Silicon Valley Trip Reflective Essay

STANFORD GRADUATE SCHOOL OF BUSINESS UNIVERSITY OF SYDNEY: SILICON VALLEY TRIP DECEMBER 1-13, 2008

IBUS6007 International Business Special Project: Growing the Enterprise: Lessons from Silicon Valley Personal Reflections - Matthew Bright

SID: 200006022

Personal Reflections

Introduction

ThefortnightinDecember2008whichmembersoftheUniversityofSydneystudentgroupspent studyingtheSiliconValleyecosystemwasamongthemoststimulatinglearningexperienceswhichIhave hadthepleasuretoenj hadthepleasuretoenjoyinmytime oyinmytimeatunivers atuniversitybothins itybothinsideandoutsi ideandoutsideofthec deoftheclassroom.This lassroom.Thisunitof unitof studyliveduptoitsdescriptionofbeinga“problem-basedlearningexperiencedeliveredgloballyina localcontext“. 1 InmyinitialExpressionofInterestinattendingthisunitofstudy,Ioutlinedmypersonalinterestinthe SiliconValleyecosyste SiliconValleyecosystemandmypers mandmypersonalexperie onalexperienceinthe nceintheearlystage earlystagesofmycaree sofmycareersofarin rsofarinworking working forentrepreneursandcontributingtotwofast-growingenterprises(onestart-upcompanyandafoundrunfirm). Ifoundthattheactualon-the-groundlearningexperienceinSiliconValleysurpassedmy(alreadyhigh) expectationsandculminatedinanenjoyablepersonalexperiencewiththegroup.Theseminarsandfield tripsweremostengagingandIenjoyedworkingbothwiththegeneralgroupandinmyallocatedgroup tacklingaconsultingbriefforSymantec.Ivestedmuchoftheknowledgecommunicatedtothegroup andgenuinelygrewmykn andgenuinelygrewmyknowledgebase owledgebaseandpersonal andpersonalskillsetfr skillsetfromthisinte omthisintellectuallye llectuallyenriching nriching experience. Forthepurposeofconceptualclarity 2,Ihaveorganisedand ,Ihaveorganisedandsummarisedth summarisedthekeyideas ekeyideaswhichIhave whichIhave 3 learnedfromthiscourse from(i)anacademic-centricperspective,(ii)anindustry-basedperspective; and(iii)inmyownprofess and(iii)inmyownprofessionalandpers ionalandpersonaldevelopme onaldevelopment(withre nt(withreferencet ferencetocommonthem ocommonthemes es 4 expressedandoverarchinglessonstaught) .

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DonnelBriley,ProfessorofMarketing,TheUniversityofSydney,courseintroductionatSymantecheadquarters,MondayDecember1,2008.

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ThetoneofthisessayispurposelyinformalasIfeelittobetheappropriatetonetocommunicatemypersonallearningsinthisunitofstudy.

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Box-outswithinthedocumentextendthekeyideaswhichIhavelearnedinrelationtocommonthemesacrossspeakersandevents.

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IanticipatethattheideasandconceptswhichItookawayfromthiscoursemayvaryfromthoseofotherstudents.Inmylearningforthis

courseIwasinterestedinlargelyintangibleelementsrelatingtotheValley’secosystem,theexperienceofentrepreneursandVCsandless-soin structuredacademiclearningwhichIfeelIhavegainedalreadyfromclassesatourhomeinstitution.

Academic-basedlearning

Inrelationtoin-classroomlearning,Iparticularlyappreciatedtheopportunitytoparticipateinthe SocraticlearningstylethroughthecasemethodspopularinUSprofessionalschools,astaughtinthis coursebyProfessorsHaimMendelson5,CharlesO’Reilly 6andAssistantProfessorIllyaStrubulaev7.I foundthelecturer-studentexchangestobeintellectuallystimulatingandthecasemethodtobea practicalapplicationofthegroup’sanalyticalskillstoquasireal-worldtasks.TheseminarsatStanford struckmeaspractical,relevantandinformedandnotrigidordogmatic.Fromeachlecture,particular nuggetsofwisdompluggedintomyexistingknowledgeandprofessionalinterests. Fromthecondensedlearningexperienceswhereprofessorswerekeentoimparttheirknowledgeina nutshelltoourstudentgroup,IpersonallyconnectedwiththecontentofProfessorCharlesO’Reilly’s lecturethatreducedfirmstrategytofourslides: -

“CustomerSelection:Whatcustomersegments dowechoosetoserve(andnottoserve)?”; and

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“Valueproposition:whatwillweofferour customersandhowwillwebedifferentiated fromourcompetitors?”and

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“Valuecapture:howwillwemakemoney?”

ProfessorBruceMcKern’slectureonstrategicgrowth opportunities8highlightedtheimportanceof organisationalcompetenciesforme,where“global firmstendtofocusonefficiencyandcooperation, whichmayaffectinitiative,whenlong-termitisyour organisation’scompetencieswhichallowyouto compete“.

KeyIdeasILearned:

-FirmstrategyintheValleyfocuses inwardsoninternalventuringandlesson bolt-ongrowthbyacquisition. -VCsinvestinpeople,almostasmuchas goodideas -Start-upfirmstrategyisentirelylinkedto productmonetisation. -Theproductisimportanttoits customers,notitstechnology. -Entrepreneurialfailureisanacceptable partoftheinnovationdilemma:abadge ofhonour,thesteptowardsthenext success.

InhislectureonValueDisciplines,ProfessorHaim Mendelson’scommentthat“Technologyisnotasimportanttothecustomerastheproductitself”was anobvious,butinsightfulopinion.IwasalsointriguedbyProfessorMendelson’ssingularslidewhichhe presentedtoKleinerPerkinsforitsannualreview–thisstruckmeasbeingemblematicofthecleverway ofdoingbusinessandlearningintheValley.

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HaimMendelson,KleinerPerkinsCaufield&ByersProfessorofElectronicBusinessandCommerceandManagement,StanfordGraduate

SchoolofBusiness,lecturetoTheUniversityofSydneystudents,MondayDecember8,2008. 6

CharlesO’Reilly,FrankE.BuckProfessorofManagement,StanfordGraduateSchoolofBusiness,lecturetoTheUniversityofSydneystudents,

ThursdayDecember11,2008. 7

IllyaStrabulaev,AssistantProfessorofFinance,StanfordGraduateSchoolofBusiness,lecturetoTheUniversityofSydneystudents,Saturday

December6,2008. 8 ProfessorBruceMcKern,DirectorofExecutiveProgramonUSBusinessLeadershipStanfordGSB,lecturetoTheUniversityofSydneystudents, ThursdayDecember11,2008.

Earlyinthecourse,ProfessorBillMiller’slecture 9ontheSiliconValleyecosystemwasmostinformative ontheregion’sinnerworkingswithreferencetothebusiness/social/politicalenvironment.Thestatistic whichProfessorMillermentionedthat70%ofleadingValleyventurecapitalfirmKleinerPerkins’s portfoliocompanieshavefailedtodate,tappedintoourlearningsfromindustrypractitioners. Industry-basedlearning

BuildingonProfessorBillMiller’sseminarontheSiliconValleyecosystem,fromanexecutiveeducation perspectiveIfoundthatbothPeterZiebelman’sseminar 10onventurecapitalandthegeneral Entrepreneurforum 11tappedintomanyofthekeyideasofdoingbusinessintheValley. PeterZiebelman’scommentinrespectofsuccessfulandunsuccessfulportfoliocompaniesthat“one winnermakesupforallthelosers”formesummedupthemantraofwhatkeepsthelightsoninVC officesonSandHillRoadintheValley.Iwasinterestedin Ziebelman’sexplanationofVCsasbeingusefulto CommonThemesAcrossSpeakersand entrepreneursforanoutsider'sperspectiveandthe Events comparisonoftheircollaborationto“legalinsider trading“.Havinganappreciationfortheuncertainnature -TheSiliconValley ofentrepreneurshipfrommycareerexperiencesatastartbusiness/social/politicalecosystemis upcompanyfromtheageof18to22(thenwithnoformal friendlyandfacilitativeandbasedon businesseducation)Ifounditparticularlyrefreshingthat weakties. Peteragreedthatmanyofhiscompany’sinvestments -Failureisabadgeofprideiflearning werebasedmoreongutfeelratherthanrigidanalysisand fromfailureisthekeytosuccess. thatfromanoperationsperspectivePaloAltoVenture -Recessionisanopportunityforthose whoarepoisedforcounter-cyclical Partnersengagesinunconventionalmethodsbothindue growth. diligenceandtheidentificationofinvestment -Employlateralthinkinginopportunity opportunities.12 identificationandduediligence -TheVC/entrepreneurrelationshipis inherentlycomplex.

FromtheEntrepreneurforum 13Iwasinterestedinproven entrepreneurs’pragmaticassessmentsofthe VC/entrepreneurrelationship,suchasTerrenceCraig‘s {PatternBuilderCEOandfounder(histhirdstart-up)}commentthat“InSiliconValleyboth entrepreneursandVCs’entireexistenceisbuiltonequity,notdebt(comparedtoWallStreet).“And JamieRapperport’s(Co-founderandEVP,BusinessDevelopment/Marketing,Vendavo)commentonVC lockups:“...theywon’tletentrepreneursexituntiltherighttime.TakingVCmoneyisabigcommitment tohittingforthefences.”Similarly,TerrenceCraig‘scommentinthatforumthat“Flameoutsareabadge ofhonourprovidedthatyoulearnfromthem”andthatmanyVCsprefertodobusinesswithserialfailed entrepreneursinthehopethattheirnextcompanywillbesuccessfultappedintothe‘failureasthekey tosuccess’mantraespousedintheValley.

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ProfessorBillMiller,InstituteforInternationalStudies,StanfordUniversity,‘TheSiliconValleyEcosystem’lecturetoTheUniversityofSydney

students,TuesdayDecember2,2008.  10

PeterZiebelman,Partner,PaloAltoVenturePartners,lecturetoTheUniversityofSydneystudents,TuesdayDecember2.

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Entrepreneurforum:“Leadingandfundingventuresindowneconomies“,heldMondayDecember8,StanfordUniversity.

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MethodswhichPeterZiebelmanmentionedincludedextendingtheduediligenceprocesstotheteam,competition,company,suppliersand

customers;andmonitoringopportunitiesforportfolioinvestmentsbyemployinglateralthinkingtobeatthecompetitiontogoodprospects (theexamplewhichhegaveinvolvedlookingoutforjoblistingsofChiefFinancialOfficersintheValleyasanindicationforcompaniesseeking venutrecapital. 13

Entrepreneurforum:“Leadingandfundingventuresindowneconomies“,heldMondayDecember8,StanfordUniversity.

Ifounditbeneficialtolistentopracticalbusinessstrategylessonsdirectfrompractitioners,suchas: -

appropriateratesofbusinessgrowth:“doublingrevenueandprofiteachyearisahealthgrowth rateforentrepreneursseekingVC”(PeterZeibelman,PaloAltoVenturePartners);

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corporatestrategyversusinternalventuring:“M&Aisnotastrategy–itisonetooltosupporta strategy...acquisitionsanddivestituresarenotastrategybutonetooltoexecutestrategy... mergersandacquisitionsarehard.Theyarenottheeasyroutetocompetitiveadvantage.They mustpasstwotests:strategicrelevanceandpriorityandfinancialviability.”14(TrinaDepel,Intel Capital).

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theinformalnetworkinoperationintheValleyisbasedprimarilyonweakties:“Thewhole Valleyecosystemisbuiltonreferralsandyouareonlyeverthreephone-callsawayfrom everyoneelseinyourbackyard.”15(TerrenceCraig,PatternBuilder)

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largecompanies’approachtoincubationanddevelopmentwith‘build/partner/buy’decisions forproductsandorganicgrowthversusgrowthbyacquisitionforcompanies-itwasparticularly interestingtoseethedifferentrequirementsbetweenSymantecandCisco

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;

largecompanies‘strategiesforweatheringtherecessionaryenvironment,includingrebalancing recession-resistantsegments,usingdownturn togainshareopportunisticallygainingmarket share,managingdiscretionaryspendingand positioningfortheupturn;and

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informedopinionsonwhetherthedownturn mayproducegreaterinnovationandstronger start-upsinlightof‘doomandgloom’ informationcirculatedintheValleysuchas SequoiaCapital’sbearish‚’R.I.P.GoodTimes’

OverarchingLessonsthatEmerged

-TheValley’secosystemisthenation’s mostuniquefacilitativeframeworkfor innovation. -Downturnscanproduceinnovationfrom frustration. -Humancapitallearnings:‘T-shaped‘ workers;successfulentrepreneurscanbe akintostarvingartists.

presentation17. FromapracticalentrepreneurialperspectiveIparticularlyvaluedtheinteractionswhichIhadwith industryspeakers.Duringtheentrepreneurforum 18IhadapersonalconversationwithSeanO’Malley, EntrepreneurinResidence,Venrock,whereheequatedthemostsuccessfulexamplesofentrepreneurs thathehadworkedwithinhistimeatYahooandnowatVenrockasbeingsimilartothatofstarving artists,wheretheiralignedenthusiasm,appetiteforriskandlackofpersonalfundsproducestheirbest work.Ifoundthistobeanintriguingcomment. Professionalandpersonaldevelopment 14

TrinaDepel,IntelCapital,‚Venturefunding‘lecture,StanfordGraduateSchoolofBusiness,TuesdayDecember9,2008

15

Entrepreneurforum:“Leadingandfundingventuresindowneconomies“,heldMondayDecember8,StanfordUniversity.

16

Ciscoquotedtheirinternalventuringrequirementsasbeing$1billionpotentialover3-5yearsforintrapreneurprojects.Symantec’s

requirementswere$100millioninrevenueachievablewithina3-5yearshorizon. 17 SeqiouaCapital‘RIPGoodTimes‘presentationtoSeqiouaCapitalportfoliocompanyCEOs,weekcommencingMondayOctober6,2008 18

Entrepreneurforum:“Leadingandfundingventuresindowneconomies“,heldMondayDecember8,StanfordUniversity.

Fromacareerdevelopmentperspective,themostinterestingideatomewhichItookfromthe‘industry fieldtrip’componentofthecoursecamefromChrisCowart,LocationLead,Ideo.Chrisvoicedthe conceptofIdeo’semployeesbeing“T-shapedpeople”:humanbeingswithexperienceandexpertiseina discretedisciplineorbodyofknowledgeandageneralknowledgabilityacrossthebroaderspectrumof lifeandworkthatiscomplementarytotheircoreskillsetsandtothecompany’soutput.Comingfroma diversebackgroundandhavingworkingprimarilyinopen,egalitarianandprogressiveworkplacesI foundthatthisconceptclarifiedmypersonalcareerdirectioninadiscreteknowledgedisciplineandmy accumulationofdiverseworkexperiencetodate. Conclusion

Myhands-onlearningexperienceinSiliconValleynowplugsbackintothecoreteachingsfromThe UniversityofSydneyontechnologycommercialisationandinnovation:whatisyourproduct’sunique customerbenefit/competitiveadvantage?Isthereamarketplace?Isthereacommercialopportunity? ThecoverstoryoftheJanuary12,2009editionofBusinessWeekasked(andanswereditsown) question“What’swrongwithSiliconValley(andhowtomakeitright)”.Thepiecetacklestheshorttermismofweb2.0,theneedforventurecapitaliststorealigntheirinterestswithbreak-through technologies,ashiftawayfromtheme-toonatureofweb2.0byentrepreneursandtheneedfor continualinvestmentbylargecorporationsindisruptivetechnologiestoseednewmarkets.Ifeelthat basedonouronthegroundlearningandresearchinSiliconValleyitisplausibletosaythattheValley’s ecosystemsolvesitsownproblemsandcannowworktowardsspathenextwaveofinnovationatthe startofanewhype-cycletoemergefromthecurrentrecessionaryenvironment. InsummaryIfeelthatthisunitofstudyachievedagreatbalancebetweentheoryandpracticethat containedinsightfullearningoninnovationandenterpriseintheUSA’smostfruitfulecosystemas samplespace,whichIamgratefultohaveparticipatedin.Thankyou.

References

Briley,D.,IBUS6007InternationalBusinessSpecialProject:GrowingtheEnterprise:LessonsfromSilicon Valleycourseintroduction,Symantecheadquarters,MondayDecember1,2008 Depel,T.,‘Venturefunding‘lecture,TuesdayDecember9,2008,StanfordGraduateSchoolofBusiness Entrepreneurforum:“Leadingandfundingventuresindowneconomies“,MondayDecember8, StanfordUniversity Strabulaev,I,Fundamentalofexternalfinancing’lecturetoTheUniversityofSydneystudents,Saturday December6,2008,CarnegieMellonWestUniversity Mendelson,H.,‘E-marketingchannels’lecturetoTheUniversityofSydneystudents,MondayDecember 8,2008,StanfordGraduateSchoolofBusiness Miller,B.,‘TheSiliconValleyEcosystem’lecturetoTheUniversityofSydneystudents,Tuesday December2,2008,CarnegieMellonWestUniversity O’Reilly,C.,lecturetoTheUniversityofSydneystudents,ThursdayDecember11,2008 McKern,B.,’Strategicgrowthopportunities’lecturetoTheUniversityofSydneystudents,Thursday December11,2008,StanfordGraduateSchoolofBusiness Ziebelman,P.,‚Capitalmanagement‘lecturetoTheUniversityofSydneystudents,TuesdayDecember 2,2008,CarnegieMellonWestUniversity SeqiouaCapital‘RIPGoodTimes‘presentationtoSeqiouaCapitalportfoliocompanyCEOs,week commencingMondayOctober6,2008AccessedMondayJanuary19at http://www.techcrunch.com/2008/10/10/sequoia-capitals-56-slide-powerpoint-presentation-of-doom/