The Silicon Valley way

13 Oct 2011

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At the recent Global Irish Economic Forum were (from left): Rory McInerney, vice-president, Intel; Tom McEnery, former mayor of San José; Barry O'Sullivan, senior vice-president, Cisco; and John Hartnett, founder and president, ITLG

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Permits at the speed of business, welcoming new cultures, helping start-ups and tapping into diaspora. There’s a lot to learn from Silicon Valley culture.

At last weekend’s Global Irish Economic Forum, the word ‘diaspora’ came up a lot. To most of us, this could seem to be misty-eyed stuff about reuniting with the generations that we lost to the evils of emigration. But, from the perspective of the technology industry, tapping into a nation’s diaspora isn’t sentimental at all. It makes cold, logical business sense. Israel has done it and China and India are doing it.

Take Israel. Like Ireland, it is a small country with a troubled history of deep sectarian divides. Like Ireland, Israel is home to a leading-edge multinational technology industry. Like Ireland, its indigenous industries have no internal market worth targeting and therefore they have to export.

But, unlike Ireland, Israel’s indigenous tech industries have soared, while ours are still trying to make a breakthrough.

Having leveraged its diaspora in the United States to attract investment and win business, Israeli technology companies last year attracted some $1.5bn worth of venture capital compared with just $300m going into Irish companies.

Israel has 140 companies listed on the Nasdaq stock exchange – Ireland has just three. Israel began floating companies on Nasdaq in 1995, Ireland followed in 1997 with Iona Technologies.

Ireland can still tap into its diaspora

The lesson is implicit – despite having one of the most visible ethnic groups in the US, Ireland failed to tap into this diaspora when it mattered; we got punch drunk on property instead. But there is still time, according to the Irish Technology Leadership Group (ITLG), which comprises 3,000 executives around the world of Irish origin and with outposts predominantly in Silicon Valley, but more recently in Wall Street and Hollywood.

Formed just three years ago by former Palm vice-president John Hartnett, the ITLG has established an Irish Innovation Center in the capital of Silicon Valley, San José, California, and has invested in at least eight Irish technology companies out of its own venture capital fund. The group is chaired by former Intel CEO and chairman Craig Barrett.

At the ITLG’s Silicon Valley Comes to Ireland gathering at DCU last week, Kingsley Aitkins of Diaspora Matters said: “Countries all over the world are trying to figure out how they can connect with their diaspora. Israel is the second-largest home of venture capital in the world.”

Pointing to emerging tech hubs in China and Israel, he continued: “Those countries networked with their diaspora. It’s no longer about countries or regions, and Silicon Valley has more in common with Dublin than it has with Fresno, which is down the road. In the past, this country gained from remittances, but then you move to donations, business networks and venture capital. That’s why the ITLG is so important.”

But why hadn’t Ireland moved sooner? “We have watched Israel knock it out of the park in terms of what’s possible,” explained Hartnett. “They leveraged the venture capital world, infrastructure and ecosystem – now it’s time for Ireland to get our fair share of that.”

Hartnett said factors like negativity about the economy have certainly had an impact the country’s reputation. However, he said that globally and in places like Silicon Valley people still have a positive view on Irish entrepreneurs, the Irish people, their attitudes and their connectivity with the US. “We need to leverage more of that.”

The key that is culture

The City of San José’s director of economic development and its chief strategist Kim Walesh was at DCU last week. She made it clear that the cultural mix is a key ingredient behind Silicon Valley’s success.

“It’s about globally connected talent. It is clear that Silicon Valley has benefited from entrepreneurial people from around the US and the world and by being open and welcoming of people from other places.

“San José is the most international city in the US and the world. Some 40pc of people in San José were born in another country. One-third of the population is Asian, one-third Latino and one-third Anglo. Over 50pc of the engineers and technologists and founders were born in another country.”

Walesh relayed the story of a Chinese engineer who worked at Cisco and said it was only place in the world that he did not feel like a foreigner.

She said the story of Silicon Valley is the story of the technology industry.

“In the Valley, we are in a constant search for that win-win exchange, sharing knowledge. It’s an environment truly based on innovation. It is where product manufacturers meet product designers and people who love to start companies and make catalytic interactions happen.”

Central to this is a cultural tolerance of economic and innovation destruction. “It’s about reshuffling resources to go onto the next thing. You can’t have the failure without the destruction. It’s about success and failure – being able to ride those successive waves.”

She quoted Thomas Friedman about how to build a Silicon Valley: “First you build this flexible, open economy, then you tolerate creative destruction so that dead capital is redeployed to other industries. Pour in energetic immigrants from every part of the world. Then stir and repeat … stir and repeat …”

Source of jobs in Silicon Valley

Walesh said 40pc of jobs growth in the Valley comes from start-ups and 10pc from companies coming in. “The key is to help companies to get a smart start. Allow them to plug easily into the various networks and scale their operations as quickly as possible.

“We work with them to find facilities, space and provide other incentives that save start-ups time and money, and we can issue permits at the speed of business.”

The former mayor of San José Tom McEnery spoke at the DCU event and caused the entire room to gasp when he mentioned how he had to take an eight-stop flight just to get to Dublin from Silicon Valley to be with us that night.

He said what Ireland and Silicon Valley have in common is the same type of people and entrepreneurs.

“Before there was Silicon Valley, we founded a wine industry in San José. But somewhere along the way something changed. It was not an act of God. It changed because there were great entrepreneurs willing to put their hearts, dreams and investments behind what they wanted to make of the world.

“They began by being more worried about how much fruit they could get into a crate rather than putting Apple computers on people’s desks.

“But it happened, and it happened by the hard work of individuals.”

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com