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Where Silicon Valley Is Wrong on Innovation

Silicon Valley exemplifies the saying, “The more things change, the more they stay the same.” Very little has changed over the past decade, with the Valley still mired in myth and stale stereotype. Ask any older entrepreneurs or women who have tried to get financing; they will tell you of the walls they keep hitting. Speak to VCs, and you will realize they still consider themselves kings and kingmakers.

With China’s innovation centers nipping at the Valley’s heels, and with the innovation centers that Steve Case calls “the rest” on the rise, it is time to dispel some of Silicon Valley’s myths.

Myth 1: Only the young can innovate

The words of one Silicon Valley VC will stay with me always. He said: “People under 35 are the people who make change happen, and those over 45 basically die in terms of new ideas.” VCs are still looking for the next Mark Zuckerberg.

The bias persists despite clear evidence that the stereotype is wrong. My research in 2008 documented that the average and median age of successful technology company founders in the U.S. is 40. And several subsequent studies have made the same findings. Twice as many of these founders are older than 50 as are younger than 25; twice as many are over 60 as are under 20. The older, experienced entrepreneurs have the greatest chances of success.

Don’t forget that Marc Benioff was 35 when he founded Salesforce.com; Reid Hoffman 36 when he founded LinkedIn. Steve Jobs’s most significant innovations at Apple — the iMac, iTunes, iPod, iPhone and iPad — came after he was 45. Qualcomm was founded by Irwin Jacobs when he was 52 and by Andrew Viterbi when he was 50. The greatest entrepreneur today, transforming industries including transportation, energy and space, is Elon Musk; he is 47.

See also: Innovation: ‘Where Do We Start?’  

Myth 2: Entrepreneurs are born, not made

There is a perennial debate about who can be an entrepreneur. Jason Calacanis proudly proclaimed that successful entrepreneurs come from entrepreneurial families and start off running lemonade stands as kids. Fred Wilson blogged about being shocked when a professor told him you could teach people to be entrepreneurs. “I’ve been working with entrepreneurs for almost 25 years now,” he wrote, “and it is ingrained in my mind that someone is either born an entrepreneur or is not.”

Yet my teams at Duke and Harvard had documented that the majority, 52%, of Silicon Valley entrepreneurs were the first in their immediate families to start a business. Only a quarter of the sample we surveyed had caught the entrepreneurial bug when in college. Half hadn’t even thought about entrepreneurship even then.

Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin and Jan Koum didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers or priests.

Anyone can be an entrepreneur, especially in this era of exponentially advancing technologies, in which a knowledge of diverse technologies is the greatest asset.

Myth 3: Higher education provides no advantage

Thiel made headlines in 2011 with his announcement that he would pay teenagers $100,000 to quit college and start businesses. He made big claims about how these dropouts would solve the problems of the world. Yet his foundation failed in that mission and quietly refocused its efforts and objectives to providing education and networking. As Wired reported, “Most (Thiel fellows) are now older than 20, and some have even graduated college. Instead of supplying bright young minds with the space and tools to think for themselves, as Thiel had originally envisioned, the fellowship ended up providing something potentially more valuable. It has given its recipients the one thing they most lacked at their tender ages: a network.”

This came as no surprise. Education and connections are essential to success. As our research at Duke and Harvard had shown, companies founded by college graduates have twice the sales and twice the employment of companies founded by others. What matters is that the entrepreneur complete a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. Founder education reduces business-failure rates and increases profits, sales and employment.

Myth 4: Women can’t succeed in tech

Women-founded firms receive hardly any venture-capital investments, and women still face blatant discrimination in the technology field. Tech companies have promised to narrow the gap, but there has been insignificant progress.

This is despite the fact that, according to 2017 Census Bureau data, women earn more than two-thirds of all master’s degrees, three-quarters of professional degrees and 80% of doctoral degrees. Not only do girls surpass boys on reading and writing in almost every U.S. school district, they often outdo boys in math — particularly in racially diverse districts.

Earlier research by my team revealed there are also no real differences in success factors between men and women company founders: both sexes have exactly the same motivations, are of the same age when founding their startups, have similar levels of experience and equally enjoy the startup culture.

Other research has shown that women actually have the advantage: that women-led companies are more capital-efficient, and venture-backed companies run by a woman have 12% higher revenues, than others. First Round Capital found that companies in its portfolio with a woman founder performed 63% better than did companies with entirely male founding teams.

See also: Innovation — or Just Innovative Thinking?  

Myth 5: Venture capital is a prerequisite for innovation

Many would-be entrepreneurs believe they can’t start a company without VC funding. That reflected reality a few years ago, when capital costs for technology were in the millions of dollars. But it is no longer the case.

A $500 laptop has more computing power today than a Cray 2 supercomputer, costing $17.5 million, did in 1985. For storage, back then, you needed server farms and racks of hard disks, which cost hundreds of thousands of dollars and required air-conditioned data centers. Today, one can use cloud computing and cloud storage, costing practically nothing.

With the advances in robotics, artificial intelligence and 3D printing, the technologies are becoming cheaper, no longer requiring major capital outlays for their development. And if entrepreneurs develop new technologies that customers need or love, money will come to them, because venture capital always follows innovation.

Venture capital has become less relevant than ever to startup founders.

Why Trump’s Travel Ban Hurts Innovation

Silicon Valley exports technology and imports the world’s best talent. That is how it has helped grow America’s economy and boosted its competitive advantage. President Trump’s executive order banning immigrants from some Muslim countries sent shock waves through the tech industry over the weekend because it was a loud and clear message to the world that America’s doors are now closed, and that xenophobia and bigotry are the new rules of law.

It is no wonder that executives at almost every major technology company, including Alphabet, Facebook and Apple, have made statements defending immigrants and distancing their companies from the president. These companies are worried about their survival and the future of the country.

Let there be no doubt that immigrants are essential to our economic present and future. These newcomers start a disproportionate number of U.S. businesses, particularly in advanced technologies. Immigrants and foreign-passport holders occupy a growing majority of places in graduate education programs in computer science, mathematics, physics and other hard sciences. They play an outsize role in U.S. research and innovation.

See also: An Open Letter to the Trump Administration  

A 2012 research paper I co-wrote, “America’s New Immigrant Entrepreneurs: Then and Now,” documented that 24% of U.S. engineering and technology startup companies and 44% of those based in Silicon Valley were founded by immigrants. My research also determined that immigrants contributed to more than 60% of the patent filings at innovative companies such as Qualcomm, Merck, General Electric and Cisco Systems. And surprisingly, more than 40% of the international patent applications filed by the U.S. government had foreign-national authors.

Study after study has found that immigrants are more likely to start job-creating businesses, not only in tech but across the economy. In 2014, 20% of the Inc. 500 companies had immigrant founders. That’s despite immigrants accounting for less than 15% of the U.S. population. According to research by economist Robert Fairlie for the Small Business Administration, immigrants are more than twice as likely to found businesses as non-immigrants, and 7.1% of immigrant-founded businesses export their products outside the U.S. as compared with only 4.4% of non-immigrant-founded businesses.

Clearly, blocking the path of immigrants into the U.S. cuts off the exact economic growth serum that has made America great. Creating an atmosphere where immigrants are fearful and uncertain about their future will reduce their incentives to open businesses here and stay. This is becoming even more so as other countries increasingly court educated immigrants and entrepreneurs. Those who support the president’s executive order say that the intent is to block people from countries where terrorism is sourced. But it’s not so simple.

By blocking entrance based on passport or country of birth rather than objective criteria, the executive order paints all immigrants from those affected countries and possibly dual passport holders with the same scarlet letter. What if the next Mark Zuckerberg happens to be Iranian? Or if an Einstein happened to be born in Libya? Let’s not forget that Steve Jobs’s father was Syrian — and he would have been banned from entering the U.S. under Trump’s dictate.

Yes, it is true that the affected countries are not the largest sources of immigrant entrepreneurs. But setting a precedent like this can mean that a politician can use this weapon against other countries that have become critical in supplying talent to fuel U.S. innovation. What if a frustrated president elected to block immigrants with Mexican, Chinese or Indian passports? The scenario, totally unthinkable a few months ago, is today entirely plausible.

In my 2012 book, “The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent,” I documented the stories of numerous immigrant entrepreneurs who were forced to leave the country because of shortages of skilled immigrant visas, called green cards. It wasn’t that we didn’t want these people here; American politics was caught in a political quagmire on skilled immigration. As a result, the country began suffering a brain drain, with highly skilled foreign-born doctors, engineers and scientists returning home.

With this executive order, Trump has made it clear that immigrants will have to worry about being singled out even after they have become lawful permanent residents; that their religion and place of birth may be the deciding factor in whether they are allowed to reenter the U.S. after going abroad. This will no doubt turn the trickle of skilled workers permanently leaving the country into a flood. Entrepreneurs who had wanted to come here will have now second thoughts.

See also: What Will Trump Mean for State Regulation?  

Whether or not the courts uphold the legality of the executive order, the damage has been done. Already, the number of billion-dollar technology startups, commonly called “unicorns,” that are located outside the U.. has been increasing dramatically. Fifteen years ago, almost all were in the U.S., while today 86 of the 191 unicorns are in countries such as China and India. We can expect this trend to accelerate because the Trump administration has just added fuel to the fire of innovation abroad and handicapped our own technology industry.