The Rainforest review featured by the State Science & Technology Institute (SSTI)

SSTI just featured their review of Greg and Victor’s new book, The Rainforest: The Secret to Building the Next Silicon Valley, on their weekly newsletter and the books section of their website. SSTI is the leading network of practitioners and policymakers dedicated to improving society and the economy with science and technology. They have comprehensive resources on technology based economic development and we are thrilled to have their input on the book:

Many authors have explored the rise and dominance of Silicon Valley over the U.S. tech landscape. Silicon Valley’s mix of talented entrepreneurs and coders, abundant venture capital and critical mass of technology businesses have not only made the region into the world’s premier innovation center, but also have kept it at the top for decades. The explanations for its elite status are diverse: from roots as an early twentieth century center for radio research, its entrepreneurial culture, its ability to attract the most talented technology workers from around the globe and the tendency of venture capitalists to invest in businesses they can closely monitor. In The Rainforest: The Secret Recipe of Innovation Ecosystems, authors Victor W. Hwang and Greg Horowitt explore the alchemy at work in Silicon Valley using the model of the rainforest, a biological system defined by the interactions between its component parts, not the components themselves.

Via http://www.ssti.org/Digest/digest.php?page=2012/022212#books

The National Association of Seed & Venture Funds announces a Special Preview of The Rainforest

The National Association of Seed & Venture Funds (NASVF) just launched a Special Preview and white paper on Victor and Greg’s new book, The Rainforest. The white paper addresses many of the core themes that have emerged from T2 Venture Capital‘s work building breakthrough startup companies and new innovation ecosystems around the world.

This white paper and a related book propose a radical “their of everything” to explain the workings of innovation ecosystems. My colleagues and I call this model for such a system the Rainforest. By weaving together our personal observations with what we know about human nature, evolutionary biology, economic cooperation, physical systems, and social systems, we can offer a new and more productive way of thinking about innovation. We argue that neoclassical economics fails to explain the real-world workings of Rainforests. Instead, the innovation process is intimately bound with the dynamics of human nature, the invisible transaction costs caused by human nature, and the development of social norms that help people in Rainforests overcome those transaction costs.

via Special Preview for NASVF NetNews Readers – The Rainforest: How “Chicago Thinking” Explains Silicon Valley.

The Creation of Innovation Ecosystems: Germinating and Thriving in Today’s Economy

On February 29th, the Licensing Executives Society is hosting a panel in Silicon Valley on the Rainforest and innovation ecosystems. Victor will moderate and Greg will be one of panelists. The other two panelists are Eric Muller and Ade Mabogunje, both are experts in the cultivation of innovation ecosystems in their respective roles at the Center for Venture Education and the Stanford Center for Design Research. The conversation will focus around how intellectual property plays into the themes presented in Victor and Greg’s new book, The Rainforest:

Intellectual property is only unleashed when great ideas are surrounded by a nurturing ecosystem. What makes communities like Silicon Valley tick? Only a few places like the Valley have become enduring innovation ecosystems – human networks that generate extraordinary economic output. What is the nature of such ecosystems, and how can we deliberately build them? Authors Victor W. Hwang and Greg Horowitt propose a radical new theory to explain such ecosystems. This panel involves leading practitioners who are shaping the growth of innovation ecosystems in places as far flung as Colombia, Saudi Arabia, Nigeria, India, and the Palestinian Territories. They will share stories, insights, and new ways to understand how human networks can flourish.

DATE & TIME
Wednesday, February 29, 2012
11:30 PM – 2:00 PM

LOCATION
Latham & Watkins
140 Scott Drive
Menlo Park, CA  94025

via February 29- 2012 Silicon Valley Chapter Meeting.

The discussion should be fantastic, make sure to check it out!

The Rainforest at the Harvard Club of Silicon Valley

The Harvard Club of Silicon Valley is hosting a reception, presentation and conversation to discuss the revelations of the about-to-be-released new book, The Rainforest. Come see Victor and check out the event if you are in the area:

What makes places like Silicon Valley tick? Can we replicate that magic in other places?

Explore the answer to this mystery at a special discussion with Victor W. Hwang (Harvard AB ‘93), one of the world’s leading experts at the intersection of venture capital and global development. Victor advises institutions like the World Bank, the State Department, the National Institutes of Health, and many others on how to develop innovation and entrepreneurship. His firm’s clients include dozens of governments and institutions around the world, including the Middle East, Latin America, Central Asia, East Asia, and Europe.

Wednesday, Feb 22, 2012
6:00 PM – 8:30 PM
Kauffman Fellows Program
Town & Country Village
855 El Camino Real, Suite 12
Palo Alto, CA 94301

6:00 to 8:30 pm
6:00 to 7:00 pm: Reception (food/drinks provided)
7:00 to 8:30 pm: Presentation, Discussion, and Conversation

via Harvard Club of Silicon Valley.

You can register for the event here and order the book here.

Global Midwest Alliance Kickoff Reception with Special Guest Victor Hwang

The Global Midwest Alliance has invited our Managing Director Victor Hwang to be the Special Guest Speaker at their 2012 Kickoff Reception in Chicago to help launch Victor and Greg‘s new book, The Rainforest:

Please join Global Midwest Alliance and its partners for a cocktail reception hosted by Brinks Hofer Gilson & Lione to celebrate innovation and technology in the Midwest, where you will have an opportunity to preview the Alliance’s agenda, market-driven programs, new website and partnership opportunities for 2012.

Our special guest speaker is Victor W. Hwang, one of the world’s leading experts at the intersection of venture capital and global development, and co-author of The Rainforest: The Secret Recipe of Innovation Ecosystems. What makes places like Silicon Valley tick? Can we replicate that magic in the Midwest? Victor will explore the answer to this and other questions during a discussion of his new book.

Attend the reception and pick up an autographed copy of the book!

The Global Midwest Alliance is a business-led, region-wide organization dedicated to transforming the Midwest into an internationally recognized leader in innovation and business growth. The Alliance aligns and integrates resources throughout the Midwest helping businesses to grow by leveraging existing resources to develop new products and find customers throughout the world. The Alliance is the Private Sector Liaison Office for the World Bank and a member of Global CONNECT. Through these and other affiliations, the Alliance facilitates access to global business opportunities for Midwest business. The Alliance offers educational and networking opportunities through a variety of programs and resources designed to promote innovation, technology development and access to global opportunities in the clean technology, energy, food, logistics, manufacturing and water industries.

via Global Midwest Alliance Kickoff Reception with Special Guest Victor Hwang.

The Rainforest featured on innovation DAILY

We are thrilled to report that innovation thought-leader Rich Bendis has published an unprecedented special addition of innovation DAILY devoted to discussing our Managing Directors’ new book The Rainforest: The Secret to Building the Next Silicon Valley and the development of innovation ecosystems.

Check out the introduction to the special edition here and the preview and excerpt of the book here. There are 23 additional articles in the special addition that provide an enormous amount of breadth and depth to answering the question: how can we stimulate innovation to drive economic growth?

We are extremely excited to hear your feedback and input on the ideas we present in the book. We hope to contribute to the global conversation about how best to foster entrepreneurship and we look forward to hearing your thoughts and comments in this blog (and all other venues!).

Finally, don’t forget to pre-order the The Rainforest here.

T2VC to launch Global Innovation Summit in summer 2012

T2 Venture Capital is pleased to officially announce the Global Innovation Summit (GIS). This invitation-only event is the first-ever in Silicon Valley produced in collaboration with the world’s leading development institutions. The event seeks answers to the question: how can innovation lift human welfare and provide a sustainable foundation for economic growth? Our institutional partners include many of the most powerful names in global development, including the World Bank, the African Development Bank, the Inter-American Development Bank, the United Nations (CSTD), the OECD, Aspen Institute (ANDE), the Arab Science & Technology Foundation, the Third World Academy of Sciences, and others. We are aiming to make this the biggest global development event ever in Silicon Valley and one of the defining events in the world.

The event will be held on July 16-18, 2012 in San Jose, California. GIS will bring together a community of 300-500 participants to close the public/private divide and find real working solutions for global innovation. These attendees will include entrepreneurs, high-level government ministers, leading investors, cutting-edge researchers, development experts and pioneering non-profits. We will target solutions in a variety of areas, including capital formation, IT development, global health, food security, clean water, sustainable energy, and others. We will do “real work” to create prototype solutions at the event, not just listen to talking heads.

To find out more, please visit the GIS website (www.innosummit.com).

What hinders innovation?

Nothing is more frustrating to an entrepreneur than not being able to connect to the resources their business needs. That resource might be money but it often goes far beyond the need for capital.  Entrepreneurs are often frustrated by the challenge of finding the talent, mentors, partners and early adopters they need to grow their businesses.

Ironically, talent, mentors, inventors, investors, partners and early adopters exist everywhere. The real problem is access to these resources.

If you are starting a new enterprise software company and Bill Gates is your uncle, then you’ll have an easy time getting connected to partners, mentors, investors, etc. But if you aren’t lucky enough to have Bill Gates as an uncle, then you will have a much harder time reaching the same people even if you had the same product. You could get there eventually, perhaps by making use of your alumni networks, LinkedIn, etc. but it would be a hard slog.

This is an example of what economists call a ‘transaction cost.’ Transaction costs happen when something slows down or adds expense to a mutually beneficial transaction between two parties. For example, if you want to buy a house, you have to go through an enormous amount of paperwork and often deal with multiple agents and brokerages to get a deal done. But ultimately those intermediary steps are really slowing down the fundamental trade of house for money.

Entrepreneurs face transaction costs everyday. For example, it used to be that term sheets and financing negotiations were highly customized and non-transparent to outsiders. Entrepreneurs would have to spend a lot of time on negotiations and money on lawyers in order to make sure they weren’t getting screwed. Thankfully this is now changing as more and more terms are becoming fairly standardized.

But some of the most frustrating transaction costs are social: not being able to connect to the people you need. Different regions actually exhibit different levels and structures of social transactions costs. In San Diego, it’s socially acceptable for a college student to approach a high level executive if they have a relevant question or idea. Many high-level people in the private, public and academic sectors will take meetings with young people far below their ‘rank’ if they’re interested and see some initiative. Leaders also often devote a significant portion of their time to mentoring or otherwise giving back to the community in-kind.

This process helps people develop networks that accelerate exponentially. Vivek Wadhwa wrote a vivid description of the innovation ecosystem in Silicon Valley on his column in the Washington Post:

Some are formal events with hundreds of attendees, and others are casual gatherings in public places. The coffee shops buzz with activity, and ideas are exchanged openly. Tech workers frequently job-hop between competitors. The Valley is essentially a series of concentric networks that constitute one giant social network.

The magic of Silicon Valley happens because the Valley supports entrepreneurial experimentation and collective learning. This is what enabled Silicon Valley to race ahead of its long-time competitors, such as Boston’s Route 128, and what no region in the world has been able to replicate.

via Cultural networks power innovation – The Washington Post.

Regions that provide easy access between and across these social categories end up brimming with successful startups. Regions that don’t make such access easy create additional challenges for aspiring entrepreneurs who have to pay high transaction costs in addition to facing all the other challenges of building a successful business.

Cross-posted on Eliot’s blog the founders’ sandbox

Startup challenges in emerging markets

In our consulting practice, T2 Venture Capital focuses on building innovation ecosystems in emerging markets. Entrepreneurs in developing countries face unique obstacles and challenges that founders in places like Silicon Valley can circumvent by virtue of the innovation ecosystem they inhabit. Omar Koudsi is a co-founder and CEO of Jeeran, the largest review site in the Middle East and North Africa that is based in Amman, Jordan. During a recent trip to Silicon Valley, Omar shared some thoughts on the obstacles emerging market entrepreneurs have to overcome:

“Being from Jordan and having visited Silicon Valley on a number of occasions, this visit (along with others) continue to show how the realities of the Valley stand in stark contrast with what an emerging world founder, particularly in the Middle East and North Africa, face to start and scale a Web business.

I believe the lack of a well-developed ecosystem (funding, mentoring, risk culture, lawyers, human resources) puts the burden tenfold on the entrepreneur in the emerging world. In many cases, foreign entrepreneurs have to do ten times the lifting of an American startup — for a much longer period of time to boot — in order to succeed.”

via Startups: Silicon Valley Vs. The Emerging World | TechCrunch.

To many peoples’ surprise, emerging markets are not the only regions where entrepreneurs face these challenges. We often hear similar complaints from founders in places like London, Chicago, Toronto, Tokyo and New York. The fact is that there simply aren’t that many well developed innovation ecosystems out there: Silicon Valley, San Diego and Boston represent a few standouts.

Luckily, the factors that have made places like Silicon Valley successful can be combined to cultivate innovation ecosystems in new places. Our consulting practice engages with new regions to help co-create business environments that are friendly towards entrepreneurs. As Omar pointed out, this is far more complex than simply setting up an incubator. There are many ingredients that need to be balanced and combined if they are to result in a healthy startup environment: mentorship, integrative capital formation, workforce training, entrepreneurial education, recruitment support, community engagement and culture building among many others.

We’ve observed that some of the most important pieces of the innovation puzzle are sometimes the least tangible. Establishing a culture of risk-taking that treats failure as a learning experience is incredibly important. Cultivating social norms that allow and promote collaboration within and across teams, firms, sectors, universities and governments is crucial. It’s also vital to socialize the perspective that entrepreneurship is about creating positive sum games: mechanisms through which 1+1=3. These win-win propositions operate in stark contrast to the ‘competitive mindset’ of traditional business development.

Only when these critical factors are mixed in a holistic design process that takes all these components into account within the local context can regions hope to build sustainable economies based on innovation, what we like to call ‘rainforests.’

Cross-posted on Eliot blog, the founders’ sandbox

Entrepreneurial Journeys /Lessons Learned – Part 1 – YouTube

Entrepreneurial Journeys /Lessons Learned – Part 1 – YouTube.

Henry Doss, T2 Venture Capital‘s COO and EIR, leads a workshop on the human and social issues in venture for a group of Palestinian entrepreneurs in Ramallah. Ramallah is home to a burgeoning ICT community with world-class coders that are creating a paradigm shift for how Palestinian businesses integrate with the global economy.