Friday, January 22, 2016

Startup Ecosystems

To understand why startups have difficulty taking root in the Philippines, we have to look at our Silicon Valley aspirations. It's a truism that anytime we want to build some form of technology complex, someone will call it "the Silicon Valley of <insert name of place here.>" But it's hard to replicate Silicon Valley magic. Why is that?

Silicon Valley is home to many high-tech companies, among them Google, Apple, Intel, and Facebook. Geographically, it's a portion of the San Francisco Bay Area. Silicon Valley accounts for one-third of all venture capital investment in the United States.

Why do so many high-tech companies and startups congregate in Silicon Valley? Because Silicon Valley is the nexus of a strong research environment, driven by the universities in the area, in particular Stanford. These universities were recipients of huge government grants following World War II. The research from these universities drove the development of many computer and networking technologies we enjoy today. Simply said, it's because of focus and proximity.

The lesson from Silicon Valley is that of the startup ecosystem. We can break down the ingredients for its success into the following parts: (1) a strong research culture; (2) talent ; and (3) venture capital infusion. These three factors combine into a positive feedback loop. Research produces talent, which draws venture capital, which draws talent, which adds to the research culture. And so on. (There are a couple more auxiliary factors, consumer base and intellectual property frameworks, but I will write about them in later articles.) These factors in combination create a network and a community that makes it easier to cooperate and reduces the risks of business ventures.

But at the heart of this is really the university system, not merely as an institution of education but as the focal point of research. Without research there is no innovation and without innovation all you can really produce are copycat products. Take a look at the entries in many of our own startup competitions -- how many are based on work coming from out of the university? how many are just clones of Instagram and Pinterest?

We may have talent but without that true innovation stemming from research, they won't have any real direction. All they can ever aspire to will be builders and craftsmen for some others' designs. Labor alone is not where the money is. Money is the last to come, and it comes when it sniffs the opportunities.

So on this road to our Silicon Valley ambitions, we need to do some self-examination. You want to produce successful startups? Where is the innovation coming from? Is it based on research? If we look to our universities to produce this, are our universities doing the kind of research that can fuel a startup?