What Makes Silicon Valley Work?

Silicon Valley or the Bay Area has a completely different “vibe” for entrepreneurship. It is the epicenter of the world’s technology innovation, where 40% of all US venture capital is invested and where 90% of the highest venture returns occur. Why?

Why Silicon Valley and not New York which is filled with Ivy alumni; or Boston, home of Harvard & MIT; or even somewhere in UK or Europe or Asia? All of them have amazing engineering and business schools filled with very smart people, so why is the Bay Area the epicenter of innovation?

It comes down to the culture. The culture in Silicon Valley is completely different – where it encourages entrepreneurship to another level.  So, what is so unique about Silicon Valley culture?

1) It is OK to Fail – Yeah, you read that right. Embodying the culture, at Stanford, all our entrepreneurship professors have continually drilled into our heads – It is OK to fail! Failure is a learning process. If you start a company and it fails, then start another one. Fail fast and fail often. Go out and take risks. If you do not fail, you are not taking enough risk. Don’t be afraid to fail. Why?

Innovation by definition has a high failure rate. So, if you are afraid of the downside, you will also miss out on the tremendous possible upside. Even if you do fail, the amount you learn would be worth the cost of failure since you will not make the same mistakes again. In Silicon Valley, starting a failed company counts as experience! 

This gives Silicon Valley a very risk-seeking culture.

In India or China, if you start a company and it fails, you are considered an idiot and probably need to move to another city!

2) Trust the Young – The community trusts the young  with their ideas and does not dismiss them because of their age. The VCs on Sand Hill Road follow suit. This has given rise to entrepreneurs who have raised millions of dollars, while still in their late teens or early twenties.

This is in contrast to industries with entry level jobs, where you start at the bottom and need to be “trained” to gain experience.

The thought process is – when a new gadget comes out, who is more likely to play around with it and figure it out? A teen or his dad? The current generation of teens have been playing around with technology almost since they were learning how to walk. So, when it comes to companies revolving around technology, the young often know what they are doing and should not be dismissed.

3) Career path out of college –  Coming from undergrad at Northwestern, success there (similar to other schools in the East Coast) was more defined as landing a job in consulting or banking. Even though there was a large entrepreneurial push, the concept of becoming an entrepreneur right out of college was relatively rare.

At Stanford, entrepreneurship is more mainstream, where working on your startup after graduating is a common path apart from traditional consulting or banking jobs.  Though most of  those start-ups don’t succeed, that kind of entrepreneurial environment encourages the next Google or Sun or Cisco or Tesla to get built.

This mindset of Silicon Valley will also seem pretty ridiculous to anyone outside the Bay Area. Imagine talking to a banker on Wall Street about it being okay to fail and trusting the young. If he does believe you, he will get himself fired.

This is also why, to learn more about why the Valley works, you will need to visit and see the culture for yourself.

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