Category Archives: Silicon Valley and Europe

A Quiz to New 2012 EPFL Students

Each year, I have a small tradition of giving a start-up-related quiz to new EPFL students. Here it was:

I was in Helsinki last week and there, the chairman of Nokia gave a talk. “The world is in crisis and the only way we will solve our challenges is with creative people and entrepreneurs. […] Therefore entrepreneurship should be cherished, it is not a profession, it is a state of mind. […] Again it is a state of mind.”

EPFL 1st mission is teaching, its 2nd mission is research. Its maybe-lesser-known 3rd mission is innovation and technology transfer, which includes entrepreneurship. If you have creative ideas, we are here to support you. More on http://vpiv.epfl.ch/innogrants

To show you that that has been understood at the top of the best universities, both the President of Stanford University and the President of EPFL have been entrepreneurs, they have been the founders of 3 start-ups each. I will offer a bottle of champagne to the first student who sends me via email the names of these 6 companies. I am Herve Lebret and I support entrepreneurs at EPFL.

The answer may be found here, and more importantly, I will come back on Risto Siilasmaa’s talk – the chairman of Nokia.

The State of Innovation

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After my summer break, I received mails from friends and colleagues, all related somewhat to new (in fact old) trends in innovation. Thanks to Jean-Jacques, Andrea, Will and Martin :-). The four articles I read are:
– Les Misérables – Europe not only has a Euro crisis, it also has a growth crisis. That is because of its chronic failure to encourage ambitious entrepreneurs from the Economist (July 2012).
– Small is not beautiful from the Economist again (March 2012).
– In bid for start-ups, venture capitalists elbow their way into the spotlight from the International Herald tribune, (not freely available online).
– In Silicon Valley, Chieftains Hold Sway With Few Checks and Balances from the New York Times (July 2012)

The second one is probably the easiest to summarize and it is such an important message, that it needs to be hammered again: Innovation is not about large or small companies (SMEs), it is about fast growth (gazelles, start-ups). And let me add, it is also about a culture of trying and risk taking. “Rather than focusing on size, policymakers should look at growth.” […] “In a healthy economy, entrepreneurs with ideas can easily start companies, the best of which grow fast and the worst of which are quickly swept aside. Size doesn’t matter. Growth does.”

The first article is more complex to describe and I really liked only the first half. The second half explains that Europe struggles because of bad laws on bankruptcy, bad access to finance and bad labor laws. I am not sure these are the causes of our innovation crisis. I preferred the first part such as: “Europe’s culture is deeply inhospitable to entrepreneurs; wanting to grow a start-up into a behemoth is quite as countercultural as piercings and performance art.” […] “They will struggle to hire professional managers to help their firms grow, because European executives are extremely risk-averse. Their young firms will quickly find that established European companies tend not to like dealing with tiny ones.” And as a consequence, “the giants are all ageing”.

“Europe gave birth to just 12 new big companies between 1950 and 2007. America produced 52 in the same period (see chart above).” […] “Many aspiring entrepreneurs simply leave. There are about 50,000 Germans in Silicon Valley, and an estimated 500 start-ups in the San Francisco Bay area with French founders. One of the things they find there is a freedom to fail.” The answer is not simple, but there is hope: “There are schemes […] to get academics to hate business less, to expose schoolchildren to entrepreneurial notions.”

The last two articles are probably less important but give interesting new trends in Silicon Valley. One shows that the venture capitalists are becoming more visible (in order to court entrepreneurs) and mostly thanks to or because of new fund Andreessen Horowitz. But there is also debate (and I agree with the following comment): ‘‘I don’t quite understand the venture capital celebrity. We should be supporting actors. The entrepreneurs do the work and deserve the credit.’’ But Andreessen adds an interesting comment about the dynamics of venture capital: “Each year 15 deals account for 97 percent of all venture capital profits. To be successful, they would have to pursue those 15 companies. And they would do it by aggressively marketing their expertise to the reporters and bloggers who follow start-ups.” The final paper complains about the dangers of too much control to founders and managers vs. board or shareholders: “Since Google went public in 2004 in a way that maintained control for its founders, the leaders of Silicon Valley have been chary about shareholder voting rights.” […] “Directors are meant to act as a check on executives or at least add their expertise and advice to big decisions. In the Valley, however, the idea of the visionary chief executive dominates, and there may be little room for input from directors.” […] “So the new thing in Silicon Valley appears to be for public companies to be run as private ones without significant input from boards and shareholders. This leaves the wunderkinder of the Internet free to run their companies without interference. The question is whether this is merely a bubble in corporate governance or a trend that will spread to the rest of corporate America.”

Start-ups hiding six feet under

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Here’s my 4th contribution to EPFL‘s “start-up of the month”

03.06.12 – The fear of failure probably explains the absence of a “European Google”. Whereas, on the other side of the Atlantic, start-ups are born and die in full view of everyone, their counterparts in Europe hang on for dear life, sometimes even when it doesn’t make sense to do so.

The fourth start-up of the month doesn’t exist! At least not at EPFL, nor in Switzerland or in Europe. I mean those start-ups that fail. European start-ups are a real paradox. We often complain about not being able to create successes like Google, Apple or Facebook, but on the other hand we don’t have any big failures either! In his doctoral work published in 2011, Sven de Cleyn – a researcher specialized in technology transfer – demonstrates that less than 10% of European academic start-ups close down [1]. In a survey dating from 2008, ETHZ produced similar metrics, with an activity rate of 88% [2]. EPFL is therefore no exception to the rule.

In fact, this strange phenomenon can easily be explained. European start-ups focus on survival, to the point that Sven de Cleyn had to use this parameter to define success. Failure is so culturally stigmatized that it must be avoided, almost at all cost. This is one of the fundamental reasons behind the difficulties we experience. In the excellent film Something Ventured, the Californians, followers of a Manichean way – success or death – call start-ups the “living-dead”!

Yet, failure is far from being a bad thing – it is actually necessary. Who didn’t fall several times while learning to ski, roller-skate or simply ride a bike? How could we manage not to fail in the far more complex task which involves bringing a technology or innovative product on to the market? Schumpeter, the famous innovation economist, had created the concept of “creative destruction”, explaining that the new replaces the old, and that this is in fact a good thing. He used a striking image to illustrate this: “It’s not an owner of stage-coach lines who is going to build railways!”

In his famous speech at Stanford in 2005, Steve Jobs echoes this sentiment: “Remembering that I will soon be dead is the best tactic I have ever used to help me make the important choices in my life. Because almost everything – expectations, pride, fear of embarrassment or failure, all these things – evaporates in the presence of death, leaving only what really matters. Remembering that you are going to die is the best way I know of avoiding the trap of thinking that we have something to lose.”

So, you may say that that’s easier to say than to do! It’s certainly very difficult to bring up past failures or to cite examples, as entrepreneurs are reticent to confess such things. I could mention a few myself, but without having the consent of the people concerned. I could almost have called this article “Desperately Seeking Start-up Failures”!

It seems that start-ups, like the mythical thorn birds, look to hide away in a thorn bush and impale themselves. We never organize proper funerals for those who fail, but now FailCon has done away with this taboo. This one-day conference is aimed at technology entrepreneurs, investors, developers and designers. It’s dedicated to the study of their own and others’ failures, as a preparation for success. During the first event held in San Francisco in 2011, Vinod Khosla, the famous venture capitalist, admitted having more often failed than succeeded. Failure in not desirable, it’s just part of the system, and it’s high time we integrated it accordingly. When will there be a FailCon in Switzerland?

[1] Sven H. De Cleyn, The early development of academic spin-offs: holistic study on the survival of 185 European product-oriented ventures using a resource-based perspective.University of Antwerp, 2011
[2] Oskarsson I., Schläpfer A., The performance of Spin-off companies at the Swiss Federal Institute of Technology Zurich. ETH transfer 2008.

Edouard Bugnion at EPFL: back to Switzerland!

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If you do not know Edouard Bugnion, you can read the article I had published in 2010, a Swiss in Silicon Valley. Edouard was at EPFL last week and gave a great technical talk about VMWare and virtualization, in fact a summary of his PhD thesis. The full text comes below.

Edouard Bugnion with the author in the middle of « cubicles » at Nuova in May 2006 (Picture: Mehdi Aminian).

For the anecdote, you can notice than Ed began his PhD in 1994 and will only finish it in 2012! As Martin Vetterli, dean of Computer Science at EPFL, said “at least he is finishing it, contrarily to the Yahoo or Google founders!”. The reason why it took Ed so much time is that he co-founded VMWare and Nuova in between… I have such a friend from Stanford who was doing his MS / early PhD in 1990-92 and obtained finally his diploma in 2004. He also had his start-up journey in the middle. (Faster though, Michael!) This back and forth adventures are not very common in Europe…

I noticed 2 other great lessons from Ed’s talk:
– as mentioned below “Virtual machines quickly lost popularity with the increased sophistication of operating systems” and it did not prevent VM to become a great market through VMWare success. Market dynamics are never simple and great opportunities may come from less explored areas of technology.
– Ed also explained that they did not or could not partner with established players (microprocessors or OS vendors) for various reasons. You can imagine the big players did not care, or would not change / adapt their (strategic) products or features. So when Ed was asked if this was not risky, he answered, risk is (sometimes) good.

Once again, this proves first that SV success comes also from immigrants and second, we need these people and their experience back! Hopefully we will have him at our ventureideas conferences. Invitation launched!

EPFL IC Seminar : “Using Virtual Machines in Modern Computing Environments with Limited Architectural Support”
By Edouard Bugnion, Stanford University

Abstract
Virtualization has gone through a full “popularity cycle”. Originally conceived in the mainframe era, virtual machines provided an efficient, isolated, and compatible duplicate of the hardware of the underlying machine. Virtual machines quickly lost popularity with the increased sophistication of operating systems, and subsequent processor architectures were designed without consideration for virtualization.

In this talk, I propose to use virtual machines to address limitations of commodity operating systems on modern architectures, even in the absence of architectural support for virtualization in the hardware. The primary technical contributions of the work were developed as part of two systems, each built for platforms with limited architectural support for virtualization. First, Disco ran commodity operating systems on scalable MIPS multiprocessors. Disco enabled virtual machines to form a virtual cluster that could transparently share the resources of the underlying multiprocessor. Second, VMware Workstation is a successful commercial product that allows multiple, unmodified operating systems to run concurrently on the same x86 system, allowing users to decouple their guest operating systems from the underlying hardware. VMware Workstation was the first 32-bit virtual machine monitor for the x86 architecture, and demonstrated that the x86 architecture was indeed virtualizable, despite a lack of architectural support.

Today, and in part because of the impact of Disco and VMware, virtual machines once again play a foundational role in Information Technology, and current-generation hardware provides architectural support for virtualization, similar to what already existed decades ago on mainframes.

Biography
Edouard Bugnion started his Ph.D. at Stanford in 1994, and is expecting to finish it this month. In the meantime, he co-founded two successful companies: VMware and Nuova Systems (acquired by Cisco). At VMware from 1998 until 2005, he served multiple roles including CTO. At Nuova/Cisco from 2005 until 2011, he built the core software team and became the VP/CTO of Cisco’s Server, Access, and Virtualization Technology Group, a group that brought to market Cisco’s Unified Computing System platform for virtualized datacenters.

His research interests include computer systems, datacenter and cloud networking, as well as technology entrepreneurship. For their work, Bugnion and his colleagues have received the ACM Software System Award (for VMware) and the ACM SIGOPS Hall of Fame Award (for Disco). Edouard was raised in Neuchatel, Geneva, and graduated from ETHZ.

Start-Up of the Month: Kandou and the Investors

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Here is my new “Start-Up of the Month” chronicle, published by EPFL.

22.04.12 – Which investors trusted their money with Kandou? This startup, active in the high-tech domain, knows how to find financing.

In November 2010, EPFL celebrated its thousandth invention. I’ve extracted a passage from an article published on this occasion: “Kandou, invented by Harm Cronie and Amin Shokrollahi of EPFL’s Laboratory of Algorithms, enables processors to communicate with their peripherals (memory, printers or screens) faster while using less energy. A small revolution in the field of computer science, but which comes from mathematics!”. In March 2012, the start-up resulting from this invention announced that it had raised 10 million dollars. Some news (or rather an absence of news!) which is intriguing: this young company has very little to say about its investors. “They are private investors, not institutions or industrial concerns”, explained Harm Cronie briefly in the newspaper Le Temps. Even more surprising, this first raising of funds has already ushered in a second, which is already being organized. “I can’t say any more about this at the moment, as we are currently discussing with the investors,” he concludes.

This is not the first such venture for Amin Shokrollahi. Digital Fountain was sold to Qualcomm in 2009 – since 1998 it had raised over 50 million dollars. The start-up had support from Cisco, Sony and TI, but also trust funds such as Matrix and Granite. With Kandou, he has changed his strategy. He knows that institutional investors have constraints which force the entrepreneur to have a more mature strategy than with private investors, whereas business angels can act out of passion, and are not accountable to their own lenders.

As I mentioned in the introduction to these columns: you have to think global. For Kandou, the first partners may be called IBM or Intel. If an innovation is solid enough, clients can be located anywhere (unfortunately, however, rarely in Europe when it comes to high-tech). However, it took nearly 18 months to move forward to this acceleration phase. Kandou knew how to use the richness of the eco-system; including the EPFL spin fund, which is similar to Innogrants, venturekick or FIT. Giving birth is not instantaneous – experience shows that you need between 1 and 3 years.

Amin Shokrollahi and Harm Cronie

Moreover, Amin is not on his own: there is also Harm Cronie, co-founder and former student. The professor-student pair is one of the most conventional. It’s certainly not the most common – the partnership made up of two young entrepreneurs is probably the most-well known type (at least in the United States with Google, Yahoo, eBay, etc.). But perhaps we are forgetting that Netscape was founded by Marc Andreessen and Jim Clark, professor at Stanford and also founder of Silicon Graphics. In addition, Amin has been able to benefit from the advice of his mentor, Steve Papa. The latter founded Endeca, an American success story, which was sold to Oracle in October 2011 for over 1 billion dollars. Mentors are essential to entrepreneurs, as the latter are often isolated and must take critical decisions from the very first days of the start-up’s existence. Friendly and experienced advice is therefore very welcome. Thus, Steve Jobs could rely on Bob Noyce, the founder of Intel, during his first years as an entrepreneur.

Kandou prepared the ground to be born under a lucky star. A breakthrough technology responding to a market-driven demand, a friendly eco-system, a very talented team and investors prepared to support ambitious growth. All the necessary ingredients are there!

European Founders at Work

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European Founders at Work is a very interesting book. It is the perfect complement to Founders at Work, particularly for the European dimension.

One comment though, I noticed 8 UK projects out of a little more than 20 and these 20 are mostly Software or Internet. More diversity may have been great. This being said, the lessons are great! Here are some… (and you will learn much more by reading the book entirely!)

About the US Market (for Europeans)

“I think that Europe has a lot of credibility in certain sectors, particularly media and the creative industry, but I think that in technology, generally, most of the world’s biggest companies were founded in the US and, therefore, the expectation in the US market is that in technology, they are going to be talking and buying from US companies. […] it’s important to become a US team in the US market. […] I think you need to be prepared to make a pretty big investment in the US and you need to be prepared to build up the business for several years,” Jos White – MessageLabs

“I would say that the IT sector, and especially enterprise software, is extremely global but remains dominated by US companies. There are very, very few examples of European IT and software companies that have managed to go global. I believe, the only way to make that happen is to go global very, very quickly, as we did from the outset.” Bernard Liautaud – Business Objects

“In my experience, if you come from a smaller European market, like Hungary or Sweden, you tend to think that it’s a nice next step to go to UK or Germany. The issue is that if you become successful there, it is still only a sixth of that of the US market. So, if you get a US competitor, you immediately become a regional player instead of a global player. So, very early on, I said we shouldn’t even be thinking about opening up offices in Frankfurt or in London because the way to make it globally was to first prove that we can make it on the world’s biggest market, which is the US. That’s going to be the truth at least for the next ten to fifteen years.” Peter Arvai – Prezi

“I think the reality is that it’s not about Europe vs. Silicon Valley. The best entrepreneurs in Europe understand Silicon Valley very well. They have spent time in Silicon Valley and developed relationships in Silicon Valley. Take all of that and all of the value that comes from that because you’re a fool if you think that Silicon Valley isn’t the most sophisticated, vibrant place for technology start-ups on the planet. It probably will continue to be so for the next twenty-five to fifty years because of the network. And the ecosystem is so profound there and keeps on getting stronger with Zynga, with Twitter, with Facebook, etc. I think any European entrepreneur or any entrepreneur in this space that doesn’t want to spend time or learn from Silicon Valley is foolish. But I think there’s a lot of things that you can learn and be aware of as an entrepreneur if you’re not in Silicon Valley, that you can use to your advantage.” Saul Klein – LoveFilm

The interviewed entrepreneurs

About success and failure

“Any successful entrepreneur knows that it was a combination of skill and attitude, with luck, that really leads to success. And there are very fine lines between success and failure” Jos White – MessageLabs

“I learned that the game is never over: you should never give up, stubbornness is somehow a requirement to lead a company to success, and the road to success is inevitably paved with failures. When things start to go wrong, the worst thing to do is panic and change everything.” Olivier Poitrey – DailyMotion

“I think as an entrepreneur you fail all the time. You’ve got failure built into your business. Right? So you don’t really keep track of failure. You never really fail. I think that’s essential when you’re an entrepreneur, that you’re not afraid of failure. You embrace failure. Your whole business is based on trying out stuff, being ready for stuff to fail and just taking the next step as soon as you fail.” Boris Veldhuijzen van Zanten – The Next Web

About ambition

“Come up with an idea which is impossible then try to find somebody who can make it un-impossible and then do deals which have never been done before.” from the Shazam founders

“[A new trend is] You definitely see entrepreneurs being extremely ambitious.” Reshma Sohoni – Seedcamp

“I guess one advice is it’s more exciting if you feel like you’re changing the world in a positive and innovative way. So we’d love to see more of those out of Europe.” Brent Hoberman – lastminute.com

“But it is probably harder in Europe in that it innovates less, because you have less-crazy investors financing crazy entrepreneurs. [Advice:] One, international. Two, innovation and no copycat. And then, three, big ambition.” Loic Le Meur – Le Web

About the team

“There are very few founders that stay with their businesses beyond five years and quite often, in my opinion, it’s because they didn’t manage to surround themselves with the right team.” Bernard Liautaud – Business Objects

“But also obviously you hire people that are better than you” Ian Dodsworth – TweetDeck

“I also learned how hiring the right people from the start is key: the very first people to join will shape the company’s personality. And finding talented people you are pleased to work with is very important to generate emulation from new hires. Olivier Poitrey – DailyMotion

“A common mistake is building the team. If they’re quite scared to part with something … Like when they’re quite scared to part with equity or bringing on mentors. “Do you want to be a big fish in a small pond or a big fish in a big pond?” They’re too closed with their equity and they try to do everything.” Reshma Sohoni – Seedcamp

“Another common mistake is like a cliché now, but it’s just the classic: “I’ll just build another feature and I’ll focus on my product.” Alex Farcet – Startupbootcamp

About entrepreneurship

“The main advice is just start. Many people have hundreds of ideas, but they never really start their own project. And if you fail, start again. Entrepreneurship is, in my point of view, the best and the only way to personal development” Lars Hinrichs – Xing

“There are a lot of moments like that where you don’t know what you’re doing, but this was the whole point.” Giacomo Peldi Guilizzoni – Balsamiq

“ “Do it.” It’s the best decision I’ve ever done in my whole life. […] And I was studying engineering as well, and I had one hundred classmates. And I know that almost zero of them actually went on to start a company, which is kind of crazy because I know a lot of them have good ideas. But none of them quite felt that they were able to pull it off.” Eric Wahlforss – Soundcloud

“I have been lucky enough to be born with optimism.” Richard Moss – moo.com

“Hang in there. Don’t give up. I heard that most start-ups fail because the founders stop working on them.” Richard Jones – last.fm

“I would be realistic and I would say, “Look, if you think you are the lucky sperm that’s going to get the ovule, go ahead and start the business.” It’s a very difficult thing to do with a very high probability of failure. But it is essential for society and even those who try and fail are also helping society. So I encourage people to try, but at the same time warning them how difficult it is. I am tenacious and I am sometimes lucky and I’m good at spotting trends. But I was also lucky. Most people who try businesses fail. That’s the truth and people should be warned about that.” Martin Varsavsky – FON

As a conclusion let me quote Saul Klein in his foreword… “Right now, Silicon Valley is peerless at both supporting innovation and creating serious scale. There’s been no master plan, but the 60-year interplay of government as an early catalyst; academia and established companies as early customers and sources of talent; and of course, investors willing to take risks and a long term view, have given entrepreneurs fertile ground to sow seeds and try to grow monsters with dragon’s teeth ready to conquer the world.You need every element of this ecosystem working perfectly to create monsters. This is serious progress. But the straight facts are that while we are unquestionably masters of invention in Europe, we don’t yet have the ecosystem— or perhaps the attitude. […] For me, the big question is if we are truly able to do this.”

Post Scriptum: I am not finished yet. I love to add cap. tables and not so many of these entrepreneurs are running a publicly quoted company. Strangely enough, one is Russian, Yandex. Its foudner and CTO says something great about sales: “I think one of them is when you create a software product, you have to learn how to sell it, you have to learn how to make it a product. It’s a very basic skill. I think every engineer has to try that at least once, to sell the software he created, regardless of how bad it is. No matter how unpolished your product is, you have to try to explain why it is good for someone else.”

Here is Yandex amazing cap. table…

Click on picture to enlarge

The Startup Factories: The rise of accelerator programmes

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The Startup Factories: The rise of accelerator programmes is certainly the best analysis I read on the new trend (the new hype?) in start-up support. “Early evidence suggests they have a positive impact on founders, helping them learn rapidly, create powerful networks and become better entrepreneurs. Although incubators are sometimes stigmatised as providing ‘life support’ to companies, these accelerator programmes are notable for the high quality of both mentors and startup teams they work with and the value they add to companies.” [Page 3]

You may not know what are accelerators, so here is what it is about: a programme that gathers a limited number of project owners with
• An application process that is open to all, yet highly competitive.
• Provision of pre-seed investment, usually in exchange for equity (a few $10k for 5-10%)
• A focus on small teams not individual founders.
• Time-limited support comprising programmed events and intensive mentoring (usually 3 months)
• Cohorts or ‘classes’ of startups rather than individual companies (from 10 at seedcamp to 60 at Y Combinator per class)

In addition, the time-limited element puts pressure on entrepreneurs who also want to look good compared to their peers; a demo day / pitch sessions further pressure entrepreneurs to deliver prototypes and visions. Obviously founders, business angels, VCs and even corporates benefit from this new source of deal flow.

Most famous programmes are Y Combinator, Techstars, Seedcamp and Startupbootcamp.

So why have these programmes emerged. The rationals are the following:
– they provide new solutions to innovation [page 24]: “The problem that accelerators solve for venture capital funds is that they create new deal-flow. A number of investors told us that this was the compelling reason for supporting Seedcamp in London in the early days. There simply weren’t enough young founders and companies having any contact with the world of investment. The venture capital community has an interest in growing the overall number of good companies. If they can attract talented people to think about setting up startups rather than going to work for large organisations, that could be good news for the whole sector.”
– they provide access to quality mentors and investors to founders who receive an early validation from the selection from the accelerator process.
– at least in the web and mobile world, start-ups costs are shrinking,
– again in these worlds, it is easier to reach new customers and there are easier routes to revenues
– the concepts around lean start-ups (Eric Ries, Steve Blank) make product development more iterative thanks to efficient interactions with early adopters.

Now the accelerators are not proven models. They are first too young and second, they have been criticized already for the following reasons [page 32]:
– They only build relatively small companies.
– They divert talent from other high-growth startups.
– Good companies still fail after accelerator programmes.
– They exploit startup founders.
– They attract companies that are already struggling.
– They’re helping to create a bubble.
– They’re just ‘startup schools’.

In conclusion: they are interesting for the connections and filtering they provide. They are also of value for the education element including an open culture. But the business model is not validated and although they make sense for software, web and mobile apps, the model is less clear for other technology segments. If you want to know more, you should read this very good report 🙂

Is venture capital a universal solution?

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Following my post from last Friday, here is a series I have been asked to write for EPFL start-ups. It is logical that it appears also here. This first chronicle is about Aleva, a great EPFL start-up, and it is also abotu venture capital. Here it is.

10.02.12 – Aleva Neurotherapeutics has succeeded in raising 10 million Swiss francs in venture capital. The EPFL start-up has shown that this type of financing is not out of reach for young Swiss companies.

For this initial article in the “start-up of the month” column, it was a “must” to talk about Aleva Neurotherapeutics. Andre Mercanzini, its founder, got his PhD at the Microsystems Laboratory (LMIS4) headed by Prof. Philippe Renaud. What was my motivation? André is a shining example of the enthusiastic and persevering entrepreneur. He obtained an Innogrant in 2008. This grant enables apprentice-entrepreneurs to devote their time to their start-up project for one year. The life of an entrepreneur is not exactly a bed of roses, and as well as enthusiasm you need courage. And you shouldn’t do it alone. By persuading another entrepreneur, Jean-Pierre Rosat, to join the adventure, Andre convinced three venture-capital funds (based in Lausanne, Basel and Zurich) to invest. But it was only in August 2011 that the raising of the 10 million francs became a reality, a full three years after Aleva was founded!

I’m not going to say much about the activity of this start-up. Aleva develops electrodes for neurosurgery and these are implanted in the brains of patients suffering from Parkinson’s disease or severe depression. I am not going to say more about Andre Mercanzini either; he can describe his adventure better than anyone else. On the other hand, I’ve noticed that Andre has already become a role model for other entrepreneurs from EPFL and that he himself had the opportunity to prepare his thesis in a very entrepreneurial laboratory. If you go to the page of LMIS4 mentioned above, you will see that no fewer than 13 start-ups originate from there. Emulation is a key element here.

Risk capital: for start-ups with rapid growth

What matters also to me, beyond the entrepreneurial qualities of the two founders, is to show that venture capital is not an unreachable objective. About 10% of EPFL start-ups have raised such funds. Some entrepreneurs who appeal to institutions in the venture capital area subsequently complain about their conservatism. Others avoid them like the plague, referring to them as “vulture capitalists”. This is open to debate. It’s undeniable that this type of investor is looking for companies with a potential for rapid and global growth, and not all start-ups can fulfill this criteria.

There is now available in the world, in Europe and in Switzerland, much more money than there was 20 years ago, even if there is a lot less than during the “irrational exuberance” period of the Internet bubble. It always has been, and will continue to be, difficult to find money (for any kind of project in fact). However, Aleva, but also Biocartis and TypeSafe (other start-ups from EPFL) have shown that it is possible. Is venture capital a must? I sometimes tend to think so when it concerns high-tech start-ups and I know that I’m sometimes reproached for giving it too much importance. I simply note that a very large number of successful American companies have applied for these funds and that boot-strapped companies are the exception in the USA. In Europe, it’s the opposite!

“In Switzerland, we prefer a small entity that you can control from A to Z”

I would like to finish with a quotation from Daniel Borel, another entrepreneur who studied at EPFL. “The only answer I can suggest is the cultural difference between the United States and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to play the internationalization card very early on. The technology was Swiss, but the United States, and later on the world, defined our market, whereas the production quickly became based in Asia. I wouldn’t be at ease with myself if I were to paint a negative picture, because I think that many things evolve and that many good things happen in Switzerland. But it seems to me that in the United States, people are more open. When you obtain funds from venture capitalists, you automatically accept an external shareholder who helps you manage your company, but who can also sack you. In Switzerland, this vision is not so widely accepted: we prefer a small entity that can be controlled from A to Z, rather than a big undertaking that you can only control at 10%, which can be a limiting element.”

The New Silicon Valley(s)

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Nice series on French-speaking Swiss Radio broadcast les Temps Modernes, this week about five stimulating experiments of high-tech clusters. Probably to fight the depressing mood around WEF and the economic crisis. (And not only because I was given the opportunity this morning to comment the last case! I was only invited on Wednesday… 🙂 )

Monday it was about Russia’s Skolkovo, which I had mentioned in a post a few months ago.

I did not know at all Kenya’s Konza, and this was really refreshing.

You cannot avoid China, but here also surprise, surprise, it was not Shanghai neither Shenzhen, but Zhongguancun.

I had heard of Startup Chile, because Stanford supports the experiment in South America.

Finally, I could comment the stimulating British case, the Silicon Roundabout, in East London. You can listen to or download the mp3 file (in French).

A spontaneous emerging cluster, a name given by a local entrepreneur, no real support by decision makers, at least in the beginning and a nice and enthusiastic atmosphere. And all this attracts people from abroad. Is this finally the cluster Europe has been waiting for? We shall see… The experiment is really interesting and if you want to know more, you may wish to read (French) Le Monde, Le “Silicon Roundabout”, un succès britannique, or The Economist, Silicon Roundabout.

Silicon Valley – more of the same?

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I was cleaning and filing old papers in my office, when I found “old” books about Silicon Valley and noticed how this amazing region has not really changed in the last 30 years. Let me just elaborate. The first book I looked at is Silicon Valley Fever.

Here is the back cover:

The next one is The New Venturers

with its back cover too:

Both were written in the mid-eighties. The New Venturers does not seem to be printed anymore and I wrote on Amazon in 2009, when I bought it, “In the mid 80s John Wilson published this book about venture capital. At the time, it was about business and how venture capital works. It has now become a history book and it shows how Silicon Valley developed in part thanks to venture capital. It is full of anecdotes, facts and figures. A great book… ”

Silicon Valley Fever is also out of print and there is no review for that one on Amazon! It is also a book I enjoyed reading. As a funny coincidence, the authors began their book with their history of Apple whereas my first chapter was the history of Google. Each decade has its role models. There is a section about Women and Entrepreneurship that Pemo Theodore would certainly appreciate: “The Silicon Valley has been called “one of the last great bastions of male dominance” by the local Peninsula Times Tribune. […] They are under-represented in management and administration. Few women have technical or engineering backgrounds. […] Why there are few women in positioning of responsability in Silicon Valley is complex and puzzling. Until recently, the overwhelming majority of engineering garduates were men. […] Scientific and engineering professionals in the finance community and in start-ups are likely to be men: these power-brokers rely exclusively on tehir personal networks. […] Twenty of the largest publicly held Silicon Valley firms listed a total of 209 persons as corporate officers in 1980; only 4 were women. The board of directors of these 20 firms include 150 directors. Only one was a woman: Shirley Hufstedler, serving on the board of Hewlett-Packard.” But the authors are optimistic: they explain that any woman with a technical background or an interest in high-tech has opportunities: “A Martian with three heads could find a job in Silicon Valley. So for women with a technical background, it’s terrific. […] An exception to masculine dominance is Sandy Kurtzig. “I wanted to start in a garage like HP, but I didn’t have one. So I started in a second bedroom of my apartment.” At first, Kurtzig did sales, bookkeeping and management of her start-up. As long as she had only five or six employees, they worked out of her apartment. It went into rapid growth and had annual sales in 1982.”

Part I of the book is historical, part II is the culture of Silicon Valley and part III is about its future (as foreseen in 1984). The final book I found is certainly not out of print. Written 10 years later by Annalee Saxenian, Regional Advantage is the reference book about Silicon Valley. It is one of my bibles. Saxenian compares the culture of Silicon Valley and Route 128 (the Boston cluster).

Funnily enough, she had this honnest recognition in 1998: “In 1979, I was a graduate student at Berkeley and I was one of the first scholars to study Silicon Valley. I culminated my master’s program by writing a thesis in which I confidently predicted that Silicon Valley would stop growing. I argued that housing and labor were too expensive and the roads were too congested, and while corporate headquarters and research might remain, I was convinced that the region had reached its physical limits and that innovation and job growth would occur elsewhere during the 1980s. As it turns out I was wrong.” (Source: A climate for Entrepreneurship)

Let me just put here pictures of the preface of the book that you can find on Amazon or Google books. It is enlighting and will be my conclusion of this post: Silicon Valley was and is the innovation center with many ups and downs that these three books describe with their own style.