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The role of growth ecosystems in entrepreneurship

The Google HQ

In this post I want to discuss the role of growth ecosystems in entrepreneurship and innovations and especially focus on the Silicon Valley as the greatest ecosystem of all times. Several months before I’ve listened to the keynote speech of Adeo Ressi from Founders Institute given at the TechCrunch Moscow 2013 event. To put Adeo’s keynote speech in one sentence:

Silicon valley is not a place – it’s mindset and people

As I tend to agree with practically everything he said during his speech and at the same time am sure that this event wasn’t properly promoted in both Europe and US, I will describe his main points and combine it with my own opinion and experience.

Silicon Valley based companies have a huge success over decades so no surprise other countries and even other states in the US want to copy it. The main problem is that they copy the wrong thing. VC money is great, but they can’t work without an ecosystem. If you have VC money but there are no good companies to invest in – VC money doesn’t matter. If there are no great employees company can hire – VC money doesn’t matter. Once company grows and needs to find partners, if there are none – VC money doesn’t matter. More of the same in case there is no merger or IPO market. As Adeo said:

VC money alone is not worth a lot without an ecosystem

Same applies to copying the facilities part – facilities alone or together with VC money can’t create a new Silicon Valley. The example of Skolkovo near Moscow which was meant to be the Silicon Valley of Russia shows that it is not about facilities and VC money.

However, what needs to be copied prior to everything else is the mindset. There are several aspects of mindset that are crucial in Silicon Valley’s success, and Adeo has listed them as follows:

  • Collaboration instead of competition, no zero sum game. In Silicon Valley people do not believe in zero sum game – they are ready to go have a lunch with a CEO of their competitor company and to discuss possible ways of collaboration because they believe that they’re growing and improving the overall market.
  • Flat ownership. Employees need to be outstanding professionals and need to be motivated to make company better every day. The best motivation is not salary but equity. Flat ownership means that the distance between co-founders’ equity and ordinary employee equity shouldn’t be 100:1 or even 1000:1, there are no giant gaps. A lot of equity in Silicon Valley based startups is given away to useful people like advisors, the idea is to bring many people who might be a competitive advantage and will be engaged in the success of the company.
  • Companies begin with the end in mind. Most of the companies are structured to go for an IPO or big exit from day 1. Investors in Silicon Valley are not too aggressive (as it often happens in other parts of the world) and don’t try to own too much in the very beginning. They have the end goal in mind and if the company goes public and no one else will own anything it defeats the whole purpose.
  • Money and knowledge recycling. People give back to the community. When a company makes a big exit, the co-founders become millionaires and do not stop their contribution to the community – they share their knowledge becoming advisors and investors in new startups and recycle their money and knowledge so that the community benefits from it. As I see it, this principle is widely spread in Finland – I’ve been to a keynote speech of Ilkka Paananen, CEO of Supercell, who has shared his philosophy and ideas with Aalto students, I’ve visited Slush which gets a lot of contributors from world famous Finnish companies like Rovio Mobile and their CMO Peter Vesterbacka.

Some words about Real Racing 3

I divide all popular computer games into two groups: it is the implementation of new progressive technologies (read: better graphics, more realistic scenes etc.) behind the popularity of the first group and it is pure idea behind the popularity of the second one.

The development process of the technology-based game is quiet transparent and predictable. Graphics becomes better, requirements become higher. When it comes to a mind-blowing idea, the development process is an absolute mystery. You can spend days and weeks procrastinating and fail all the milestones, and then all of a sudden you get an insight into what you are going to offer to your customer.

Therefore, as I see it, big companies focus on technology-based games and idea-based games are usually avoided as risky or sometimes get a status of a spin-off and a budget of several hundred bucks. At the same time, idea-based games are developed by a handful of enthusiasts with or without strict documentation, timeline, budget and overall strategic planning.

But it is not always like this. At first sight, Real Racing 3 seems to be just another brick in the wall of detailed realistic racing games, which appear here and there every couple of months and more or less demonstrate the possibilities of the newest hardware. Actually, it is beautifully designed and currently seems to be the best iOS racing game ever. At this point developers could have said “That’s it, boys and girls!” – but they didn’t. In fact, they invented the whole new way of playing a game in a multiplayer mode being offline, and it is called Time Shifted Multiplayer (TSM). In a nutshell, TSM downloads other player’s lap times (and, perhaps, their specific paths) while you’re online, and after that you compete with real people being on- or offline. Well, we can’t say these are real people – these are their shadows. But it is still an amazing compromise between multiplayer mode, which requires good Internet access, and single player mode, which is boring as hell.

What I want to point out is that RR3 is a game with both brilliant graphics and a unique idea behind it. It is something out of line. It is something awesome. You shouldn’t blame Firemonkeys for their monetization strategy. You should enjoy.