What is the role of government in Silicon Valley?


By Miguel Ángel Casillas

How to reconcile that California is the fifth economic power in the world and on the other hand is the most regulated state and less friendly to do business?

Regarding the contribution of Silicon Valley to the California economy (500 trillion of the 3 trillion dollars of Californian GDP), I find the answer in the extremely high density of talent, connections and capital in the same place. In only 3.1 million inhabitants there are a high number of engineering doctors produced by local universities, plus those who come from other parts of the world. All races, cultures, creeds and ideologies coincide in an area equivalent to one tenth of Puerto Rico. And there is close to $ 20 billion a year to invest in this talented and hyper-connected breeding ground with the entire world.

This article is written on the occasion of the visit of a group of Secretaries of State, mostly of corporate and non-political origin, who left me the task of giving my recommendations to encourage the growth and expansion of their local Silicon Valley.

The recommendations are along the lines of causing these three elements to be found.

Talent: Undoubtedly there is it all over the world, be it technical, entrepreneurial, business or sales talent. What happens is that Silicon Valley attracts them all equally, despite the very high cost of living here, adventurers from all over the world come looking for “the new gold”. This “new gold” is the exponentiation that technology causes in any type of business. In these 10 years I have seen people with a very high technical and engineering preparation circulate. I have seen others with a non-technical profile but ambitious and determined to develop their idea, product and never accept a no as an answer (stubborn). And finally, there is another category of people who have managed to weave a very valuable network of contacts who make up a puzzle of talents and do wonders with them.

Connections: The flow of talent from all over the world to Silicon Valley brings with it their network of contacts in their own country. This phenomenon makes their respective professional networks and connections available to all, giving access to new markets throughout the planet without having to move more than 50 km around. In the case of our organization, it took us to bring our program offering to 21 countries in less than 18 months. Today we already make proposals for 4 continents. If the organization had stayed in my city of origin in Latin America, the offer would hardly have covered the entire geography of my own country.

Capital: Just as there is talent everywhere, so is capital, even in countries classified as third world. And Silicon Valley attracts it too. The money here is not just from here. It comes from all over the world. But unfortunately many of the families with the ability to invest in emerging countries, particularly in Latin America, are not trained or qualified to participate in these businesses. And the few that are, practically do not invest, they just stay in theory. This confirms that there are already very large international funds that are beginning to invest in this region (Softbank of Japan has just allocated 5 billion dollars, one of them has just invested in Rappi, a Colombian startup). If the owners of Latin American capital do not join this trend, the biggest beneficiaries will once again be the owners of foreign capital only.

On the other hand, I can give you some examples and experiences that I have lived here in relation to interactions with entities and government representatives.

  1. We organized a meeting with a recognized investor from Silicon Valley and a senior Mexican government official responsible for entrepreneurship in the country. The investor’s recommendation was that they allocate one of the states (provinces) of the country to exclusively use cryptocurrencies. He motivated him by saying “If you do it you will go down in history in your country and perhaps in the world.” What happened is that the manager left that function a few weeks later to deal with the next political campaign of his party’s candidate. In case of having tried that “madness”, the investor in question has all the necessary resources to fund and advise him.
  2. Another senior manager of the largest and only oil company in the country asked us to help connect at the highest level in Tesla (which we did) to raise a mega project to transform gas stations into “electric stations.” Less than a week before the meeting, the government official canceled the appointment to attend a political event with the president in turn.
  3. A state government had a budget to support 20 entrepreneurs in their region with 50% of the cost of a trip to Silicon Valley. The businessmen paid their share, but the government delayed their contribution, causing it to be canceled on two occasions.
  4. The TechBA accelerator sponsored by the Mexican government and the United States was founded in 2005 to help Mexican entrepreneurs develop startups or technology companies in the United States. The same year, a technology accelerator called Plug and Play Tech Center was started by an Iranian businessman who migrated to the United States. Today TechBA no longer exists and Plug and Play is the entity that makes the most angel investments in the United States and from there companies such as Dropbox, Lending Club among other unicorns have come out. (Companies that were worth more than 1 billion dollars)

Given these and many other experiences, I have managed to learn and confirm what the author of the Best Seller “Secrets of Silicon Valley” collects in her book:

Silicon Valley culture advocates passionately argue that government bureaucrats can and should provide the necessary legal framework for startups to succeed (easy startup registration, free flow of talent, favorable tax treatment, etc. ), but otherwise should be “do not disturb”. Page 245

Definitely our mission to connect emerging countries with the World Capital of Innovation is very strong and deep. It is our desire to help developing ecosystems and thereby contribute to economic growth. This is what moves and excites us. However, we have experienced that the speed and life cycle of startups is of an order of magnitude higher than the speed of public policies, which even with good intentions, the slowness of the latter kills the former. Hence our conviction that the role of the Government is to leave private initiative as free as possible, pave the way for it, remove obstacles and regulations, generating demand, buying solutions from startups, paying on time.

For some reason the state of Delaware, one of the smallest states in the US, has simplified the creation of companies, in such a way that there are more companies incorporated there than inhabitants. There they are incorporated before the Federal government and operate elsewhere. All in the same day and online. Google, SV Links Angels and thousands of other Silicon Valley companies are incorporated there.

My recommendation to the Secretaries of State is to pave the way for these three elements to be found permanently. The rest will be generated organically thanks to the impetus, energy and passion of the entrepreneurs.