Valley of Dreams – the allure of Silicon Valley (2)

In my last post a few weeks ago, I had alluded to a few reasons for firms wanting to establish a presence in the Valley, and since then have gotten quite a bit of response – with arguments for and against. More than that, people were interested in the “structured argumentation” on how to decide which option best suited them. Took a bit of time to delve into some sound principles to adhere to, but here it is …..

1. Reason 1: I want to increase my brand image and project myself as a innovative firm. What better than to have a prominent Silicon Valley address
   • If you want to do this, you better have a very deep coffer to draw from and make large and aggressive moves. Only an address will not get you noticed – Sand Hill road is peppered with VC’s, but the deals you make – especially the successful ones will.
   • Make sure you hire a few very well connected people who have an established network and get you in the front row seat to maximize visibility. It is all about the network.
   • Ensure that your top management at least has some face time there, or there will soon be questions on the ROI of such an investment. Most people, especially top management love the spotlight!
2. Reason 2: I want to keep abreast of the latest trends which helps my firm be on the forefront of what is out there, not only for myself but also to lookout for what competitors are doing. No better place to find new ideas popping up (even loony ones) than this small spot of land!
   • Good reason; the only question is if this is adequate? You can find enough 3rd party reports and boutique consulting firms who will give you just that – most likely for a fraction of the cost that it takes you to hire and set up an own establishment.
   • If you want to do it cheap – subscribe to primary blogs and follow major VC’s – you may not be ahead of the curve, but will certainly be a fast follower. This may be more than sufficient in your market.
3. Reason 3: I want to find small, agile firms to partner with and get their cool products to my customers. With a good network within this region I will be able to find a plethora of firms to do just this.
   • Even better argumentation than Reason 2. In fact – I would suggest starting with 2 – and if the HQ interest is there, move on to 3.
   • Challenge is that you are still a newcomer – and you need guidance and support from Valley insiders to get you going. That being said – there are two additional obstacles that you need to overcome
     • First one is external – if you are the newcomer, and you do not have an established pedigree – most of the A list firms (the ones you want) are more difficult to talk to…..
     • Second – and a bigger one is internal. We are talking about smaller and much more leaner firms here. They understand and know how to partner with firms like themselves BUT they have little time, money and even less patience to juggle working with a huge firm. To misquote Lou Gerstner – “make sure that the Elephant can first dance”!
4. Reason 4: I want to go the Venture Capital (VC) rout; build a VC capability in my firm and invest in young startups. If there is one place I need to be – it is Silicon Valley
   • This is the close to the holy grail of most firms, but one which is fraught with danger. If you have never dabbled in this business, and have few connections – stay away.
   • A business acquaintance had a saner idea – initially start as a Limited Partner to one of the major VC’s. This does not mean that you will become rich overnight – but will give you two things; help you to gradually understand the ecosystem, and initially start in a “less riskier” approach by leveraging off those who have done it many times in the past (that being said – past performance is not an indicator for the future….)
   • Once you have established yourself, built up capabilities and a network – only then should you jump into direct funding.
   • Oh – and make sure your management is aware of the time-lines of return, and that you have sufficient independence in management and allocation of funds. The worst thing you can do is have a bean counter who is used to typical corporate metrics evaluate your performance on a quarterly basis!
5. Reason 5: I want to engage in serious development at different levels needing close collaboration with experts within the field. Silicon Valley with its proximity to several leading academic and research institutions along with a huge pool of talent is the right place to be…
   • Very good – but know what you are getting into. If you just want a brand such as Stanford – sure, this works. But if you want to really develop the next generation of products – then definitely consider the time frame, your risk profile and dedicate people to the cause
   • Universities and other institutions are always happy to have your money – but you as a business need to know what you are getting out of it. That being said – I think if you have a clear idea of what you are looking for in the long term – this is definitely a worthwhile avenue to pursue!

That pretty much summarizes it – there are use cases and examples for each, but since this was drawn based upon talking to many people in anonymity, will keep it as is. As in many cases – no right or wrong answer, but more a – it depends -based upon what your ambitions and goals are.