1. Circles of Influence
And the Seven Paradoxes
of Silicon Valley
Prepared by Lena Ramfelt and Tom Kosnik,
Coauthors of
Circles of Influence (in revision)
Discussion led by: Tom Kosnik, and
Amber Fowler, Shadi Mehraein, & Eghosa Omoigui, co-founders of
echovc
Presented for N-Chat at N-House Venture Lab:
August 22, 2012
If you circulate any part of this
presentation please give credit to the authors.
Circles of Influence #1

2. Who is Tom Kosnik?
1970 1980 1990 2000 2005 2010
AMERICAN MANAGEMENT SYSTEMS
Circles of Influence #2

3. Circles of Influence
Agenda
• Silicon Valley
• Circles of Influence
• The Seven Paradoxes of Silicon Valley
• Silicon Valley vs. Singapore Circles of Influence
Circles of Influence #3

4. What is Silicon Valley?
An entrepreneurial state of mind.
Circles of Influence #4

5. What is Silicon Valley?
Lots of roads with too much traffic!
Circles of Influence #5

6. What is
Silicon Valley?
The highest
concentration of
entrepreneurial high-tech
companies
in the world.
Circles of Influence #6

7. Silicon Valley Start-ups Have Innovated in many industries
• 1940s -1960s: Aerospace/Defense
• 1970s: Semiconductors and minicomputers
• 1970s-1980s: microcomputer hardware and
software plus biotechnology
• 1990s: All of the above plus internet
• 2000- and beyond: All of the above plus Clean-tech
(Clean Energy, Air and Water), next-generation
bioengineering, wireless, and web 2.0.
Circles of Influence #7

8. Circles of Influence
Agenda
• Silicon Valley
• Circles of Influence
• The Seven Paradoxes of Silicon Valley
• Silicon Valley vs. Singapore Circles of Influence
Circles of Influence #8

9. What are the Circles of Influence?
A model to help entrepreneurs to get players
to bet on their ventures.
Entrepreneurial Cluster
Stakes Players
Code
The Sweet Spot!
Circles of Influence #9

10. Players bet their stakes
on entrepreneurial ventures.
• Venture capital firms (and their Limited Partners)
• Angel Investors
These are major players
• Research Universities (Stanford and Cal)
in Silicon Valley.
• Silicon Valley Law firms
• Public Accounting firms
• Investment banking firms How are they similar to or
• Consulting firms from different players in
• Marketing, advertising, and PR firms Singapore?
• Executive search firms
• Stock exchanges (NASDAQ, NYSE, etc.)
• TiE, SABA, Monte Jade, AAMA, Silicon Vikings, etc.
• Industry Associations (Semicon, SVASE)
• Accelerators/Incubators (Astia, Clean Tech Open, Plug-and-Play, Y-Combinator)
• BASES, ASES, NUSEA, Energy Crossroads, SWIB
• Business and Technical News Media, Blogs, etc.
• Joint Venture Silicon Valley; Clean Tech Open, etc.
• Social media for entrepreneurs (Facebook, Linkedin)
• Government agencies Circles of Influence #10

11. Friends
The stakes include…
& Family
Money
Time
Reputation
Passion
Customer Relationships Talent
Technology
And more…
Circles of Influence #11

12. To get players to bet
their stakes on your venture -
you’ve got to know the code…
What is the code?
• “Local” business etiquette that builds trust
• Rules of the game that vary from cluster to cluster
• Explicit and implicit
• Verbal and written
• Communicated in public and private
• Rooted in local cultures of entrepreneurial clusters
• Changing across industries in the same cluster.
Circles of Influence #12

13. The Players in Silicon Valley in 2000…
Silicon Valley VCs
Investment Banks
High
Angel Investors Leading Silicon
Valley Law Firms NASDAQ
Regional Business
National Business
News Media
Local News Media
Influence Large High Tech Fortune 500 Firms
not in Silicon Valley Stanford & Berkeley
Of Players Companies with
Medium Silicon Valley HQ (Customers)
Inside Big 4 CPA Firms
(Lead Customers
Silicon And Suppliers)
Valley Executive Search U.S. Government
Firms
Global Consulting
Firms
Low Local Government State Government
Institutions Most Non-US
Institutions
Corporations
Low Medium High
Global Influence of Players Outside Silicon Valley
Circles of Influence #13

14. The Players in Silicon Valley in 2012…
2
SV’s “global” VCs U.S. Government
High SV “local” VCs/
Leading Silicon National Business
and Angels
Valley Law Firms News Media
Regional Business
Blogs & Social media Stanford & Berkeley
Local News Media
(Facebook, Linkedin)
Influence Large High Tech
Big 4 CPA Firms
Of Players Companies with
Fortune 500 Firms Most Non-US
Inside Medium Silicon Valley HQ
not in Silicon Valley Corporations
Silicon (Lead Customers
(Customers)
And Suppliers)
Valley Global Consulting
Accelerators Firms
& Incubators
Executive Search NASDAQ
Local Government
Firms
Low Institutions
State Government Investment Banks
Institutions
Low Medium High
Global Influence of Players Outside Silicon Valley
Circles of Influence #14

15. Circles of Influence
Agenda
• Silicon Valley
• Circles of Influence
• The Seven Paradoxes of Silicon Valley
• Silicon Valley vs. Singapore Circles of Influence
Circles of Influence #15

16. The 7 Paradoxes of Silicon Valley
Myths about entrepreneurship in 7 Paradoxes of Silicon Valley
Silicon Valley
The Valley is an open network. Paradox 1:
Mountains in the Valley.
The Valley is a meritocracy. Paradox 2:
Academic aristocracies sing praise to
meritocracy.
Money, talent, and other resources Paradox 3:
are abundant. Scarcity in the land of plenty.
Silicon Valley is “ground zero” for Paradox 4:
innovation. Innovation masks tradition.
It’s OK to fail! Paradox 5:
It’s OK to fail if you shoulder the blame.
Learning fuels success in Paradox 6:
Silicon Valley. Long on knowledge, short on wisdom
Everyone cooperates – even Paradox 7:
competitors. Competitors Collaborate and
Collaborators Compete.
Circles of Influence #16

17. Mountains in the Valley
and every mountain is a mountain range!
Semi
Mfg./ Life
Defense/
Semi- Sciences:
Clean Aero Computers
Conductors sBiotech,
Tech Medical Equip. &
Software,
Pharmaceuticals. Software Communications
Personalized Medicine as a service,
Medical Informatics. Etc. Web 2.0, etc.
Circles of Influence #17

18. Academic Aristocracies
Sing Praise to Meritocracy: 2003
Figure 4.1B: VCs with MBAs from Leading Universities
Source: Sample of 164 VC professionals from 21 Silicon Valley firms,
June 2003.
All Others
16%
Northw estern
2%
Columbia Stanford
2%
UCLA
Harvard
2% Stanford
40% Pennsylvania
Santa Clara
3%
Santa Clara
Pennsylvania
4% UCLA
Columbia
Northwestern
All Others
Harvard
31%
Circles of Influence #18

19. Academic Aristocracies
Sing Praise to Meritocracy: 2008
VCs with MBAs from Leading Universities
Source: Sample of 167 VC professionals from 20 Silicon Valley firms,
November 2008
All Others
15%
Northwestern
2%Columbia
2%
UCLA Stanford
2% 40%
UC Berkeley
3%
Pennsylvania
5%
Harvard
31%
Circles of Influence #19

20. Would you expect such dominance by males
in a pure meritocracy?
F ig 4.5: Gender Distribution in VC F irms o f Different Fo unding P eriods
Source: Sample of 323 VC professionals from 20 Silicon Valley firms in
(A) VC firms founded before 1 980
(B) VC firms founded from 1 to 1
981 989
(C) VC firms founded after 1990
100% See Appendix for breakdown.
90%
80%
70%
60%
89 85
50%
95
40%
30%
20%
10%
11 15
0%
5
A B C
Circles of Influence #20

21. Scarcity in the Land of Plenty
The Money Talent Merry-Go-Round
Circles of Influence #21

22. It’s OK to fail if you learn –
and shoulder the blame
Myth 5: Paradox 5:
It’s OK to fail if you learn -
It’s OK to fail And shoulder the blame.
How to cope with the paradox:
• If you blame investors they won’t forgive or forget.
• Fail fast and adapt before burning through your funding.
• When failing remember to show grace under fire.
Circles of Influence #22

23. Do the Paradoxes of Silicon Valley
apply in your Entrepreneurial Cluster?
The Paradoxes of Silicon Valley No ?? Yes
1. Mountains in the Valley
2. Academic aristocracies sing praise to meritocracy
3. Scarcity in the land of plenty
4. Innovation masks tradition
5. It’s OK to fail if you learn – and shoulder the blame
6. Long on knowledge, short on wisdom
7. Competitors collaborate, collaborators compete
8 . Are there other paradoxes in your cluster?
Circles of Influence #23

24. Circles of Influence
Agenda
• Silicon Valley
• Circles of Influence
• The Seven Paradoxes of Silicon Valley
• Silicon Valley vs. Singapore Circles of Influence
Circles of Influence #24

25. Entrepreneurial Clusters
• A region engaged in entrepreneurial activity.
• Bigger than a single city.
• Smaller than a state or most countries.
• Examples:
– Silicon Valley
– Singapore
– Bio-Valley (in Philadelphia)
– Wireless Valley (Kista and Stockholm, Sweden)
– Beijing
– Shanghai
– Bangalore
Circles of Influence #25

26. Singapore and Silicon Valley
are Complementary Clusters
Singapore Silicon Valley
Circles of Influence #26

27. Singapore and Silicon Valley offer different
context for the Circles of Influence
Stakes Players
Code
Circles of Influence #27

28. Exercise
• Form teams with people sitting near you
• Compare the context that surrounds the Circles
of Influence
• What factors in Singapore help hinder the
local Circles of Influence?
• What factors in Silicon Valley help hinder the
local Circles of Influence?
Circles of Influence #28

29. Factors in Singapore that help and hinder the
local Circles of Influence
Stakes Players
Code
Circles of Influence #29

30. Factors in Silicon Valley that help and hinder
the local Circles of Influence
Stakes Players
Code
Circles of Influence #30

31. Thank You
Tom Kosnik
+1 650 450 3330
Facebook: Tom Kosnik
skype: thomas.j.kosnik
kosnik@stanford.edu
But please don’t email me!
Circles of Influence #31