Startup Paradoxes

Silicon Valley is world famous for being the birthplace to many start ups, most of the US’s venture capital goes to firms based in the valley but many fail as they struggle to grow and the process weeds out the best ideas and the strongest businesses from the rest.

Silicon Valley has access to talent from the best universities, lots of venture capital funds, decades of tech firms and an ecosystem that fosters founders into startups, providing a connection to the global market not to mention a group of peer companies that might buy or be bought.

Those firms most likely to succeed are often a startup paradox those with good ideas that look like bad ideas to everyone else. Good ideas that look like a good idea are too obvious you need something more.

In fact Airbnb makes a perfect example, on the surface the challenges to the business seemed insurmountable. How do you check guests backgrounds, how do you insure, what about quality of the properties, or cleanliness for guests?

But of course as we know those issues were not insurmountable and they have created an industry and hundreds of copycat firms leveraging the model.

Silicon Valley’s rich and supportive ecosystem nurtures unproven entrepreneurs, encouraging them to pursue ambitious goals. 

Oren Zeev one of the most successful venture capitalists says that the founders of his best investments were from outside the industry. That is because they bring a level of naïveté about what can and others believe cannot be done. The founders of Uber, PayPal and Google were all industry outsiders and its the same for the founders of WhatsApp, Square and Stripe.

CoVID has seen many of the talented workers move away from Silicon Valley to new places given the ability to work remotely. These changes may see the innovation and practices expand to new geographies.

“Even turkeys can fly in a high wind”

Eugene Kleiner, co-founder of the venture capital firm KPCB (now Kleiner Perkins). 

The diffusion of Silicon Valley’s innovation culture will also make it less unique unless it learns from other ecosystems and transforms again. At the same time, the Covid-induced “pause” has given the world an opportunity to weigh the momentous impact of Big Tech on democracy, privacy and freedom of speech. Large technology companies are increasingly coming under scrutiny for being too powerful and not transparent enough for users and governments.

Key Takeaways

  • Silicon Valley has always been able to back successful ideas that could be loss making for a long time and therefore not meet the investment hurdles for others
  • The startup paradox is where the idea looks bad but actually it is an industry changer.
  • Sometimes a bad idea is just that – even turkeys can fly if there is enough wind…
Synopsis from an article in INSEAD KNOWLEDGE
Illogical Truths: The Paradoxes of Silicon Valley
By Gopi Rangan and James So
Published: 27th October 2020

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