What is Silicon Valley?

A place for people who are impatient about changing the world

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🍎 Quick Bite of the Week: Your humble author got engaged last weekend! (Can’t help but share the news far and wide… and my media diet was notably lighter last week. Forgive me!)

There’s clearly something going on in Silicon Valley.

Over the past four years, I’ve made it my mission to understand what it is.

I started, as one does, by moving to the Bay Area to start a company of my own. I won some awards and got a fundraising offer — but turned it down because I wasn’t ready to invest ten years of my life on the idea. I briefly tried my hand as an investor, which got me plugged in to the startup gossip wire and scored me an invite to the penthouse suite of a Bitcoin billionaire who gave out Square tiles as a party favor. (I pocketed three.) And, finally, Silicon Valley led me to Astranis, a rocketship startup founded by literal rocket scientists.

I won’t claim that this journey is particularly special, or that it has given me access to some Eternal Truth about Silicon Valley. But I certainly know more now than I did in Minnesota, and that understanding is worth sharing.

In short, I’ve learned that Silicon Valley is custom-built for people who are impatient about changing the world.

That impatience-enablement has a dark side, but it’s a force to be reckoned with. Unfortunately, the latter has overshadowed the former in recent years — at least if you ask the world outside of Silicon Valley.

🔭 View from the Outside

Today, I see the Outside world making the same mistake I made when trying to understand Silicon Valley from afar: hero worship.

Silicon Valley has made heroes of both startups and their founders. But just because some startups and founders are more visible than others does not make them representative of most companies or most people in Silicon Valley.

Steve Jobs, for instance, was a living legend who singlehandedly started many Silicon Valley stereotypes. Jobs was an early Atari employee who refused to shower. He started Apple in a garage. He was motivational, but mercurial, as he held his employees to an impossibly high standard to help them accomplish great things. He was strongly contrarian, building Apple as a vertically-integrated company in a horizontal age. And he was unabashedly capitalistic, laying the foundation for the world’s first trillion-dollar company, despite his personal asceticism.

Jobs was a huge shaper of Silicon Valley culture, but emulating him directly has proven not to be a foolproof plan. His journey is also emblematic of a founder — and most people in Silicon Valley are not founders.

Most Silicon Valley employees are not Steve Jobs. Similarly, most Silicon Valley startups are not Google and Facebook.

Google spawned Silicon Valley stereotypes of brightly-colored walls; cutesy company values like “don’t be evil”; a youthful office culture (e.g., ping pong tables and massage chairs); 10% time for side hustles; and compensating engineers highly. Facebook championed a reverence of technical talent with late-night hackathons, “move fast and break things," and a general distaste for suits and traditional credentials.

Lumping Google, Facebook, and other mega-mega-success stories in with the companies striving to become the next behemoths, however, doesn’t make much sense. In August 2018, all 1,867 Y Combinator startups combined eclipsed $100 billion in market cap. Sounds big — but at the time, Google was worth $862 billion and Facebook was worth $513 billion.

Some companies in Silicon Valley emulate Google and Facebook, sure, but so does every Fortune 500 CEO who flies out to Silicon Valley to learn about “corporate innovation.” The things that really define Silicon Valley are not surface-level, easily replicable cultural tidbits — if they were, you would see more Silicon Valleys popping up around the country and world. But you don’t.

Why not?

🕵️‍♂️ View from the Inside

As a Minnesota native living in a land where folks think of 45 degrees as intolerably cold, I am often asked how we Northerners survive subzero temperatures. The answer, boringly, is infrastructure. We have skyways (below), snowplows, and portable windshield scrapers.

Just as Minnesota is prepared for snow, Silicon Valley is prepared for growth.

Silicon Valley has well-established cultural norms around everyday employees working hard and taking on outsized responsibility. Companies are optimized to grow at all costs, often burning money and foregoing profits along the way. A battalion of startup-optimized lawyers, marketing firms, accountants, bankers, technical recruiting agencies, and other supporting service providers are waiting in the wings and willing to work on startup-friendly terms. (For instance, an introduction from a VC to a law firm will often let you defer tens of thousands of dollars in legal fees until you’ve raised real money.)

The town is also prepared for the flipside of growth: failure. It isn’t true that Silicon Valley “celebrates” failure — we’re just ready for it. When startups fail, their HR and recruiting teams become placement agencies to help their employees find jobs. The density of new job creation in SF also means that talented operators don’t have to worry about company failure as much as you might expect.

But the most remarkable aspect of Silicon Valley — and what makes this town so incredible — is what happens in the case of startup success.

Silicon Valley’s power comes from successful startup operators from one generation that become investors in the next.

This has been true ever since the first generation of Silicon Valley. As founders and startup employees happen upon newfound wealth, they put it back into the startup ecosystem to keep the good times rolling.

As Paul Graham wrote:

The companies that rule Silicon Valley now are all descended in various ways from Shockley Semiconductor. Shockley was a difficult man, and in 1957 his top people — "the traitorous eight" — left to start a new company, Fairchild Semiconductor. Among them were Gordon Moore and Robert Noyce, who went on to found Intel, and Eugene Kleiner, who founded the VC firm Kleiner Perkins. Forty-two years later, Kleiner Perkins funded Google, and the partner responsible for the deal was John Doerr, who came to Silicon Valley in 1974 to work for Intel.…

There's a lesson here: startups beget startups. People who work for startups start their own. People who get rich from startups fund new ones. I suspect this kind of organic growth is the only way to produce a startup hub, because it's the only way to grow the expertise you need.

The current generation of Silicon Valley has three standout investors that exemplify Silicon Valley’s pay-it-forward ethos:

  1. The PayPal Mafia (c. 2002)

  2. Y Combinator (c. 2005)

  3. Andreessen Horowitz (c. 2009)

The PayPal Mafia includes truly legendary founders and investors like Elon Musk, Reid Hoffman, and Peter Thiel.

The group went on to found YouTube, Tesla, SpaceX, Palantir, LinkedIn, Yelp, and Yammer after spending their formative years together at PayPal before its exit to eBay. But, importantly, these entrepreneurs also became investors. The most obvious example is Founders Fund, a firm started by Peter Thiel, but the PayPal Mafia has combined to make over 1000 venture investments over the past two decades.

Y Combinator is a venture firm through which entrepreneur Paul Graham has made over 2000 investments, 125 of which are now valued at $150 million or more. In another example of Silicon Valley symbiosis, YC companies often buy products from other YC companies. The best example is Brex, a credit card custom-built for startups, which was funded by YC, sold its credit cards to YC companies, and achieved rocketship growth as a result.

Andreessen Horowitz (a16z) is a venture firm started by Marc Andreessen (founder of Netscape, creator of the world’s first internet browser) and Ben Horowitz (founder of Loudcloud/Opsware, author of the best startup book ever written) that fundamentally reshaped the venture landscape — both by investing at earlier stages and by empowering technical founders to become the long-term leaders of their businesses.

Investors like these three make the Silicon Valley world go ‘round, and they’re far from the only examples of such symbiotic behavior. This structure — older generations helping the younger generations — is fractal. Old founders help new founders; old operators help new operators; old engineers help new engineers. Silicon Valley, to me, is a remarkable network of informal and formal mentorship. As soon as you’re in the arena, people are incredibly willing to help you advance. The bar to enter may be high — nothing is free! — but once you’re in, you’re in.

🙋‍♂️ What is Silicon Valley?

Silicon Valley is a city built for people who are impatient about changing the world. It’s a tribe of mentors, investors, and co-workers who all have experience in battle. It’s the view from the Bay Bridge, where startup billboards (mostly from Brex) dominate your view as you head into San Francisco. It’s a calendar full of startup events, a phone full of startup contacts, an email inbox full of requests to “pick your brain,” and an outbox that looks startlingly similar.

There is simply no better place in the world to start a company, and Silicon Valley is far from dead. Need proof? Just look at the current generation of successful founders, many of whom are already investing while running their companies or funding future startups off of their companies’ balance sheets.

Or, you know, just move here. I’ll show you around.


P.S. Before my “first generation” of Silicon Valley above came an the zero-th generation, largely fueled by Department of Defense investment. Check out the Secret History of Silicon Valley by Steve Blank to learn more: