CASE STUDY ON SILICON
VALLEY
Silicon Valley, Tech Bubble and Indian Startups Ecosystem
Introduction
on Silicon Valley:
Silicon
Valley is a region in San
Francisco, California that is considered to be the technology hub of the United
States. The region is made up a number of computer companies and computer chip manufactures. The region gets its nickname from the silicon that is
used in computer chips. Due to the demand for space in Silicon Valley, real estate and other property is very expensive and hard to find. Silicon Valley is an
area that located on the San Francisco, California, peninsula, radiates outward
from Stanford University. It is contained by the San Francisco Bay on the east,
the Santa Cruz Mountains on the west, and the Coast Range to the southeast.
History
The term Silicon Valley was used occasionally mostly
byeasterners who would mention making a trip to Silicon Valley, until 1971 when
it was popularized in a series of articles, ``Silicon Valley USA,'' written by Don Hoefler for Electronic news, Hoefler was choosing a name for an article
about the semiconductor industry that he was writing for Electronic News. Ralph Vaerst, then president of Ion Equipment, suggested Silicon Valley. Hoefler named his article, ``Silicon Valley USA;'' it was a series that ran for 3 weeks, beginning 11 January 1971."
History of Silicon Valley :
•
1891—Stanford University was
founded
by Governor Leland and Jane
Stanford.
demonstrates
the first arc radio
transmitter for high-quality voice
transmission
in his Palo Alto
laboratory.
He later invents the first
practical
device for magnetic sound
recording
and reproduction.
•
1912—Lee de Forest invents the
vacuum tube amplifier in Palo
Alto.
His
“audion” became the foundation
for
radio, radar, television, computers,
and
the electronics age. Stanford
faculty
and officials helped finance the
work,
the first of many cooperative
partnerships
between higher education
and
Silicon Valley.
•
1930’s—Professor Frederick Terman
is
recruited by Stanford University and
starts
a lifelong promotion of the
benefits
of the Valley. Later, Terman
becomes
known as the father of
Silicon
Valley.
•
1937—Encouraged by Terman,
William Hewlett and David
Packard
start
a company to produce their
their
first customer, purchasing the
product
for use on the film Fantasia.
•
1937—Stanford professor William
Hansen
teams with brothers Sigurd
and
Russell Varian to develop the
klystron
tube. Their work continues
through
WWII and leads to the
development
of radar and the 1948
founding
of Varian Associates.
•
1946—The Stanford Research
Institute is founded to support
nonprofit
research.
• 1951—Stanford Industrial Park is established as a
“center of high technology close
to a cooperative university.” Varian Associates, General Electric,
and Eastman
Kodak sign the first leases.
• 1952—IBM locates a key research facility to the
valley.
•
1956—Dr. William Shockley founds
Shockley Transistor Corporation to
produce semiconductor-based transistors
to
replace
unreliable vacuum tubes. Early
employees
read like a who’s who of the
high-technology
future.
•
1958—Robert Noyce, Gordon Moore, and
six
other engineers from Shockley
the
first company to mass produce
integrated circuits.
•
1958—NASA moves a research facility to
the valley.
•
1968—Douglas Engelbart and team at the
Stanford
Research Institute (now SRI
International)
give first public demonstration
of
the computer mouse, windows, and
networking.
•
1968—Robert Noyce and
Gordon
Moore (Moore’s Law) create Intel.
•
1970—Intel introduces first 1k DRAM chip.
•
1971—Alan Shugart invents the floppy disk
for
data storage.
•
1973—Intel introduces 8008 CPU and
ushers
in the new era of the microprocessor.
•
1973—Stanley N. Cohen of Stanford
University
and Herbert W. Boyer of UC San
Francisco
invent a technique for splicing
genes, leading to the formation
of the biotech
industry.
•
1974—Development of the Graphical User
Interface (GUI) at the Xerox Palo Alto
Research
Center (PARC) led to the intuitive
design
of Apple's Macintosh computer and
Microsoft
Windows.
•
1975—The Homebrew Computer Club is
founded
to experiment with home
computers.
•
1976—Homebrew founder Steve Wozniak
teams
with Steve Jobs to form Apple
Computer and build the first microcomputer
in
Jobs' garage in Cupertino.
Steve
Wozniak
and
Steve Jobs
with
early Apple
• 1970's—Relational database
technology invented at IBM's
Almaden
Research Centre.
•
1982—The Stanford University
Network
is the catalyst behind the
founding
of Sun Microsystems.
Silicon Graphics uses
the same
network
chips to create its first graphic
workstations.
• 1984—Cisco Systems is
founded by
Leonard
Bosack and Sandra Lerner
•
1989—Don Eigler a
researcher
at IBM’s Almaden
Research
Centre, uses
nanotechnology to spell
“IBM” with
35
xenon atoms.
• 1993—Stanford Professor Jim
Clark
hires web browser pioneer Mark
Andreesen to found Mosaic
Communications, predecessor to
Netscape
Communications
Corporation and the browser that
made the Internet an everyday tool
• 1994—Jerry Yang and David Filo
start
a directory of websites that explodes
into Yahoo!
• 1995—Netscape IPO at $28 per
share
went to $75 at close valuing it at $3bn
• 1999—Kleiner Perkins and
Sequoia
agree to co-invest in Google at $12.5m
each
• 2003—Google purchases Pyra
Labs to
support blogs, today’s online
community forums
• 2006—Google buys 15 month old
YouTube for $1.6bn
• 2007—29th June Apple launch
iPhone
Brin and Page in Susan Wojcicki’s
garage in 1998
– Google’s first offices after moving out of Stanford
Factors Leading To Growth Of Silicon Valley :
ü What really drives Silicon
Valley companies is an emphasis on getting things done quickly rather than
agonizing over every potential flaw. A sign painted on a wall at Facebook
summarizes that attitude: “Done is better than perfect .
ü Silicon Valley is filled with dedicated professionals. They regularly
put in long hours in and outside of the office. People
in Silicon Valley behave more like independent contractors, moving from job to
job. The result is a highly mobile talent base in the region, where
professionals are significantly more likely than their non-Valley counterparts
to receive employment offers from other companies on a regular basis.
ü Although Silicon Valley high-tech firms and their people can be ruthless
competitors, there’s also a pervasive attitude of cooperation. Valley employees
have a healthy appreciation for the importance of good teamwork.
ü IT professionals in Silicon Valley are more than twice as likely to
actively participate in crowdsourcing or open-source projects than their
counterparts elsewhere.
ü In Silicon Valley, people fail but
pick themselves up, dust themselves off and continue. Also, it has encouraged
prudent risk taking. More than half of Silicon Valley high-tech professionals consider their company to be a high risk
taker, in comparison to non silicon valley residents.
ü Most of the IT professionals in Silicon Valley said that making a lot of
money was very important to them—yet many of them stated that they would work
for less, just for the opportunity to work on something that energizes them and
helps them grow professionally and, potentially, create more value for their
organization.
Tech Bubble –What is it ? ; It’s Significance And Effects on
India.
Mark Cuban mentioned about the onset of tech bubble 2.0 in his blog :
What is a Tech Bubble ?
When tech
startups are willing to offer almost anyone — even a journalist — shares ahead
of an I.P.O.StartsUPs are growing day by day and with the onset of start ups
,the crowdfunders , called as “ Angels” .because they provide money to start
ups , are also increasing.So, People are
investing loads of money in risky
companies leading to lots of money in danger. Assets have prices that cannot be
justified with any reasonable assumption .
 |
| Mark Cuban |
Significance:
Private valuations have become disconnected from public reality
and extreme end of a cycle is fast approaching. Bill Gurley, a partner at
Benchmark Capital and a member of Uber's board of directors, has urged caution
for the past year, believing late-stage investors have "essentially
abandoned traditional risk analysis" and are pouring money into companies
with unsustainable burn rates.
Tech Bubble in India
"There are signs of more immediate problems too. India’s recent rush of venture funding means weaker players are getting as much money as the best. This ramps up competition, making it tougher to acquire customers and hire good people. Investors mutter darkly about increasing burn rates "
India is going through a startup boom.Each student now dreams of owning a startups .This has lead to a bubble overgrowing over India Startup Ecosystems. More and More digital and E-commerce companies have delivered impressive pitching and got huge funds without knowing how to have sustainable business model. India may be at the cusp of round two of the dotcom bust that came at the beginning of the century, as the first generation of online companies saw a ruthless market correct.For Example : . A food app promises a user a 50% discount each time he orders from a restaurant using the app. On its part, the app management pays the restaurant full price. A leading hotel bookings app has blocked and paid top rates for thousands of hotel rooms and is saddled with a huge inventory. However, it has been able to sell less than half those rooms, and that too at an extremely discounted, promotional rate. Where is the revenue stream?
In all cases, the ‘incentive’ or ‘discounted pricing’ is paid
for by the massive investment (itself the result of eye-popping valuation)
brought in by a familiar bunch of big international funds. As is usual, they
are putting their money in multiple startups, knowing most will fail but one or
two may hit gold. That’s the long-term call; in the short-term everyone is on
the treadmill and is too scared to get off.
Factors
That Lead To Growth Of Indian Startups
A latest study, India Start-up Report 2014, conducted by National
Association of Software and Services Companies (Nasscom) reveals that India is
the fastest growing and third largest startup ecosystem in the world after the
US and the UK.
There are around 3300 startups operating in India which is expected to rise by
11,500 up till 2020. Some reasons for growth of start ups in India are
described below.
ü Fired Up Indian youth wants to
make his own way . Typical 9 to 5 jobs don’t
excite them . The glamour of being your own boss attracts young
students.
ü Tech Savvy generation always in
want of more and more techy stuff is leading to generation of new apps and
websites in India.
ü Critical mass of Internet
users: With more than 100
million Internet users, the country is beginning to achieve a critical mass of
users who are familiar with web services.
ü With the rise
of small and medium enterprises, foreign direct investment, and India’s own
powerful multinational corporations creating millions of new jobs, a new
generation of globally-minded Indian consumers has been created. These
consumers are spread across the country. Furthermore, access to many global and
domestic brands is limited to major metropolitan regions, such as Delhi,
Mumbai, and Bangalore. Therefore, this growing middle class is increasingly
turning to e-commerce as the primary outlet for sophisticated consumer products
and service.
* Being a developing country, venture capital goes much farther in
India than the Valley. But, unlike the Valley, it is in limited supply. Indian
startups need to be much further along than startups in the Valley in order to
raise rounds. Hence, successfully raising money can allow startups to scale
rapidly and outrun their competitors. Investors at all stages have taken notice
and are capitalizing on this trend by significantly increasing activity in
India.
Example — Ola and TaxiForSure were going head to head in June ’14, with Ola having a slightly larger fleet size. SoftBank
invested $210 million in Ola last October. Fast forward 3 months: Ola has grown
over 4X in size with 60,000 cabs in over 52 cities while Taxiforsure has a
significantly smaller fleet in about 37 cities.
Conclusions :
Silicon Valley
With the
advancement of technology the Silicon Valley is now world’s hub for Technology
and Revolution . Some elements of that culture
can’t be replicated, nor should they be. There’s not much of a business case
for encouraging employees to dilute their company loyalty or put aside company
interests in favor of their buddies. And entire regions can’t easily duplicate
the laid-back, optimistic vibe that seems to be uniquely Californian.
But the lessons of non-high-tech
firms in and around the Valley show that companies across multiple industries
can develop the kind of culture capable of attracting top talent and increasing
competitiveness and creativity.
Tech Bubble
We should not underestimate the
power of the human movement to dislodge non self serving technological innovations
off the rails.Once companies lose the social
license to operate, thats where the companies see a major drop in its
revenues. AI or Deep Learning based startups were supposed to be enablers to
humans and not replace them in the process.The lack of funding available for seed stage companies has
drastically shrunk impacting diverse sustainable concepts to seed in the
marketplace.
When and if the Tech Bubble
bursts, we will also come to a realization that in chasing the imaginary
future, we failed to invest in the tangible present.
Indian
Startup Ecosystem
India’s startup growth is in all time
high .Investors are trusting new ideas and putting their money .
ü P.M.Modi launched ‘Startup India
–Standup India’ Initiative to provide quick loans via Mudra Scheme in Banks.
ü It is important for Indian
entrepreneurs to not just focus on gaining funds and offering lucrative
discounts, focus should also be on building a great sustainable revenue model
to achive long term profits.
References :
Wikipedia
Indianweb2.com
Business Insider
Times Of India
Techcrunch.com
SiliconValley.com
