Can Silicon Valley's Work Culture be Replicated in India?

It is well understood that entrepreneurship is the bedrock of the economy. Perhaps the most copied entrepreneurship ecosystem is that of Silicon Valley in the US. No institution is as integral to and as embedded within Silicon Valley as Stanford University. Over the last 50 years, Stanford faculty, staff and graduates have launched nearly 1,200 companies. More than 50 percent of Silicon Valley’s products come from companies started by Stanford alumni —and that excludes Hewlett-Packard, one of the Valley’s largest firms.

So when Stanford Graduate School of Business’ Dean Garth Saloner met with Forbes India in Mumbai, we found it a good idea to engage him in a discussion with some sharp Indian entrepreneurs to understand why Silicon Valley works. What does India need to do to come up with it's own Silicon Valley?

We teamed up Saloner with Contest2Win founder Alok Kejriwal, who is a passionate entrepreneur, and Rajiv Kaul, who combines insights from the world of private equity [Blackstone] and entrepreneurship [CMS Infosystems].

Forbes India: Is the Silicon Valley model relevant for an economy like India? Is it based on a large amount of available capital?
Garth Saloner: I don’t think either of those two things is the essence of Silicon Valley. Of course, the Valley is synonymous with tech in many people’s minds but there’s a lot of non-tech development that comes out of it as well. If there’s a trend in capital, it is towards less capital and not more of it; today there are opportunities for startups to get going because of mobile devices, which need much less capital and help them get to market quickly.

The essential feature of the Valley is the ability to incubate an idea; to take an idea that is in somebody’s head and turn it into a business in a day or six months. There’s employment and growth, and that’s an ecosystem of human capital, legal infrastructure, ideas from universities like Stanford and, most importantly, a culture that embraces startups and innovation at any scale.

Alok Kejriwal: Let me give you an example of something very strange that someone from Seattle told me. He said he was working on a game and coding it late into the night. At 4 am, he heard the thud of a newspaper at his door. He went outside and the newspaper guy was still around. He offered him to come inside and have a coffee. He asked him whether he could help him integrate the .wav file with the game code. And the guy said “Let me try.” The point I’m making is that was Seattle way back in the ’90s, not the Valley of today. The real thing to have is a set of people with a common mind who don’t find it bizarre that you’re working on a game that has to do with farming sheep, and you have 300 people sitting and thinking about whether the sheep should be white or black. Compare that to someone in Mumbai who, if you tell them “I’m farming sheep,” are going to say “My God, I don’t know why I’m dealing with you here.” [And] This is a town where we have Bollywood; nothing on earth is as bizarre as Bollywood!

Rajiv Kaul: I completely agree. There’s been an old standing culture, which has worked far more in the Valley than in other parts of the world or the US. Was it money? Was it fame? When I was in the US, I found that among my friends there was far more appetite for taking quick, measured risks, which one doesn’t get to see anywhere else. What drives that?

GS: I think if you live in the Valley or if you’re a student at Stanford, you look around and at the last few years. You see people who created something out of nothing. You say, “Why not? Why not me? What’s the next big thing? I want to be associated with that.” And it is not a narrow commercial mindset; it’s a land of exploration that goes back decades to the days of Fairchild and Intel. These things spawned brilliant young people who would say, “This company is too big for me; it’s not doing the next big thing. I want to be the Fairchild; I want to be the Hewlett or Packard. I want to be part of the next big story.”

Forbes India: Private capital has been available in India for the last 15 years…
AK: The mandate of that private capital has to be examined. The mandate is not what that in the Valley is. If I go to a Seed, Angel or Early Stage and say, “I am going to be creating an app that takes a photo from your iPhone and puts filters around it. It’s the best thing to do because your photo looks better,” I want to hear how people in India would have reacted to that before Instagram came about. People would say, “What’s the purpose?”

Rajiv, just to make a point here: We’ve been a capitalistic society, we’ve had the BSE that was at 100 in 1981 and is at nearly 20,000 now; so people know what capital is. The question is who is going to put the money on the table and say, “Here is experimental capital.”

GS: You’re right, but I think it’s more than that. Take that same $100,000 and some would say, “If you can turn that into $600,000, that’s a great day.” But others would say, “If you can turn that into $1 billion, then that would be a great day. I’m willing to take the proportionate odds. There’s a very small chance you get a billion, but I want a billion.” That’s the mindset of the venture capital community; it’s a different form of capital source. The model is predicated on—for most of my investments I will get a zero percent return. For a small number, I will get three or four times in return. It’s the one that makes $1 billion, which creates the whole portfolio.

Forbes India: Rajiv you’ve been associated with some of the most hallowed names of private equity in India. Why do you think such ‘experimental capital’ is lacking in India?
RK: There are a few things which happened in India. After the dotcom period, a lot of people burnt their hands, including us. We barely managed to get the money back and were lucky. That got people thinking because you have to remember the Indian context at that time. People left jobs at McKinsey to join these startups. I also think that we are very risk-averse as a society.

RK: I think it’s already happening in India with InMobi, a company not even 7-8 years old and supposedly valued at $1 billion; they’ve got $220 million in funds some time ago.

AK: The challenge is can I see proof of delivery in terms of listing? In the US, you see plenty of companies that aren’t $20 billion but at least half a billion. You look at Naukri, which is valued at $700 million. There are many gaps in looking at things that are proven; a lot of VCs want to assure themselves that this can happen. In India, it is one-in-thousand and in the US you’re way beyond that hump.

AK: It’s [also the] societal environment. In 2000, thankfully,
we had a dotcom that survived the crash. We had 50 employees of which 40 came to us saying, “We love the work, the company and you. We love everything. All we want is, the ‘.com’ to be removed from the visiting card so that I can show my uncle.”

Kirthiga [Reddy], the head of Facebook India, told me a great story. She faced much resistance because parents said, “Facebook? That’s the website that distracted you during exams! You can’t work for Facebook! Please go and work for L&T.”

RK: The ecosystem which has worked for many countries with some measure of success, whether it’s Israel or South Africa or the Valley, at best is only partially existent in India. As the country grows, it will take 8-10 years to develop. If you had influence on policy, which is the one thing you would pick on to change?
GS: I don’t know how to do this through policy but the key feature that I would encourage in any one of these nascent ecosystems is to understand the critical role that Stanford plays in the Valley. We think it is not the ideas that move; but ideas move with people. We have facilitated policies for the free flow of ideas with the people into the Valley and back in again. My president [Hennessey] was an engineering faculty; he developed the MIPS computer but didn’t patent it and move on. He took it to the Valley. He ran the company, sold it, came back and became the dean and then president. It is very, very typical.

Forbes India: Where do you think Indian universities stand on this matter?
RK: I think there are some small examples. It’s happening in IIT-Chennai. They are attempting to incubate businesses and ideas and professor Jhunhunwala, who is a friend and whose ideas I criticise, showed me a locally-made ATM in 2003. His dream was to make it at a cost of $1,000. Now they’ve made it.

It costs $2,500-3,000 but that is still half the price of a roughly comparable ATM. More importantly, it is adapted to be robust enough to work in rural India.

AK: IIM Ahmedabad too! That’s where people think the best careers in India are made, comparable to the Ivy League’s. And if you look at those guys, they just manufacture robots that go and mint salary cheques. You talk to any of the professors at these places and they don’t make any sense. I spoke at MICA, which is supposed to train young people in communication. They were so rigid in their thinking. They hadn’t heard of Lady Gaga. I asked the dean what he thought of Lady Gaga’s Twitter ideology and he just thought I was some zombie who had come out of the jungle.

RK: We seem to be lacking many things but are especially deficient in creativity, sensibility and user awareness. The Indian system has produced good talent in one direction but our left-right brain mix is lopsided. How does a country even begin to think about changing that?

Forbes India: Well Rajiv is right. Indeed, how do we change that?
GS: It doesn’t surprise me in the following sense: The growth in India is phenomenal and the changes have been dramatic, but if you look at what fuelled the growth in India, in the beginning it was cost arbitrage. The innovative part of that is a more mature step. I think you see it now.

AK: You’ve hit the nail on the head. I don’t meet many people who say, “I don’t know.” I keep asking people, “Do you know?” and they keep saying, “Yeah, we know!” The biggest challenge in India is the close-mindedness and of not being able to share. We write blogs on how we get to the No. 1 position on iTunes without spending any money. I routinely get people asking me why I’d want to share that. I say look at Techcrunch: It’s the Wikipedia of this industry. Second, before you share you don’t even know if you’re right or wrong!

RK: I recently got an email from an international competitor who is trying to enter the market. I had met him a month before. He was apologetic. When I said, “Yes I’d like to meet you,” he was taken aback and said, “Are you sure?” He wasn’t used to Indians talking to competitors.

AK: If you go back to the essence of the startup community in San Fransisco and go to any office that you know, they will come forward and say, “You spend so much time here, why don’t you get a chair and sit with my marketing guy and we’ll tell you how we do Facebook marketing.” No one’s telling them to tell us that.