Silicon Valley Losing its Luster?

A guest column from Paul Kedrosky of Infectious Greed.

It’s a depressing time to be a venture capitalist: venture-backed IPOs are at a 30-year low; fund-raising is finally catching up with horrible results; and the ten-year performance numbers are soon going to knock the last prop out from under the business. Arguably, the until-recently over-funded venture business was really just an unremarked perimeter of the now-deflating credit bubble, and it’s shrinking accordingly.

Yuuuu-uuuuck. So let’s talk about something else. Let’s say a 23-year-old entrepreneurially-minded university graduate came to you and asked where he/she should go in the world to work, what would you tell him or her? For the sake of argument, let’s pretend languages and visas aren’t an issue. In other words, they could go anywhere from Sydney to Slovenia, Shanghai to Sao Paulo, from San Francisco to Saskatoon. What would be your advice?

I was asked that question recently, and before getting to my answer, let me say something obvious but important: While young people love to travel, and that’s fine, where such people want to go to work, where they think they can earn the most money and be part of the most dynamic economy, is an interesting indicator.

For example, say you had asked the same question in 1999. What would the “right” answer have been then, or at least the most common one?

While we might not all agree, among the better answers then was the U.S., and, more specifically, the West Coast of the U.S. – Silicon Valley, in particular. It was humming like a dynamo, throwing off startup-producing sparks, and it wall all happening at a prodigious and unprecedented rate. Many of us, me included, would have been hard-pressed not to tell our hypothetical 23-year-old graduate to go there and see what they could do for themselves.

The answer, I think, is different today. But to test that view I asked the question on my blog recently, telling people to imagine the situation and give their own best answer to the new graduate. And what sorts of answer did I get back? The number of responses was huge, something like 80 comments at last check, and the answers ranged across Dubai, West Australia, Canada, Brazil, Eastern Europe, and on and on. People made their cases for regions around the world, and while the U.S. did come up, including San Francisco, it was much less common than it would have been ten years ago.

My takeaway? Among other things, the U.S. isn’t where the entrepreneurial fervor is these days. It’s moved and mutated. What used to a proud point of domestic differentiation – the innately and uniquely entrepreneurial nature of the U.S. – is now more evenly spread, at least in perception. People don’t first think of this country when they think of entrepreneurial opportunities. Instead they think of China, India, Brazil, Eastern Europe, and, yes, even Canada.

It’s a big and important change. Granted, it’s not a zero sum thing – entrepreneurial gains elsewhere aren’t a total loss for U.S.entrepreneurs and venture investors – but it is a difference in how the world sees itself, and in how likely it is that future entrepreneurial immigrants come to the U.S. to start their company, as has so often been the case in the past.


And my answer to my question: If I had to make one choice, Brazil. The level of dynamism in the country blew me away on a recent trip, and I have been impressed for years with the rapid change in Brazil’s economy, from improved job growth, to lower interest rates, and so on.

If I were a 23-year-old entrepreneur and I wanted a dynamic place to try out for a while, it’s be Brazil for me.

What’s your answer? And if it’s not the U.S. and not Silicon Valley, what does it say for the future of venture capital in this country?