Silicon Valley is Dead; Long Live Silicon Valley

I just got back from my annual pilgrimage to Silicon Valley, the global Mecca of Innovation. I have lived there from 1995-2007 and also worked in high tech industry there. Now, I co-run an early stage VC fund (Prime Venture Partners) in India but have visited the Valley frequently over the the years. This trip felt very different compared to any other visit I had made to the valley in the last decade. Of course, one had read a lot about startups leaving the valley since it was becoming super expensive.

Here were some of my observations.

Caveat: This is based on a subjective assessment based on meeting a variety of folks across startups, large companies and VCs.

The Valley is somewhat "disconnected" from the digital revolution in the rest of the world.

The valley has always led in defining new customer experiences around the world. Innovation and inspiration has often moved from West to the East. However, I realised that just in Asia, there are over 2.5B human beings leading far "richer" digital lives than even the denizens of US. Everyone lives on WeChat, WhatsApp and other social platforms in Asia. In places like China, people have moved on from Email and even abandoned the "classic" calendar altogether. In India, thanks to IndiaStack, over a 1B citizens have a digital identity that is richer than any other country in the world - they have Aadhaar, drivers licenses, vehicle registration, even 10th and 12th grade scorecards, and much more are fully digital and accepted nationally. The payment infrastructure in India through UPI/Digital Wallets, m-Pesa in Africa, and not to mention WePay/Alipay in China is quite evolved. My partner, Sanjay Swamy, has lived with zero cash in his physical wallet for over 5 years (probably over a decade but comfortably for the last 5 years).

I strongly believe that it will be difficult for engineers and PMs in the Valley to connect with rich, new world problems. And this can't be solved from afar or through "token" presence in India or China. Over time, I think there will be a lot of interesting solutions in area of Social, Financial Services which might migrate from "East" to "West" and the valley may miss out on these.

China is giving the Valley a run for its money.

Just as as I visit the valley, I often also travel to China. In the last 4 years, as a visitor, I have noticed how they have forged ahead on a variety of topics from AI, Robotics, Logistics, Financial Services, Social networking, new forms of Digital Entertainment and more. Every visit to China I learn more about new human and digital "behaviours" that are being unearthed. Don't get me wrong - the level of churn of these new ideas is very high but a culture of rapid experimentation has always been the ethos of Silicon Valley.

Secondly, the level of digital scale that Chinese Engineers and PMs are dealing with are comparable to that of the rest of the world put together. India is also getting there slowly but surely. However, the level of "phyigital" infrastructure that one has to deal with is getting to a scale that is unfathomable in the US. Meituan Dianping (a Food Tech Co in China) delivers 22M orders a day with an average delivery time of 31 minutes across 1000 cities. JD.com, China's 2nd largest E-commerce company, delivers hundreds of thousands of orders on the same day and some even in a few hours in Beijing, one of the largest cities in world! Alibaba's Yu'e Bao fund is largest money market fund in the world.

Last but not the least, given the large consumption, the digital exhaust is nothing short of stunning. The Artificial Algorithms are increasingly going to be commoditised but whoever has has the most data is going to win. This can be particularly true in areas such as Autonomous Cars, Healthcare, even Education. Of course, this is not to say that there aren't going to be country specific cultural or regulatory norms. However, my assertion is that you will see enough, if not more innovation, from Beijing. Shanghai and Hangzhou as you are going to see from the Valley.

The above infographic from the @MaryMeeker Internet Trends 2018 report shows the rise of the China Tech Juggernaut not just in consumption but also in Market value that has been created, just in the past 5 years.

The opportunity cost of leaving of AAAA tech giants (Alphabet, Apple, fAcebook, Amazon) feels like the highest that it has been in history.

For as long as I can remember (since 1995), every other social conversation in the Valley revolved around new ideas, new startups and who was quitting to join what new startup. However, this is the first time, I mostly heard about things like how many companies would reach $1T valuations, people's second homes, the value of equity in their homes, the cost of housing in San Francisco, Google's new 30,000 employee facility that's coming up in San Jose, and how Amazon stock (yes, in the Valley!) is way better in "expected value" than ESOP in any startup.

Apparently, the cost of a mid-level Software engineer, Architect or a Development Manager is in $500-600K (yes, 0.5-0.6M) range.

If you have an AI/ML skill set, you are apparently talking $1M+ per year! Lets not even talk about folks that are in leadership positions! The above infographic is from a fascinating thread on Quora about this.

No wonder, there might be little incentive for people to leave and worse yet, to start companies. There are probably still about a couple of thousand new tech companies that are started in the USA every year however I wonder how many of them can afford to staff up with top talent. Even if one did leave, one will have to figure out how sell the dream to attract top talent that is in the big companies.

The Valley has enough "Oomph" and will rock for decades to come.

Of the world’s venture capital, roughly 2/3 is provided in the US and roughly 1/3 in offices clustered around what is essentially a 3 mile long stretch of asphalt: SandHill Road, Menlo Park, Silicon Valley (Source: Thomas J Dittler). Many of these funds have generated astronomical returns for their limited partners over the last 15 years. So, their appetite to invest in larger, bolder ideas continues to be audacious. That said, Thomas says that about 2/3rd of the funding is now going into startups beyond the Valley.

It feels like we have gone beyond Marc Andreessen's famous quote that "Software is Eating the World".

"Full stack Software Startups are Eating Every Industry".

This felt like the case in Insurance, Real Estate, Logistics, Autonomous Vehicles and much more. While the markets are monstrous and it will take some time for this to pan out, I think Silicon Valley VCs and startups will dominate more in the US and other "homogenous" markets.

I think the opportunity for a new generation of "global" non-Valley startups to serve the rest of the world may have just cracked open.

(Amit is a Managing Partner at Prime Venture Partners, an early stage Venture Capital firm based out of Bangalore, India. Prime VP invests in category creating, early stage companies founded by rock star teams. Prior, Amit has held leadership positions at Makemytrip, Google and IBM. He is also deeply engaged with the early stage startup ecosystem in India and actively volunteers with iSpirt, TiE and NASSCOM. Find his other blogs on LinkedIn and tweets at @amitsomani)