There can only be one Silicon Valley, so let’s try something different

The world only needs one Silicon Valley. Evidence? First, Silicon Valley is not only for the United States, it is a magnet for entrepreneurs and enterprise capital from throughout the world.

Secondly, as the American entrepreneur and scientist Vivek Wadwha did it he said: :

“Hundreds of regions around the world have collectively spent tens of billions of dollars trying to build their version of Silicon Valley. I don’t know of a single success.”

We have never had a good tech startup sector in Australia. At times the industry has shown some promise but has been odd, eccentric and moderately successful, but that is about it. Most people with the required expertise realize this. One trip to Silicon Valley convinces them that they have something there that we do not.

Yet our local media mainly publish articles from the technology sector incredibly optimistic. I think it’s because stories in the tech sector are portrayed as feel-good stories.

For example, a two-person startup might be promoted as the next Uber, and then quietly disappear, never to be heard from again. Your local medical researcher who makes some effort to find out the reason behind Alzheimer’s disease will win a Eureka Award, and the public may think there is a cure and a large Australian medical corporation is on the way. This almost never happens.

Experts who can see through positive media coverage appear to have a favorite hypothesis as to the root reason behind the “problem” plaguing Australia’s tech sector. They will say in another way that they are not qualified enough entrepreneursOr too little qualitative innovationor not enough investment capitalor does not have sufficient qualifications enterprise capitalistsand the list goes on.

Some of them then start promoting their hypothetical solutions to the government; for example (examining the above list of examples) creating university courses to upskill entrepreneurs, or the government increasing investment in university research and development to create more innovations, or removing barriers to crowd-funded enterprise capital funds, or making enterprise capital available on friendly terms Australian enterprise capitalists returning from Silicon Valley (and the list goes on).

There is a pattern here.

First, experts announce that there is a problem with the lack of a vibrant technology sector in Australia, without precisely defining what a vibrant technology sector would appear like. There is little point in beginning to look for a solution to a problem until the problem is properly defined.

Second, experts hypothesize a solution without realizing that their idea is just a hypothesis. This means it could be buggy and must be stress tested before being implemented. Since different people have different hypotheses, you’ll think they’d catch on. But no, everyone just thinks everyone else is fallacious.

Third, most experts look at the problem in “kinetic” terms. That is, they imagine that the lack of dynamism in the Australian technology sector is resulting from the lack of certain elements of the technology food chain (which consists of innovation, entrepreneurs, expert technology employees, enterprise capital, enterprise capital managers, enterprise capital managers, investors) bankers, corporate buyers and technology-friendly public stock exchanges). Fix the broken thing, as they say, and then magically every thing will be effective, despite evidence to the contrary from previous efforts.

The problem is actually “thermodynamic” in nature. What I mean by this is that there is no place for the technology sector to exist in our economy.

Commodity sectors don’t need it; have their very own research and development channels. Oligarchies in the service sector don’t need it; they buy technology from foreign suppliers. Education exporters don’t need it; they innovate only to chop costs and improve their marketing. The list goes on.

Identification of the need

There is essentially no major corporate sector in Australia that requires a regular supply of recent platform technologies powered by start-ups. They are doing great as they are. Without this high driving force, no amount of tinkering with the tech startup food chain will do any good.

Until one of Australia’s corporate sectors buys into the idea of ​​buying startups and attacking global markets with the platform technologies they acquire, we’ll never have a thriving technology startup environment.

Worse yet, any startups that succeed will succeed quite quickly disappear abroad serve larger markets with cheaper capital, leaving the local environment deprived of their potentially positive impact. This fact underlies the need for local businesses to adopt effective startup technologies.

Silicon Valley was built in the post-war era on defense, semiconductor and computer technology firms. After a long time of slow growth, the VC sector really took off in the Nineties (in terms of capital employed) when three things happened.

First, the U.S. corporate sector viewed Silicon Valley as a reliable and profitable source of recent platform technologies. The opportunity they saw was to chop most of the unprofitable corporate R&D spending and use those funds to accumulate startups or publicly traded technology firms; this proved to be a less expensive approach to innovate.

Second, Silicon Valley experienced the first Internet boom and saw an opportunity to take over the once-in-a-millennium IPO market for recent global technology firms.

Finally, the 1978 changes introduced by ERISA allowed U.S. pension funds to “prudently” invest in early-stage unlisted firms. Previously, the VC industry was much smaller and limited by capital supply; these amendments solved the problem until the Nineties.

As you can imagine, little of this story overlaps with what we can come up with in Australia. If we wish to have a vibrant high-tech startup sector, we want to return up with our own need for it, reasonably than attempting to copy and compete with Silicon Valley.

Solution identification

If we accept this assumption, we have two possibilities:

1. Create a recent, export-oriented enterprise sector from scratch that needs technology platforms powered by local start-ups, or

2. Encourage one of our existing corporate sectors to start out purchasing recent technology platforms and start exporting.

Which of them has the biggest probability of success?

For the former to succeed, we might have to miraculously create each a recent, export-oriented business sector and a vibrant startup community. In the Nineties, many in the Australian startup community looked to Nokia as a template for success. “Create enough startups,” they said, “and eventually you’ll get Nokia.” They argued that Nokia had created a recent technology export sector for Finland and was also supporting the local tech startup community. Well, after 35 years of trying, we do not have Nokia, and neither does Finland for that matter.

My money is on used government incentives encouraging our vibrant service sector corporations to rework from national oligarchies using off-the-shelf third-party technology platforms to global providers of intermediary technology platforms in their very own sector. They have the capital to execute this plan, if not the leadership and culture. It won’t be easy, but it has a higher probability of success than many other commonly proposed options.