An Answer to Critics Who Say that Silicon Valley Isn’t Building/Funding the Right Things

One persistent canard from would-be SV critics is “Silicon Valley isn’t building/funding the right things, aka solutions to big problems.” There are six logical problems with the false choice of “make trivial apps for 20-something SF hipsters” vs “do things that matter”.

First, “make trivial apps” vs “do things that matter” are not actually in conflict; there’s plenty of room and plenty of money to do both.

Second, it’s often hard to tell which is which up front. Almost all big world-changers were dismissed by critics as trivial at first.

Third, observer bias: Only read consumer tech blogs, only go to consumer tech conferences, think SV only works on consumer tech. Founders of non-consumer-tech startups routinely find same pundits mounting criticism have little interest in hearing about other domains. This is exacerbated by the SF-centric consumer tech party scene–other domains in SV don’t have the same party culture, just nerds at work. New arrivals to SV get sucked into SF party scene, and never make it to the South Bay industrial parks where everything else is happening.

Fourth, battling cynical critiques: Founders who articulate the big vision for changing the world get called arrogant and vainglorious. Both criticisms are leveled with no cognitive dissonance: Founders are either not pursuing big ideas, or are out of control egomaniacs if they are.

Fifth, subtext often that communication tech/apps in particular somehow aren’t important or don’t matter, vs energy, education, etc. I think this is 100% incorrect: Communication tech/apps including the Internet are the foundation for everything else we’ll do for 100 years. Why? Communication is the foundation of collaborative work, which is how all the important problems get solved. People working together.

Sixth: Anyone who thinks SV can be doing more/better/different, come join us and participate in building new things, products, companies! Jump in, the water’s warm! SV draws talent from all over the world and all walks of life; nothing preventing any critic from contributing. As my old boss Jim Barksdale used to say, “We have plenty of uniforms your size.” Many opportunities to contribute and make a difference! And, of course, tech startup ecosystem now expanding worldwide. Opportunities to contribute from anywhere abound, linked via Internet.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17


Tweetstorm Addendum to Unbundling Series

Late night tweetstorm addendum to earlier series on unbundling and rebundling: Younger followers asked me to expand on DEC/Sun/Microsoft unbundling: older history, therefore useful to study as precedent for our time.

Once upon a time (1950s-1960s), businesses mostly bought computers from IBM, and IBM also bundled in all the software & services you’d need. IBM bundled offerings were extremely expensive, while demand for computers spread to departments and smaller businesses who had less money. So DEC unbundled the computer itself from the total bundle and sold it for less money to customers who could then write their own software.

But a DEC computer itself was a bundle of proprietary components: VAX hardware, VMS operating system, RDB database, etc. In the 80’s, Sun came along & sold a similar power computer to DEC’s for 1/4 the cost w/unbundled components: Unix OS + Motorola chips.

DEC responded by going upmarket and becoming more like IBM; Sun and other Unix workstation vendors chewed through their market + grew it more. Critical point: At the point when DEC started to tip over, its integrated offering was as close to perfect as our industry will ever see.

Ask people who were working then (like me) and they’ll tell you to this day that they miss VAX/VMS and how productive they could be on it. Meanwhile Microsoft and Intel came along and fully implemented the unbundled low-cost computer, first PCs and then Windows-based servers.

Sun responded to Microsoft/Intel by rebundling: Rebuilding itself in DEC’s image with Sparc chip, Solaris OS — proprietary HW+SW stack. Again, Sun got close to perfection as an integrated system when it unbundled Microsoft+Intel and Linux+Intel went broad and forced the sale of the company.

Picking up thread with Microsoft: Microsoft has spent last 15 years rebundling, rebuilding itself in DEC’s image much like Sun. Now + HW! Once again, bundled Microsoft stack very close to perfect just as it comes under attack from next unbundling wave: mobile + cloud.

Fascinating twist: Under new leadership, Microsoft 2014 now committed to unbundling — full app + cloud support for iOS, Android, Linux! Microsoft is taking new unbundling strategy offensively vs new titans who are bundling as fast as possible! Apple, Google, Amazon, Oracle.

The point? I don’t know much about what our industry will look like in 50 years, but I’m quite confident these same dynamics will apply.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17,18


Intellectual Generosity In Silicon Valley

One of the special things about our industry is how intellectually generous many of the leading participants are (no, I don’t mean me.) When I arrived in Silicon Valley in Jan 1994, I sought out all of the written material I could on startups and venture capital. I found exactly two books. An excellent but dry financial analysis of startup returns, and an excellent but dated book by Gordon Bell. So then I looked for magazines, and found exactly one: Red Herring. Which for several years was the best magazine about startups.

Red Herring Magazine Cover

Red Herring Magazine Cover

But, in 1994, Red Herring was ~8 (?) memographed pages, cost $12 (?), published every 2 months (?), and available at only a few newsstands. That was it. I knew there was more material at Stanford and Harvard business schools but I couldn’t get to it. There was nothing else. Today, 20 years later, the difference is *profound*. Many of the leading theorists and practitioners share *huge* amounts of info for free. That’s a big difference in Silicon Valley, but what I hear every day from people all over the world is what a big difference it’s making everywhere else.

A 14-year-old kid in Indonesia w/smartphone has access to 10,000x more info on tech and startups today than I did in Palo Alto 20 years ago and the cycle is closing: there is startlingly profound new thinking happening all over the world and coming right back to Silicon Valley. In our industry, it’s hard to underestimate the consequences of a positive feedback loop and this is a positive feedback loop.

Assumption *must* be: Tech entrepreneurship all over the world is going to expand a thousand fold in the next 20 years. How could it not?

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12

As Software Eats The World

Tech people like me can sometimes come across as presumptuous/arrogant regarding the disruption of other peoples’ industries. It is possible this is an understatement. I am sure that some of my Twitter friends will expand on this for me.

From this side of the aisle, though, it’s less smugness, It’s more the result of hard experience and learning from our own lives and careers. In tech, our *own* businesses are disrupted by technology changes and new competitive entrants at whiplash-inducing rates. It’s shocking how quickly you can go from the hot disruptive upstart to the stodgy disrupted incumbent in tech frequently within 5 years.

I’ve probably been on the receiving end of disruption 30 times in the last 20 years, almost as many times as I’ve been on the giving end. Now, on the one hand, you might say, “How can people live like that? What’s wrong with a little stability?” But, what we see is: Frequent disruption is the handmaiden of rapid progress and it’s a blast to create and work amid rapid progress.

It’s not just the rapid progress of tech. It’s also the rapid growth of companies, and even better, rapid development of *people* and their talents. It’s hard to stay in tech for any period of time and not get good at rapid adaptation, skill acquisition, and new product creation. As software eats the world, the same disruption dynamics always present in tech are now applying to many more industries, fields, and professions. Rather than superiority/contempt, what a lot of us feel is deep sympathy/understanding, even if that’s not always how it comes across! Now we all have the opportunity to learn together, to make many parts of industry/life more innovative/dynamic, which is better for everyone.

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Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13

A Few Thoughts On Timing and Staging Of Capital Into Modern Tech Startups

A few thoughts on timing and staging of capital into modern tech startups. Start with the fact that 2003-20011 seed rounds were ~$500K-1M. As points out, now you see more startups raising $2-3-4M or even more in “seed” financing, often in multiple tranches. So then, think about the startup that’s raised $3-4M or even $5-6M in “seed” funding that goes to raise a “Series A” from VC firms.

Venture capitalist looks back across the table: “You’re not raising a Series A, you’re raising a Series B. You already raised your Series A [in seed $]”. This can take the startup by surprise, because it really affects how VCs think about progress and milestones, is key to raising new round. VC’s assume Series A is to build, product and get first beta customers; Series B is to build the business around the product and get to revenue.

So a startup that raised as much cash as a Series A in seed funds, but hasn’t achieved actual Series A milestones, can be in real trouble. VC says: “You said you’re raising A but you’re actually raising B, and you haven’t accomplished enough to merit a B. Thank you, but pass.” So the risk of calling $3-4-5-6M “seed” raises “seed” is that the founder can fool himself/herself heading into the first real VC raise.

The rise of the “New Series A” by firms like A Capital is intended to address this issue head on. In effect, a $3-5M seed round or a $3-5M “New Series A” is a recreation of the original conception of an A round from historical VC. Takeaway for founders? Think very hard about timing and staging of capital versus progress and milestones. This matters a lot for raising A/B/C.

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12

BusinessWeek Illustrates Who’s Coming To Silicon Valley

Have to post this again because it’s just too good not to. A graphic illustration from BusinessWeek showing who’s coming to Silicon Valley.

Image originally published on <a title="" href="">BusinessWeek</a>

Image originally published on BusinessWeek

One third of Silicon Valley startups are founded by Indian-Americans. As of 2010, Asian-Americans are the majority of Silicon Valley tech workforce: 50% vs 40% for Caucasians. Possibly eye-opening sources of talent in quantity: Japan, Middle East, Vietnam, France, Pacific Islands, Africa, Caribbean.

Silicon Valley is a powerful successful example of the “melting pot” theory: ignore origin and ethnicity, come together to do big things.

It’s why we must continue to push to expand access/openness/inclusion to all origins/ethnicities/genders/religions: there are huge opportunities ahead.

Source Tweets: 1,2,3,4,5,6

The Productivity Puzzle Of Robots Eating All The Jobs (Or Not)

Progressive and smart economist Jared Bernstein on the productivity puzzle of robots eating all the jobs (or not):

Productivity growth was up 1% last year and has averaged 0.8% since 2011, a smooth trend through the numbers. The trend suggests that the pace of productivity growth has decelerated since the first half of the 2000s which begs an important question.


I keep hearing about ‘the end of work‘ based on the assumption that the pace of labor-saving technology such as robots and artificial intelligence has accelerated. Maybe it has. There’s lots of good anecdotes to that effect, most recently that geeky-looking Google self-driving car.


But the robots-are-coming advocates need to explain why a phenomenon that should be associated with accelerating productivity is allegedly occurring over a fairly protracted period where the [productivity] trend in output per hour is going the other way.


A shave with Occam’s razor [explanation] would be weak demand and its corollary, weak capital investment [nothing to do with robots]. Until someone can convince me what’s wrong with the above argument, I don’t want to hear that automation is precluding full employment.


My own take: We’re still coming out of a severe macroeconomic down cycle, credit crisis, deleveraging, liquidity trap. The prevailing pessimistic economic theories (death of innovation, robots eating all the jobs, crisis of inequality) will fade with recovery.

For bonus points, identify the other tech-driven economic force that could explain low productivity at a time of great tech advancement. My nomination: Tech-driven price deflation; lowers prices, reduces measured GDP and productivity, while boosting consumer welfare.

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12