Tag: Silicon Valley

Bubbles, Unicorns, Outliers and Innovation in Silicon Valley and Austin

Founder of Silicon Hills News

IMG_2628When the Facebooks and Twitters of the world are soaring everyone thinks of Silicon Valley as a glorious place, said Bill Gurley, general partner of Benchmark Capital.
“But when that changes people go away very, very fast,” Gurley said. “They scatter like the lights coming on in a room.”
He tells people they should be investing in Silicon Valley when no one else is. That’s how they get phenomenal returns, Gurley said. They also need to develop long-term relationships, he said.
“I think it’s important for people to understand how cyclical things are,” Gurley said.
He spoke Thursday afternoon on a panel of experts discussing trends and emerging technologies during the second annual University of Texas in Silicon Valley event at the Sharon Heights Golf and Country Club on Sand Hill Road in Menlo Park.
Another panelist, Mike Maples Jr., partner in Floodgate Ventures, thinks this decade is going to be as pivotal in innovation as the 1970s were. In the 2000s, the cost of starting a company collapsed, he said. That created an opening for a new class of venture firms, he said.
“Innovation is becoming democratized,” Maples said.
Bob Metcalfe, professor of innovation at the University of Texas at Austin and the inventor of the Ethernet, is worried there’s a bubble in the startup world going on now.
“I do think one of the reasons the business is cyclical is because we take on risk very marginally and there’s a lot of mimicry,” Gurley said.
IMG_2629For example, in 2012, Workday went public and immediately started trading at 15 times forward revenue even though half the revenue is services and they’re burning $30 million to $40 million a year, Gurley said.
That triggers a discussion in every software as a service boardroom around Silicon Valley about whether the companies are pushing hard enough and going far enough, Gurley said. “So you go raise more money and you build up the sales and marketing line items and you burn more.”
“And so the collective burn of the SAS companies in Silicon Valley must be in the billions right now if you could add them all up,” Gurley said. “Another way to think about this, which I wrote about recently, is the number of people employed in Silicon Valley in money losing companies is at an all time high now.”
The last time it was that high was in 1999, Gurley said.
“There is inherent risk in that,” Gurley said. “If we hit any kind of speed bump you won’t be able to get those companies into a position where they can be sustainable without very catastrophic events.”
Twitter is an example of this trend. It’s unprofitable.
“No one is sacrificing growth for profitability right now,” Gurley said. The markets are rewarding companies for that, he said.

Centers of Innovation

Silicon Valley, Austin and Israel have been so successful as tech centers because they have a fundamentally different belief system in place, said Greg Horowitt, co-founder and managing director of T2 Venture Capital and the author of “The Rainforest: the Secret to Building the Next Silicon Valley.”
One of the beliefs is in the concept of paying it forward, Horowitt said.
“The fact is we have to take care of each other,” he said. “There has to be a sense of yes it’s important to compete, but you also have to collaborate.”
There has to be a sense of a paradox of innovation, Horowitt said. That is only accepted once it’s imitated, he said. It’s hard to spot innovation because there’s no pattern recognition when something is completely new, he said. The bubbles happen when entrepreneurs get caught up in the imitation, he said.
“And so what we have to do is we have to be able to support the crazies,” Horowitt said. “We have to allow them to experiment and be creative. We have to allow people to fail and take the risks and we don’t punish them for doing that.”
The most successful tech centers have created systems in which knowledge and ideas flow freely, Horowitt said. He cited, as an example, author Matt Ridley’s book: Rational Optimism in which Ridley defines innovation as ideas having sex.
“When I read that I knew my job is to promote promiscuity,” he said.

Cultivating risk-tasking environments

The kind of environment that promotes risk-taking leads to rewards, Maples said. At Stanford University, the roots came from the gold rush, Maples said. Its professors encourage students to drop out and try out their ideas, he said.
“The thing I’ve seen in Silicon Valley is why don’t you just try it,” Maples said. “That’s the kind of atmosphere that is going to cause you to find the next rock of gold or create the next Google.”
In Silicon Valley, there is a tiny fraction of outliers who pursue counter-intuitive exponential ideas, Maples said. “Most of them fail. But when they work, they are spectacular. The crazy exponential idea out here gets encouraged and has an outlet. The crazy exponential idea in Austin, which I hope will change someday, but it tends to have mentors, advisors and people around it that say you’re trying to be a vitamin not a pain killer. You’re not solving the customer problem.”
Innovators in Silicon Valley like Sergey Brin and Larry Page, co-founders of Google, and Elon Musk, founder of Tesla and SpaceX, don’t think that way, Maples said.
“That’s the X factor that Silicon Valley has,” he said.
Part of that is volume, Gurley said.
“Every smart and dumb version of every idea gets tried,” Maples said.

In search of Unicorns and Thunder Lizards

The size of undergraduate ideas is very small at the University of Texas at Austin, Metcalfe said.
“We’ve got to do a Unicorn in Austin pretty soon,” Metcalfe said. “That’s in my performance appraisal. I have to deliver some Unicorns.”
Unicorns are startups that hit $1 billion in valuation. Maples calls them Thunder Lizards.
Austin also needs more catalysts to help grow its ecosystem. Dell hasn’t created as many startups in Austin as some of the successful technology companies in Silicon Valley, according to the panelists.
The research university, in this case the University of Texas at Austin, is the driver in the innovation ecosystem, Metcalfe said.
There’s a bubble in social, mobile and cloud, Metcalfe said.
But Maples thinks more opportunity lies in the mobile industry because young people rely on their mobile phones more than cars. His 19-year-old daughter doesn’t have a driver’s license. He investigated and found out many teenagers no longer get their driver’s license. They rely on their phone for freedom that cars once provided, he said. So he thinks there’s a lot more opportunity developing for social, mobile and local apps for the mobile phone.
He thinks there are going to be companies worth more than $100 billion that put mobile first.
Gurley said a lot more of the population is becoming urban.
The democratization of innovation will lead to more diverse tech entrepreneurs creating companies regardless of their geography, Maples said.
In Austin, the new Dell Medical School will spark more innovation and startups in the life sciences and biotechnology industries, said Metcalfe. He often tells his students: “The world’s most important problems will not be solved by yet another website.”

Austin Ranks #5 on Richard Florida’s List of Top High Tech U.S. Cities

Photo courtesy of Wikipedia

In 2006, Richard Florida visited San Antonio and spoke at the Texas Lyceum Conference.
I covered the conference for the local newspaper.
Florida made quite an impression on me. I thought he understood the high-tech workforce better than anyone.
And at a time when everyone focused on globalization and a mobile workforce, Florida’s message was that cities needed to create places where talented people liked to live.
“Place is the single most important thing in the global economy,” Florida said at the time.
That’s still true.
That’s why Austin does so well in attracting and retaining a high-tech workforce. The city is a wonderful place to live and raise a family. It’s affordable and the city has a thriving creative class of artists, musicians, writers and high tech workers. The city has lakes, hike and bike trails, parks and more. Austin Fit, a marathon training program downtown, regularly attracts between 300 to 500 people at 6 a.m. on a Saturday during the sweltering summer heat to train for marathons. Austin and its citizens focus on recreation and exercise. But they still know how to have fun with festivals like Keep Austin Weird and Eeyore’s Birthday as well as the nationally known Austin City Limits and South by Southwest. Austin also has great restaurants, bars and more than a dozen coworking sites.
One of the things that makes Austin attractive, in my humble opinion, is the collective intelligence of its people. Maybe it’s because the University of Texas makes it home there, but Austin people are whip-smart.
San Antonio isn’t on the list – yet. But I think San Antonio is making huge progress toward becoming a high-tech hub. Mayor Julian Castro has addressed the obesity epidemic and put a huge focus on the importance of exercise and nutrition. San Antonio has the Fit Family Challenge with free Zumba classes and more every week in city parks.
The city is also focusing on improving its high school dropout rate, which is among the highest in the country. San Antonio is affordable, beautiful and has a creative class of artists, musicians and writers. And it’s high-tech workforce has also been growing.
This month, Richard Florida has a revision of The Rise of the Creative Class book coming out: The Rise of the Creative Class Revisited and he’s compiled a list of the top tech cities in the U.S.
Seattle, home to Microsoft and Amazon, claims the top place from Silicon Valley, which ranked first in his last book. Silicon Valley, which consists of the San Jose metro area, ranks second followed by the greater San Francisco area.
Portland, Oregon claims the fourth spot followed by Austin.
Raleigh, San Diego, Durham, Greater Boston and Boulder round out the top 10.
New York and Washington, D.C., don’t make the list despite their growing high-tech regions.
Florida ranks the top Tech cities by technology, talent and tolerance.
“While technology is an important driver of economic growth and development, it needs to be part of a broader social and cultural ecosystem before it can generate real prosperity,” Florida writes in this article in Atlantic Cities. “There is considerable overlap between the Technology Index and the Creative Class, which makes up more than 35 percent of the workforce in 14 of the top 20 Technology Index metros, and exceeds 40 percent in six of them.”

Austin companies seek tech talent in Silicon Valley

By L.A. Lorek
Got tech talent?

Then Austin companies want to recruit you.

A group of Austin CEOs plan to travel to San Francisco and Sunnyvale on Sept. 13th and 14th to hire engineers, software developers and others with technology skills.

Many Silicon Valley area companies already have a presence in Austin, but this will be the first organized effort by area CEOs to hire high tech workers from California, said Joel Trammell, chairman of the Austin Technology Council.

“We certainly have good talent in Austin,” said Trammel, who also serves as CEO of CacheIQ. But the city’s growing high-tech industry needs more, he said. His company seeks three or four more software developers, he said. And it’s not alone.

In May, the Austin Technology Council hosted a high tech CEO summit and many company executives reported a shortage of  engineers, coders, programmers and software developers.

The 30 companies travelling to Silicon Valley to recruit include Homeaway, BazaarVoice, Gowalla, CacheIQ, Ravel and Creditcards.com.

Why would software developers pull up stakes and move to Austin? The city repeatedly lands on best place to live in the country lists.  Austin ranked second behind Silicon Valley on the nation’s most innovative places list compiled by Forbes Magazine. And Kiplinger’s list of best cities for nurturing a business. Austin offers a much lower cost of living, shorter traffic commutes, high quality schools and a strong high tech community, Trammell said. Also, Texas does not have a state income tax, he said.

“The lifestyle is amazing,” said Bart Bohn, chief operating officer of Ravel, which needs four new employees focused on product sales and services. Ravel does analytics on big data.

“Austin is shockingly easy to recruit for,” Bohn said. “It has great brand recognition. Everyone thinks of it as fantastic lifestyle with good technology jobs. A lot of people get exposure to it in other ways like Austin City Limits Music Festival and South by Southwest.

Already, several big Silicon Valley companies have offices here.

“Most people don’t know that Apple has a 3,000 person office in Austin,” Bohn said.

Google and Facebook also have offices here and Evernote is going to open one soon, he said.

“Austin is known to have a great talent base,” Bohn said.

Austin has recently seen an explosion of good, credible start-ups combined with the opening of established tech companies’ offices and that has increased the demand for technology talent, Bohn said.

“Maybe that sucked up a lot of talent that would be available for other companies,” he said.

CreditCards.com wants to add up to five new employees to its staff of 55 in Austin, said CEO Chris Speltz.

“We need to grow the talent pool here,” he said.

For more information, you can follow the Austin Technology Council on Twitter @ATCouncil or  follow the conversation on Twitter with #ATXGrow.


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