
I’m an investor and for us, the more startups the better. We get to pick and don’t have to care much about the collateral damage. Money controls the media conversation so you will rarely see anyone argue for the well-being of founders (aside from making sure they don’t burn out — but that’s also self-serving).
As long as the startup experience is not recognized in the larger job market, it is a very, very risky thing to do. If the result of failure in your local ecosystem is wrecking your life, you could move to a place where failure has less severe downside, and be prepared to stay there for a while. Otherwise I wish you good luck!
Note: one thing I haven’t figured out yet is WHY France changed. Did CEOs of MNCs change their mind? Were they replaced by open-minded ones? I don’t know.
Do you know of other safety nets? Let me know in the comments, by email at email@example.com or on Twitter @benjaminjoffe.