How to Recreate Silicon Valley: A culture that forgives failure

Everybody loves a winner! Unfortunately, even in Silicon Valley there are many more failures than winners.

Over the decades, a few of the winners have made thousands of founders, employees and investors billions of dollars. What we’ve learned from the winners is that they were willing to take risks and perhaps lose everything in the process.

If the risk takers are true “serial entrepreneurs,” they will keep starting companies and taking risks until they win. There is no better place on earth than Silicon Valley to be a serial entrepreneur.

The entrepreneurial risk culture of Silicon Valley is ingrained. After living in the Valley for a few years, billionaire Intuit founder Scott Cook, who is admittedly risk adverse, said, “Lots of people start interesting and successful companies… it begins to get the air of normalcy.”

Lew Wolff, a major Silicon Valley developer and co-owner of several professional sports teams related, “The thing I like about Silicon Valley is that people will listen to new ideas. In the Midwest, they all want to know where it’s been successful before.”

Many of the residents of Silicon Valley are either looking for startups to work for or investments. Homeowners in the Valley usually have several hundred thousand dollars of untapped equity in their property; it’s not unusual for a few neighbors to invest in a new, crazy idea.

Throughout the evolution of Silicon Valley, there’s been an increasing tendency for venture capitalists to invest in short-term operations, companies that can advance a technology over a year or two then sell out to a larger, established corporation. Only a few companies that are controlled by the founders, such as Google and Facebook, don’t have the pressure from their investors to cash-out early.

A few years ago, I visited my wife’s relatives in a small Kansas community. A new restaurant had opened that offered fresh fish. I suggested that we all go there for dinner. The response that I got was very typical of the area. “That place probably won’t even be open; a fish place will never make it around here.” The next day I heard a similar comment about a gourmet coffee bar. Within a couple of years, both the fish restaurant and gourmet coffee bar had closed their doors.

In Silicon Valley, the prevailing attitude is to try out new businesses. The fish restaurant and coffee bar would most likely flourish.

Maybe one of the most unusual aspects to the culture of the Valley is that entrepreneurs who have failed with their startup have earned a badge of honor. The Valley takes a healthy view of failure. As Steve Jobs told us, “Some of the failures are as widely discussed as the successes. And even with the failures —people are admired for trying.” ●

John McLaughlin is founder and president of the Silicon Valley Historical Association.
Next Month: Venture Capital
This is the second in a series of columns taking an in-depth look at what made Silicon Valley what it is today.