Why Silicon Valley Works

Re:Why Silicon Valley Works by graycat on Monday November 03, 2014 @04:17PM (#8553575)

From

http://www.avc.com/a_vc/2013/02/venture-capital-returns.html...

at least on average, there is some serious question if Silicon Valley "works" at all well.

For

> One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t.

Well, as I recall, Sam, from one of your lectures in your current course at Stanford, both Marc Andreesseen and Ron Conway made it quite clear that they no longer take proposals from "over the transom" and, instead, learn about new investments only from their "network". Sounds quite closed and not very "open" and, instead, like an echo chamber from the past with not a very good view of the future.

Or, NSF, NIH, and DARPA will take proposals from strangers, but not Sand Hill Road.

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Re:Why Silicon Valley Works by twic on Monday November 03, 2014 @07:42PM (#8554551)

I'd be interested to see a comparison of something like "dollars of revenue at ten years of age per dollar of initial investment" between Silicon Valley startups and newly formed companies of other kinds. That seems like a reasonable measure of the actual worth of a company to me, and so a decent test of whether Silicon Valley works or not.

Looking at valuations or even market caps is much less useful, because that tells you more about what's going on in investors' minds than in reality.

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Re:Why Silicon Valley Works by graycat on Monday November 03, 2014 @10:04PM (#8554940)

You have a point, but in this context necessarily works has to mean making money for the limited partners (LPs) and, there, more money than the alternatives, e.g., an index fund of the NYSE. Well, follow the link I gave to AVC.com and Fred Wilson's table of data there and have to conclude that on average information technology venture capital, and, thus, nearly necessarily also Silicon Valley, doesn't work very well.

I did mention NSF, etc.: There, Ike wanted pictures. The U-2 was not getting it done. So, one day Lockheed's Kelly Johnson walked in with a pile of papers and proposed a new plane, fly at 80,000+ feet, at Mach 3+, for 2000+ miles without refueling, and essentially impossible to shoot down. The project was approved; the plane flew as planned; and we got the pictures.

So, Kelly had a very ambitious start-up, and delivered as planned, with the project approved from work essentially just on paper.

Such work can be done. Other cases include the F-117, GPS, passive sonar, Keyhole (essentially a Hubble but before Hubble and aimed at earth instead of space).

It really is possible to do accurate evaluations of ambitious projects just on paper and, then, go forward with a quite high batting average. And this fact does partly respond to your point.

Well, NSF, NIH, DARPA, CIA, DoE, etc. can work this way, but Silicon Valley just flatly refuses to. Instead, they want another SnapChat with traction and f'get about anything more, and that means that they can't do the really valuable projects. And that's why, on average, they don't make the big bucks.

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