23 December 2016

New trends in Silicon Valley and innovation

"There are venture funds that were previously large, but now have ceased to exist"

Stanford professor told what is the secret of Silicon Valley

Albert Bikbov, Real Time

The other day in the Kazan IT park with a lecture on the topic: "New Trends in Silicon Valley and Innovations" was delivered by Ilya Strebulaev, Professor of Finance and Venture Capital at Stanford Graduate School of Business. Albert Bikbov, an economic observer of the online edition of Real Time, who attended the lecture, liked the rather general, and therefore accessible to the general public, speech of the lecturer, who later managed to ask a few questions.

How one valley gives 5.7% of GDP

Ilya Strebulaev, who has been a professor at one of the best universities in the world for 13 years, is a very interesting lecturer. At least because he knows the subject of his lecture deep inside, since he lives and works in the very epicenter of one of the most creative places on the planet. In his rather general lecture, a Stanford University professor told Kazan entrepreneurs about the role of venture capital in the development of an innovative economy and what is the phenomenon of Silicon Valley, which has become a symbol of high technology and free enterprise.

Silicon (or Silicon) Valley in California is the personification of the word "innovation" all over the world. Corporations such as Apple, Google, Twitter and thousands of other innovative companies have emerged here, and the most commercially successful ideas are born here. Today, the total contribution of Silicon Valley to the US economy is 5.7% of GDP. Known as the birthplace of the most risky, breakthrough and subsequently hyper-successful brands until the 1970s, the valley contained only a university campus – the famous Stanford. Strebulaev stressed that it was the university that initiated such rapid technological and economic growth in the region, becoming a supplier of specialists and developments and creating a full-fledged economic cluster around itself.

Silicone clones are dead

Many countries dream of creating their own analogue of Silicon Valley. Is it possible to replicate this unique ecosystem? Many governments explain the phenomenon of Silicon Valley only by state policy and state financing – as a result, we have a whole cemetery of failed clones in Europe, Asia and Latin America. And the number of dead is growing. The most important, in his opinion, the main problem of many attempts to recreate Silicon Valley analogues is the lack of financing chains with the involvement of venture capital. Innovations should be developed with private money and there should be a special attitude to risk. During his lecture, Professor Strebulaev revealed some secrets of the success of the Silicon Valley ecosystem, in particular, he talked about how promising business ideas are selected and financed, how entrepreneurs compete with each other in an attempt to attract the attention of investors and why American startups are always ready for possible failure as an incentive for further development. Ilya Strebulaev urged our entrepreneurs not to be afraid of failures:

"Look at the slide – there is a photo of a man in a white T-shirt on it. It has the inscription "I love failure" on it in English. Innovation is impossible without failure. If an aspiring entrepreneur starts his startup and if his startup fails, then the entrepreneur should not go into oblivion, he should definitely have a chance to start all over again."

Global trends

Ilya Strebulaev briefly noted the most important new technological directions being developed in the valley:

Electric cars. For example, according to Stanford University scientists, by 2040 there will be half a billion electric cars in the world, and in a few years you will not need to study for a license, all cars will drive themselves. At the same time, they will learn to assess the road situation wisely.

  • Drones. Unmanned aerial vehicles.
  • Internet of Things.
  • Distance education.
  • Robotization. Many processes will come under the control of technology, but it does not mean that people will remain out of work. We have to control the machines, control their interaction.
  • Medical startups, genomics. Personalized medicine, sports, when any medicine or physical activity will be really developed for each person individually.
  • Big Data ("big data").

After the lecture Ilya Strebulaev answered a number of questions from journalists:

– In Tatarstan, we are working on an attempt to create an analogue of Silicon Valley, on the Innopolis project. Are you familiar with this project?

– I don't know much about Innopolis, the Minister of Informatization and Communications of Tatarstan Roman Shaikhutdinov held a small presentation. But what I heard has already made an impression. I am glad that the leadership of the republic really has a desire to develop, act, and not be limited to words. To transform Innopolis from an ambitious regional project into a global IT center, it needs private investment. When the decision to invest in specific startups is made only by officials, it does not end with anything. The main problem in attempts to recreate Silicon Valley analogues is the lack of financing chains with the involvement of venture capital. This is the money of large companies that are willing to take risks. According to this scheme, Facebook, Google and others, well-known today, developed. Mentors are also needed for quality development. Their role can be successfully performed by investors, in this case they should not be limited only to investing money, but also monitor the processes, engage in the search for human capital. That's what you should pay attention to when developing a center like Innopolis. Such an innovative ecosystem can hardly be created without a university. I was pleasantly surprised that Innopolis is trying to develop it. Yes, of course, there are questions about how this is done, but the idea itself is correct.

– Is it right that the entire Innopolis, together with the university and startups, is being created artificially, and not evolutionarily?

– This is how all such projects are created, and this is normal. In Israel, such a platform was also made artificially, the state was engaged in this, but it was able to move away from it in time. Now it does not sponsor technology, private investors are doing it. Tatarstan has chances to create a project equal to Israel or Silicon Valley. But to do this, you need to take into account the issues of private and public financing and be prepared for the fact that failures are inevitable.

– Do you consider the high level of monopolization of the Russian economy and its nationalization, when the share of state-owned companies in the country's economy reaches 70-75%, compatible with innovative development?

– In general, I am not a supporter of state-owned companies and those that are monopolies. Again, I am not a general economist, but I will still note that state-owned companies are usually inflexible, although they have a good financial base. But there are exceptions – look at the giant, at Sberbank, they are very innovative, but at the same time they are a state-owned company. Although it may be the personality of their outstanding leader.

– Does the Sommop law system, this Anglo-American law system, really play an important role in supporting innovation? Do we need to create special zones or reservations in Russia where this system will operate? In Singapore, at first, they did so, in general, everyone was sued in the High Court of London...

– Yes, in general, the Anglo-American legal system promotes innovation for various reasons. But the creation of special zones in which this system will operate is still a question of the reputation of the whole country as a whole, which is not acceptable.

– There are a number of very large investment funds specializing in venture capital, such as Kleiner Perkins Caufield & Byers and Sequoia Capital, which manage to constantly "beat the market" over a long distance, show stable returns. What is their secret?

– That's not quite true. There are funds that were previously very famous and large and they have ceased to exist. But there are also new funds that are just starting to show amazing results. For successful large funds, the secret lies in the quality of the management team, which is very well versed in the quality of the startups offered. It is also important that these funds are not on public funding, but on private. The scale is also important – the closure of one or several unsuccessful startups is not fatal for such funds, because they have hundreds of other projects, among which someone will definitely shoot. In addition, they always have a stream of promising startups, they go under their name with very good projects. This is a very big advantage.

– Crowdfunding platforms based on blockchain technologies are currently developing. Tell me do they have a future?

– Yes, blockchain technologies will change not only the crowdfunding market. Blockchain will change the entire financial system, the entire economy. Herman Gref, claiming such things, is deeply right.

– Thank you!

Portal "Eternal youth" http://vechnayamolodost.ru  23.12.2016

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