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An End to Silicon Valley? Not Even Close

One month after Microsoft acquired his company Yammer, David Sacks declares Silicon Valley near its deathbed. Here's why he's wrong.
David Sacks

Yammer Founder David Sacks

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It didn't take long for Yammer founder David Sacks to give up on the start-up culture of Silicon Valley. As Alexia Tsotsis at TechCrunch notes, he kicked off a lively discussion recently on his Facebook page by declaring that "Silicon Valley as we know it may be coming to an end." This comes only a month after Microsoft paid $1.2 billion in cash for his company.

Of course, from one view, everything is coming to an eventual end. The question is how long it could take to get there. And given the nature of Sacks's argument, that end is a long way off.

Sacks essentially argues that human ingenuity in the Valley is running its course because of the difficulty in finding an idea that:

  • major Internet companies have overlooked,
  • that can be launched and proven for a typical $5 million in series A funding, and
  • can be protected from large companies, once they take notice.

Sacks is mistaken on a number of counts. First is that he seems to see Silicon Valley as the land of high-tech innovation. It certainly has spawned a significant amount, but the question is not whether Silicon Valley in particular remains at the top of its collective game, but whether entrepreneurs do.

Next, Sacks assumes that the basis of the Valley's importance in technical innovation is the Internet. Clearly the Net has helped open amazing possibilities. And yet, it is only a tool, not the entire playground of innovators. Square is innovative and successful in mobile payments, but is hardly a typical Internet-centric company. ServiceNow? Just went public with a business-to-business service that works via cloud computing. Yes, the Internet is necessary for its operation, but this is hardly the typical "we'll-give-service-away-and-hope-to-figure-out-how-to-monetize-eventually" company.

Protectable from the onslaught of big companies? Put patents aside for a moment and consider how behemoths react to small companies that innovate. They often buy them. Microsoft bought Yammer, for heaven's sake. Much of Apple's vaunted achievements were the result of acquisitions, whether the multi-touch interface, the chips powering its devices, or the voice recognition service Siri. Google bought the company that created Android.

What Sacks is really saying is that he can't think of more ideas. And that isn't unusual. Quite often, wildly successful entrepreneurs have a winning idea and then never get another big hit again.

There is a way to avoid the dead end, however. You have to stop building organizations based on your own insights and start focusing on a culture that encourages and supports flashes of genius and has a framework to make them commercial. Thomas Edison employed a big team of engineers, researchers, and inventors to create the many inventions accredited to him. Some big names in Silicon Valley have already done the same.

Learn to recognize the great ideas of others that you bring into your organization. And you'll quickly find that those ideas never seem to stop arriving.

Last updated: Aug 22, 2012

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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