Forget the Valley, build Silicon Bridges
The message got some flack on social networks for being trite, but it smartly answered the many starry-eyed start-up geeks: "The notion of recreating Silicon Valley is old, and stupid. And nobody has achieved it in 60 years."
So said Mike Butcher, editor of TechCrunch Europe, and founder of a club of entrepreneurs and investors known as TechHub, in London. He was addressing NetProphet 2013, a gathering of 1 500 tech geeks, entrepreneurs and investors, in Cape Town.
That's not to say there is no value in organised accelerators and incubators, but no ecosystem for start-up businesses can be as complete and balanced as it is in San Francisco. Besides, Butcher said, the real innovation doesn't happen in the neat, regimented areas designed just for start-ups. It occurs in the messier parts of town, where clusters form and "randomness happens".
"They don't bus them into business parks," he says of the Valley. "You do need labs and facilities, but you often find the scrappy part of town is where it happens. And that makes sense when you think most start-ups start with nothing."
Justin Stanford, founder of 4Di Capital and the Silicon Cape Initiative, confirmed there are many local start-ups, some of them deserving investment, but there just isn't enough supply of capital to fund them.
"It's very lonely being one of the few VCs in town," the ebullient, idiosyncratic young investor told the audience, noting that start-up capital gets little respect in the investment community.
He warned that such an imbalance leads to deals that aren't good for both investor and entrepreneur, because the terms are too tough. To make matters worse, Stanford said, red tape ties down the start-up community, despite the best intentions of government.
While there may be no replicating the Valley, there are many European clusters of entrepreneur and investors, however. Butcher sketched out a few of them, in Berlin, Paris and Barcelona, all of which connect with each other to fill gaps in their own ecosystems.
"We don't have to create Silicon Valley in our own backyards. We have each other," he said. "Come over and see us. Create your own ecosystems, and link them up. Build Silicon Bridges."
By "us", Butcher meant London. "We have a shared heritage. We're in the same time zone. You're a cowboy; you're herding your cattle. When you want to sell it, you roll into town and go to where you do deals. Deals happen in London. If you're having trouble getting heard in the Valley, London is a fantastic place to get heard."
While Stanford distrusts government intervention in the start-up space, saying it can only ever hinder, not help, entrepreneurs, Western Cape finance minister Allan Winde took to the stage to punt the idea of replicating Cape Town's government-funded Bandwidth Barn across Africa.
"There are huge opportunities for South Africans to gain access to fast-growing African economies," Winde told the conference. "The space is there for our companies to drive innovation in other parts of the world."
While such an initiative may create wider networks and help build the sort of ecosystems Butcher advocated, he agreed with Stanford that "government cannot pick winners".
Butcher cited Israel as an interesting example, however. Its Yozma Programme, started in 1993, promised to match all private venture capital investment with government funding, without requiring any return or even repayment. As a consequence, venture capital and technology exports mushroomed, and its technology start-up ecosystem enjoys legendary status.
He added, however, that Israel is a special case because of its lack of natural resources, its lack of nearby markets, and the leadership skills and teamwork that three years of military service instils in young entrepreneurs. "Small tech teams operate in a similar way," he said. "They learn how to pivot from an early age, iterating fast, failing fast, keeping moving."
Compared to reintroducing compulsory military service, Butcher's notion of building "silicon bridges" between local start-up ecosystems and big investment hubs such as London might appear trite, but it certainly seems a more benign solution to South Africa's dearth of venture capital.