• by William Mougayar
    Venture advisor, 4x entrepreneur, marketer & strategist. I live in Toronto, curate a lot, blog a bit, and help startups.

You Don’t Need a Perfect Tech Ecosystem, but You Need Many Parts to be Excellent

dfs_xerces_andrew-holder1There is an ongoing debate on what constitutes a great tech startup ecosystem outside of Silicon Valley, as other cities and regions try to export, copy, emulate, or learn from what makes Silicon Valley the model that it is.

Brad Feld, who wrote the book on Startup Communities recently discussed whether Silicon Valley is like religion. Fred Wilson asked if the NYC Tech Community could have another name than the default moniker it often gets, as Silicon Alley.

Some others want to minimize Silicon Valley’s impact on the rest of us, but I don’t believe you can do that.

My perspective on Silicon Valley and its impact on other such ecosystems is tainted by two personal perspectives: a) having worked at Hewlett-Packard for 14 years, I started working with and visiting Silicon Valley since the early 80’s, b) being part of the Toronto-Waterloo tech ecosystem, a region that is trying hard to earn its reputation and place in the “world of tech ecosystems”.

I have two conclusions that I’ll summarize here, and will expand on each later:

  1. Silicon Valley is the only region that has been producing industry giants for each successive waves of technological innovation cycles, decade after decade.

  2. No ecosystem in the world is perfect, including the one in Silicon Valley.

Silicon Valley Produces Giant Companies for each Wave

Silicon Valley is not only still the largest ecosystem that produces tech companies, but its history is made-up of a succession of giant companies that emerged out of each successive technology cycles. Almost each decade is defined by a handful of representative companies who symbolize a particular era:

  • Pre 80’s, Semiconductors and Aerospace: Intel, Fairchild, Lockheed Martin, Hewlett-Packard.
  • 80′s, Computers and Software: Sun Microsystems, Oracle, HP, Apple.
  • 90′s, Networking and Internet I: Netscape, Cisco, Yahoo!, eBay.
  • 2000′s: Internet II and Cloud Computing: Google, Apple 2.0, Salesforce, Netflix, VMware.
  • 2010’s: Social and Tech Energy: Facebook, LinkedIn, Twitter, UBER, Dropbox, Tesla, SolarCity.
  • 2020’s: ??

Silicon Valley is an amazing epicenter of energy and activity in tech innovation. Keeping it in the back of your mind provides an incredible mental model for any other tech ecosystem.

No Ecosystem is Perfect

In my own backyard, the Waterloo-Toronto ecosystem is on top of my mind, as it gets frequently self-introspected by its participants because it’s not so perfect, as it tries hard to be recognized as a top global tech startup region.

But no ecosystem is perfect, and none will ever be.

Even Silicon Valley has its own flaws and imperfections, despite its appearance to be the “model”: office rents are high, real estate is expensive, employees are less loyal, traffic is bad, salaries are higher, it has some arrogance, it suffers from a superiority complex, it’s hyped, etc.

What sets an ecosystem apart and on the path of success is not the degree in which it tries to copy Silicon Valley, but in how it develops its own uniqueness. And if there are ecosystems to be copied, the better lessons come from places like New York, Austin or Boulder who created and evolved their own ecosystem, with their own identity and uniqueness, without being obsessed by replicating Silicon Valley.

Any tech ecosystem needs to work with what they have, make it its own, and work with it to make it better, piece by piece.

Truth is, you don’t need a perfect ecosystem, but you need many of your ecosystem parts to be excellent.

Despite the intent to “copy” or “emulate”, you can never make a perfect copy of something as complex as an ecosystem. You can only take lessons and apply them in your own way. Using a cooking analogy, you can follow a recipe, but because you will source most of the ingredients locally, the expected results will be different. The flavors will not be the same. And the rituals, stories, companies, actors and landmarks of an ecosystem will be different from region to region.

Maintaining an ecosystem is also like living in a city you like- if you find a pothole, you avoid it, but you also would do good if you report it.

In the Toronto-Waterloo ecosystem, we’re still growing to be that ecosystem that stands tall on its own two feet (literally). We probably have the best of both works in terms of underlying cultural underpinnings: a Silicon Valley culture mentality (Waterloo), coupled by a New York City drive intensity (Toronto).

What really matters to the success of a tech ecosystem is:

  • Entrepreneurs that do
  • Mentors with experience that give
  • Capital owners that fund

For Toronto-Waterloo, we should make sure we continue to improve our ecosystem in the right direction. The visible signs will be manifested as:

  • Experienced entrepreneurs helping each other at the peer level, without being prompted or rehearsed.
  • Exited entrepreneurs re-investing in the ecosystem that fed them.
  • Ex-employees of companies starting other startups after gaining experience in previous ones.
  • Venture capitalists, funds and angel investors taking risks with local startups.
  • Startups attracting capital and mentors from outside the region.
  • The region producing (via universities) or attracting (from outside) enough of the right human talent to fuel the growth demands.
  • Anyone else supporting the ecosystem following the needs of the above players, and not leading them.

At the end of the day, a tech ecosystem is like nature’s ecosystem. It is full of interdependencies where each organism contributes, interacts with or links to another one. Its members feed from one another, and gradually, the ecosystem becomes stronger and stronger by virtue of its stability via the symbiotic dependencies.

When you have excellent parts, just as when you have excellent ingredients, it becomes more difficult to ruin a bad meal, as it becomes easier to build a great ecosystem.

  • I definitely agree with the visible signs you mention, it’s the rare person who understands that an ecosystem needs growth and momentum in a bunch of areas to be successful. Part of that, which you point out nicely, is that an ecosystem can’t be controlled…and I suspect that attempts to do so end up being toxic.

    Also have to admit that this made me think of how I am overly critical of SV, in large part of because of some of the crap that gets funded there. But entrepreneurs can and do give back there, and if they can expand their worldview to give back to people who don’t think and look like them, there’s a lot of good to be had. As a parallel example Albuquerque, where I grew up, suffers from a scarcity mindset. There’s very little angel or seed money for early stage startups that don’t fit a tech transfer / IP / Los Alamos or Sandia Labs model. It’s frustrating at times, but it’s what we’ve got to work with and just like SV there are strengths, too.

    • Right. well, if you live in a smaller community, it’s more challenging to get critical mass for all the components (or ingredients) of an ecosystem.
      First and foremost is human talent. Otherwise, you need to extent yourself and work across geographies, but it might be more challenging early on.

  • William, An interesting response to recent Fred and Brad posts.

    I know that you and Arnold like to discuss positioning of a proposition to a client.

    I think that if you think about the positions that a local tech. eco-system can occupy you start working out how to differentiate effectively.

    You state Waterloo-Toronto has “a Silicon Valley culture mentality (Waterloo), coupled by a New York City drive intensity (Toronto).”

    I imagine it also has different immigration requirements (another subject of Brads recent interest), different linguistic bias, different local interests (culturally, sports, economically), appeals to different socio-economic sectors etc.

    Surely if you are trying to emulate success it is necessary to create a differentiation and position to occupy. IMHO if you are positioning yourself as SV coupled to NYC but NOT. You are not establishing position.

    A friend of mine wrote an excellent article on this called Positioning: The battle for your startup

    http://startupmanagement.org/2013/04/18/positioning-the-battle-for-your-startup/ – I would recommend it to anyone – but particularly to a startup community :)

    • ha…thanks James.
      I don’t think Waterloo or Toronto are trying to position themselves specifically, but they are trying to make the 2 areas look like one and working together more.
      i think there’s still lots of grass root work that needs to get done, but it’s getting there, and it’s getting better for sure.

  • I know there isn’t a single “fix” to make a tech ecosystem go, but what do you think of the idea that SV has more “quick checks” written than most places? It seems that $25-100K checks for an entrepreneur or small team to get started is quicker and easier to get in SV – and while many (most) of those flame out, there’s also a few Unicorns in the mix. And unless you are making wide and broad bets, it’s less likely you’ll find the Unicorns. And then of course, those newly minted Unicorn billionaires start writing $25-100K checks for the next generation….

  • Twain Twain

    In addition to these:

    * Entrepreneurs that do
    * Mentors with experience that give
    * Capital owners that fund

    Add:

    * Market buyers who repeat buy

wp-w3tc