Atlanta Emulating Silicon Valley

guy.pngGuy Kawasaki had a fantastic post today on his blog. In it, he shares his take on what it takes to “emulate Silicon Valley”, or more specifically, what it takes to create that unique entrepreneurial environment that seems to only exist in its true form within Silicon Valley.

You can read the full text of Guy’s post here. However, I want to share with you my take on some of Guy’s thoughts, with a special focus on how it might apply to creating that entrepreneurial firestorm here in Atlanta.

Guy breaks his post down into three areas:

  1. The stuff you can’t do Jack about
  2. The stuff you should do Jack about
  3. The stuff you shouldn’t do Jack about

First, the stuff you can’t do Jack about. At first glance, there are a number of these attributes of Silicon Valley that Atlanta shares. For example, we have beautiful, but not necessarily gorgeous surroundings. The housing prices here are nowhere near what they are in Silicon Valley, but they are on the rise, and have been for some time. And as far as being “crowded” goes, all one needs to do is look at Georgia 400 at about 5:00pm on any day of the week to realize that we are running elbow-to-elbow here.

Okay, so what about the stuff we “should do something about?”

Focus on educating engineers: I actually think we do a fair job of this. Georgia Tech is one of the best engineering schools in the country. Next.

Sidenote: if you want to read a fascinating post on this subject, check out this post by my pal Matt McCall up at Draper Fisher Jurvetson/Portage Ventures in Chicago. Don’t miss his followup post as well. Good stuff.

Encourage immigration: Unlike the Atlanta of just a few decades ago, we are now an incredibly diverse city. There are large ethnic communities here, ranging from Hispanic, to Asian, to European. Many of the best and brightest engineers here are of Asian and Indian origin. Next.

Send the best and brightest to Silicon Valley: We don’t do this, although we have entrepreneurs leaving Atlanta for other reasons (i.e. they can’t find capital here in the Southeast.) There could be something in this argument, but I’ll leave you to ponder it. Next.

Celebrate your heroes: We have a few massively successful entrepreneurs here in Atlanta (Arthur Blank, Ted Turner, Bernie Marcus, et al). I think we actually do a fair amount of celebration around their successes (and more importantly, their community involvement.) Check.

Forgive your failures: Aha! Finally, we’ve stumbled upon something where we have a cultural departure. Guy states:

There is no better place to fail in the world than in Silicon Valley. (Where else can you get your clock cleaned by Microsoft and become a venture capitalist and top-ranked blogger?) Indeed, some people here have made a career of failing. Some of this is cultural—failing in Europe or Asia casts a cloud over one’s family for generations. Not in Silicon Valley. Here, it doesn’t matter (within reason) how many times you fail as long as you eventually succeed. So many entrepreneurs who failed went on to create massive successes that we’ve learned that failure is a poor predictor of future results.

I don’t see this sort of environment here at all. If you fail in Atlanta, especially if you are tossing around other people’s money, I don’t think we have the culture to trust again. I think this is perhaps one of the biggest reasons why we have not recovered from the bursting of ye olde digital bubble. Have we re-established a shared “trust” between the entrepreneurial and investment communities here in Atlanta? I’m not convinced.

Speaking of learning from failure, a while back I was talking to one CEO here in town when he mentioned that he wanted to meet with some others that had tried similar types of things (to what he was doing) in the past. Specifically, he wanted to meet with some folks who had been successful at it. I suggested that perhaps it would be beneficial to also meet with someone who had failed at what he was trying to do. He disagreed. His argument was that if you want to “write a diet book, you talk to skinny folks.” While I think there is some value in that, it really is only half of the equation. There are a lot more overweight people that have failed at dieting than there are skinny folks who have been successful. There is something to be learned in either event. But I digress.

To me, the most important and poignant part of Guy’s article was the last section: Things you shouldn’t do Jack about. This piqued my curiosity.

A few hours ago, I was sitting in the auditorium down on 14th street, attending the MIT Enterprise Forum’s Angel Investing event. Great event, by the way – kudos to Nelson Chu and the rest of the team. Great local panel, by the way (Stephen Fleming, Bob Ross, and Karen Rands.) One of the things that came up in the Q&A was the fact that Atlanta has a different investment atmosphere than other parts of the country (Boston, Silicon Valley, etc.) This is true. As angel investor Bob Ross (a panelist) pointed out, there are 50 angel investment groups in California. In Atlanta, we have 3 or 4. Another attendee remarked to me that she thought Atlanta was “10 years behind the rest of the country.” Perhaps.

When you are behind the curve, human nature is to knee-jerk and try to solve the problem with policy, programs, and initiatives.

Guy offers these suggestions:

Don’t focus on “creating jobs”

When a region adds the second bottom line of creating jobs, things get whacky. Such a goal perverts the objective of a startup because the primary, perhaps the sole, goal of a startup is to kick ass. If it also has to create jobs for the sake of creating jobs, then you defocus it. The thinking should be: “If this company kicks ass, then it will survive and grow. If it survives and grows then it will create jobs.” So let startups focus on kicking ass and the jobs will come naturally-or not.

As informal as Guy’s vernacular is here, there is some truth in what he is saying. I must admit, I am guilty of this. I run around town all week spouting on and on about job creation, and trying to come up with ways to spur economic growth. What we should be focusing on instead is fostering innovation, and an atmosphere conducive for entrepreneurial endeavors. As Guy points out, the jobs will come naturally – or not.

Tonight at the MIT event, I had a fellow entrepreneur (and good friend) sitting to my left. He and I have been meeting informally nearly every Friday morning at a local coffee shop. It has become a great “sounding board” event for the both us. We are able to help each other work through issues with business models, capital structure, advisory boards, product strategy, etc. Good stuff.

To my right sat a young entrepreneur. I won’t mention his name here on the blog, as he is still in “day job mode”, and I wouldn’t want to accidentally force him to focus on his new idea full time. ;) I looked over at one point and saw him taking notes as the panel of angel investors served up their nuggets of wisdom. I looked at this young man and thought back to when I started my first company. Young, full of energy and desire. I like it when people take notes – it shows a genuine interest.

I leaned over to my friend and said “you know what? We need to help this guy.” We’ve invited him to our Friday morning pow-wow. Hopefully, we’ll be able to help coach him along, and provide guidance, counsel, and introductions for him as he builds his dream.

I will no longer run around town spouting on about job creation. I am going to evangelize about innovation, and helping each other. That is what it is all about. I will leave the “job creation” tasks to the folks at the capitol building downtown.

Don’t pass a special tax exemption:

There’s an assumption that tax benefits for investing in startups encourages entrepreneurship. I disagree; I think it mostly creates sloppy decisions by unsophisticated investors and crooked ones by others. Indeed, the unstated (and perhaps unrealized) goal of a sophisticated investor is to create, not avoid, tax liabilities. Nothing would make me happier than having to pay $100 million in income taxes. I would hand deliver that income tax return to the White House.

I have to disagree with him here, but to a point. I think tax exemptions for startup investors could be a positive thing, but perhaps not without more stringent guidelines. This is one of the great unproven economic theories of our time – of that I am convinced.

Don’t create a venture capital fund:

The thinking here is that a government created venture capital fund would kickstart entrepreneurship because of the influx of money. However, if there’s one thing you can depend on in venture capitalists, it’s greed. If you show them good engineers with good ideas for good companies, they will appear by (private) plane, canoe, dogsled, and camel. Such a region doesn’t need to create a fund. A supply of capital does not create demand from entrepreneurs–at least not the kind of entrepreneurs that you want.

(There is one notable exception to this: the government of Israel created a seed fund that launched its venture capital industry. However, my interpretation is that the fund was successful because there were already entrepreneurs there; the fund didn’t cause entrepreneurs to suddenly appear out of the desert.)

Interesting take. I don’t think it is necessarily a bad thing that the state governments launch venture funds. However, I think guy’s point is that creating venture funds is not a solution to the problem. It is a way to augment what should already be happening in the free market, and perhaps it helps to put local dollars to work.

As I wrote and podcasted about back in January (Why, Georgia, Why?):

Sure, we’d all love for Georgia companies to raise capital from local investors, but in this day and age, it really isn’t important. What is important, however, is actually raising some capital to begin with, irrespective of where the money originates. Capital’s point of origin is merely a footnote in the ledger – what matters most is where it is deployed – as that is what stimulates local job growth.

Don’t provide cheap office space and infrastructure:

The rationale is that if entrepreneurs had office space, photocopying machines, T1 lines, and adult supervision, they would be successful. I can’t think of a case where cheap space, incubation, whatever caused success. This isn’t to say that there haven’t been successful companies from incubators (eBay is arguably one), but the key point is to determine the actual causes of success. Cheap space, etc, can’t hurt, but I’d buy engineering professors, not crappy buildings. Just because there’s a cheap building doesn’t mean you should create an incubator out of it.

The logical nexus here is with the local incubators, such as the ATDC and the Gwinnett Innovation Park. I don’t think dismantling the incubators is a good idea, and I don’t think Guy is saying that either. I think the point here is that we shouldn’t fall into the trap of thinking that an incubator is going to solve the problems of innovation deficit, job creation, etc. They may help to some extent, but as Guy points out, a company that is destined to be a huge success is going to do it regardless of whether it is hatched in a garage or nurtured in an incubator. At the end of the day, it won’t matter.

For some other interesting reading on this subject, take a look at what Atlanta angel investor Charlie Paparelli has been writing about lately:

What say you?


1 Comment

  1. Great article…I actually posted my own thoughts on the Highgroove Studios blog:

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