Silicon Valley: Endgame

By Alvin Mak

Alexandre Lazarow discusses the rise of global startup hubs and the evolution of the startup gospel

Silicon Valley has been the gold standard for innovation for decades, fostering the world’s most successful startups. The Big Six–Apple, Alphabet, Facebook, Visa, Wells Fargo, and Chevron–all hail from this sacred tech haven in California (Investopedia). However, its once-unquestioned global dominance is starting to show signs of waning, especially as the world faces an economic crisis due to the Covid-19 pandemic.

Cathay Innovation Investment Director Alexandre Lazarow put the spotlight on this topic during his Collision 2020 panel, ‘Time to ditch the Silicon Valley way?’ (Collision). Lazarow draws from his experience as an adjunct professor at the Middlebury Institute for International Studies and as a former principal at the philanthropic investment firm, Omidyar Network.

He recently published Out Innovate with his alma mater, Harvard Business School, which sets out to reshape the startup narrative. Jumpstart speaks with Lazarow to learn more about the book’s thesis and the lessons learned from global startup ecosystems beyond the Valley–or what he calls the ‘frontier.’

Out-Innovate’s inception came from speaking with his international students at Middlebury, where many hope to return to their home countries to build their startups. 

“Every time I wanted to share best practices or readings with them, I invariably always felt like I had to contextualize it […] for ecosystems with less capital, less depth of trained startup human capital, and fewer resources,” he adds. 

The book places an important distinction between ‘creating’ and ‘disrupting.’ He notes that the Silicon Valley wisdom of disrupting industries by developing a smarter, faster solution has fallen out of style. Instead, entrepreneurs in frontier cities, such as Sao Paulo and Nairobi, create new industries to directly tackle infrastructural shortcomings through needs-based solutions in industries like transportation and fintech. 

“[Creators] target the mass market, not just the top of the pyramid and off the shoulders of giants,” says Lazarow. 

He uses the Indonesian superapp, GO-JEK, as an example. While GO-JEK began as a ride-sharing platform similar to Uber and Lyft, it “completely reinvented” itself by introducing products that provide the unbanked and small businesses with tools for financial inclusion, among other solutions.

“[GO-JEK] was giving riders and drivers a full ecosystem of activities,” he says, “They deliver food throughout the day; they would also do ecommerce packages, financial products, and other things.” 

Critical to the success of creation is ‘cross-pollination,’ which is the intersection of diverse perspectives, whether in terms of gender, ethnicity, or culture. Such an environment encourages a deep appreciation of the problems faced by a community or society. Lazarow believes that Silicon Valley can do better in this regard. 

“I am hopeful that we will continue to make progress on this, I think the questions of diversity, particularly on gender and cultural diversity, are now rising to the agendas in many startup communities around the world,” he adds.

Another stark difference of the frontier is entrepreneurs’ mindsets when it comes to scaling their startups. They don’t operate on zero-sum principles, where expansion should come at all costs. Lazarow says that these companies are instead taking measured, rational risks, placing value on sustainable growth. He calls them ‘camels.’ 

“The camel approach […] essentially builds sustainability and resilience in your business model from day one,” says Lazarow. He adds that eschewing Silicon Valley practice of subsidizing user acquisition and growth-at-all cost capital burn funded by venture capitalists, will allow startups to survive macroeconomic shocks. 

Lazarow cites GrubHub as a company that went against the Silicon Valley gospel to much success. Founded in 2004, GrubHub reported nearly 23 million diners as of last year (Statista). When Lazarow asked its founder Mike Evans why he took a decade to go public, Evans says:” ‘Look, I could have done it in two fewer years, but I would have done it with a tremendously greater risk.’” 

Looking ahead, Lazarow warns that the Valley may lose its influence in the coming decade, drawing upon Detroit’s example as the world’s once-leading vehicle manufacturing and innovation hub before being overpowered by foreign competition. Silicon Valley risks sharing the same fate “unless it continues to learn and reinvent itself and stay ahead.”

Still, he is optimistic and believes that Covid-19 will lay bare the more basic needs of our society, paving the way for innovative entrepreneurs, regardless of where they are based, to address them and better lives. 

“I’m hopeful that out of Covid, we’ll all be creators, and we’re going to be looking at some of these incredible, but intractable challenges […] to build really meaningful, impactful, successful businesses.”

Lazarow has much to look forward to on the personal front as well, as Out-Innovate has been published to exceedingly positive reviews, and he recently embarked on an exciting new chapter. 

“I don’t think I’ve ever had a job that I’ve been so unqualified and unprepared for, being a father to my daughter, Artemis Eve,” he says. “I’m excited about growing into that and building a relationship with her and building our family.”

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