It’s time to bust Silicon Valley myths
Age, gender and lack of capital should not come in the way of building an innovation economy
India’s policy makers and investors look to Silicon Valley as the model for innovation and believe what its venture capitalists (VC) say. This is not a wise thing to do because these VCS often propagate false stereotypes and live under the delusion that they know it all. For India to build an innovation economy, it needs to dispel many myths.
1. Only the young can innovate: One Silicon Valley VC went as far as to say at a NASSCOM event: “People under 35 are the people who make change happen, and those over 45 basically die in terms of new ideas.”
In fact, the average and median age of successful technology company founders in the US is 40, as my research and subsequent studies have shown. Twice as many are older than 50 as are younger than 25; twice as many, over 60 as under 20. The older, experienced, entrepreneurs have the greatest chances of success. Marc Benioff was 35 when he founded Salesforce.com, and Reid Hoffman was 36 when he founded Linkedin. Steve Jobs’s most significant innovations — imac, itunes, ipod, iphone, and ipad — came after he was 45. Qualcomm was founded by Irwin Jacobs, when he was 52, and Andrew Viterbi, when he was 50. The greatest entrepreneur today, transforming industries including transportation, energy, and space, is Elon Musk; he is 47.
2. Entrepreneurs are born, not made: As my teams at Duke and Harvard documented, the majority, 52%, of Silicon Valley entrepreneurs were the first in their immediate families to start a business; about 39% had an entrepreneurial father, and 7% had an entrepreneurial mother. (Some had both.) Only a quarter of the sample we surveyed had caught the entrepreneurial bug when in college. Half hadn’t even thought about entrepreneurship then, and they had little interest in it when in school. Look at Mark Zuckerberg, Steve Jobs, Bill Gates, Jeff Bezos, Larry Page, Sergey Brin, and Jan Koum. They didn’t come from entrepreneurial families. Their parents were dentists, academics, lawyers, factory workers, or priests.
Anyone can be an entrepreneur. The next Infosys will probably be stared by an older and experienced employee of Infosys.
3. Higher education provides no advantage: Believe it or not, some Silicon Valley investors also say that degrees are not needed because a few college dropouts like Zuckerberg have achieved success.
On an average, companies founded by college graduates have twice the sales and employment compared to the companies founded by people who haven’t gone to college. What matters is that the entrepreneur completes a baseline of education; the field of education and ranking of the college don’t play a significant role in entrepreneurial success. The founder’s education reduces business-failure rates and increases profits, sales, and employment.
4. Women can’t succeed: Women-founded firms receive hardly any venture capital investments, and women face blatant discrimination in the technology field in both the US and India. This is despite the facts that women now match men in mathematical achievement; that 140 women enrol in higher education for every 100 men; and that women earn more than 50% of all bachelor’s and master’s degrees and nearly 50% of all doctorates in the United States. Research by my teams at Duke and Harvard also revealed that there are almost no 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.
They actually have the advantage: womenled companies are more capital-efficient, and venture-backed companies run by a woman have 12% higher revenues than the others.
5. Venture capital is a prerequisite for innovation: Many would-be entrepreneurs believe that without VC funding, they can’t start a company. This was the reality a few years ago when capital costs for technology were in the millions of dollars. But that 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 centres. 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, and no longer require 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.