Recipe for a Silicon Valley: Entrepreneurs
Posted: August 16th, 2009 | Author: Chim | Filed under: Education, Food for thoughts, Networking, Private Equity, Startups, Venture Capital | Tags: Blogs, Brazil, Education, Entrepreneurs, Entrepreneurship, Interesting, Networking, Private Equity, Trends, Venture Capital | 1 Comment »
I’ve just read news from Revista Exame, a prestigious Brazilian weekly magazine, which talks about the new generation of entrepreneurs in Brazil. According to it, there are 10 million of Brazilian entrepreneurs and the new generation of entrepreneurs are creating companies because they believe they have the skills and will to do it. Compared to the older generation, a lot of self-described entrepreneurs had to open a company because they were not able to get into the job market.
10 million of entrepreneurs in Brazil
Then I went to the Global Entrepreneurship Monitor website and I downloaded the GEM 2008 report. It is a comprehensive survey about entrepreneurs in 43 countries. It separates these countries in 3 categories: Factor-Driven Economies (economies that depend on natural resources mainly), Efficiency-Driven Economies (economies that rely on the economy of scale or comparative advantage in production) and Innovation-Driven Economies (economies that rely on the invention of new technology).
There are some interesting data.
For instance, it seems that the less developed the country, the stronger entrepreneurial activity in that country.
Early-Stage Entrepreneurial Activity Rates and Per Capita GDP, 2008
Early-Stage Entrepreneurial Activity Rates by Gender, 2008
However, the entrepreneurial activity in Technology sector is stronger in more developed countries such as Canada. Although the GEM report doesn’t explain why this happens, it is intuitive to know that the development of high technology needs a strong education system in the country. That is why that you can see that countries such as Australia, Ireland, Denmark and Canada have the strongest entrepreneurial index in the Technology sector.
Percentage of Early-Stage Entrepreneurial Activity Active in Technology Sector, 2002-2008
The Ex Post Facto blog commented about a report from the Center for Economic and Policy Research August 2009 about the percentage of total computer-related employment in companies with fewer than 100 employees. It is interesting to see United States in the bottom of the graph. You can find that Italy, New Zealand and Austria have more small companies in the computer-related services than the US.
Ex Post Facto - Entrepreneurs in the US
Definitely, this doesn’t mean that United States lag behind in the entrepreneurial activity. It is totally the opposite. United States have the Silicon Valley.
All these data do not account other many particularities for the US entrepreneurs. Even though the US main not be in the top position for any entrepreneurial index, it does have a strong entrepreneurial culture and environment.
In my experience, there are some strong cultural traits that you can only see in the Silicon Valley:
- Belief that one can get rich by starting up a new Google or Apple.
- Low opportunity cost for entrepreneurs.
- An unusually high concentration of venture capitalists per square foot in the region.
- A lot of stories of very successful entrepreneurs.
- Great universities and culture for innovation.
- Local culture that see failure as a good thing instead of a bad thing.
- Also, a lot of young people want to follow the entrepreneurship path, instead of going for the traditional and stable way of life/ career (medicine, lawyer, corporate life, etc.)
In comparison to Brazil, most university students and young people don’t have the same type of culture or thinking. Maybe, there is a huge difference of opportunity cost in becoming entrepreneurs.
- Most university student aim to get to work in a big multinational or for the government.
- Most jobs don’t pay enough for young people to sustain themselves, so most young people live with their parents until late stage of their lives.
- Families pressure their sons to follow a more stable career path.
- There are not a lot of successful entrepreneurs stories to tell, or those who are successful have some kind of special background that most Brazilian don’t have (rich family support, family have money to send children abroad, etc.)
- Universities in Brazil are followers or they don’t have great innovation in high growth industry such as internet.
- Venture capital industry in Brazil is still in its infancy (Private Equity is much stronger in Brazil, GP Investimentos is the top firm in Brazil)
As you can see, these “soft” attributes cannot be accounted in any of the researches you have on the market. I believe they can make a significant difference in determine if a country or region will have its own Silicon Valley.
