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June 16, 2006

Is a Silicon Valley likely to happen in India?

Paul Graham has a couple of great essays on how other cities and countries could replicate Silicon Valley:

1. The first one,
How to be Silicon Valley
basically says that all it taks is a great university near a town that smart people (aka nerds) like. Incidentally, Guy Kawasaki has a similar essay here titled "How to Kick Silicon Valley's Butt".

2. The second, Why Startups Condense in America, lists "the advantages startups get from being in America".

Extract from Graham's second article:

2. The US Is a Rich Country.

I could see India one day producing a rival to Silicon Valley. Obviously they have the right people: you can tell that by the number of Indians in the current Silicon Valley. The problem with India itself is that it's still so poor.

In poor countries, things we take for granted are missing. A friend of mine visiting India sprained her ankle falling down the steps in a railway station. When she turned to see what had happened, she found the steps were all different heights. In industrialized countries we walk down steps our whole lives and never think about this, because there's an infrastructure that prevents such a staircase from being built.

The US has never been so poor as some countries are now. There have never been swarms of beggars in the streets of American cities. So we have no data about what it takes to get from the swarms-of-beggars stage to the silicon-valley stage. Could you have both at once, or does there have to be some baseline prosperity before you get a silicon valley?

I suspect there is some speed limit to the evolution of an economy. Economies are made out of people, and attitudes can only change a certain amount per generation.

Extract from Kawasaki's post:

Absence of multi-national companies—especially the finance industry. If your companies have to compete with conglomerates or banks like Goldman, Sachs throwing money at people, it’s going to be hard to get anyone for a startup. Pity the startups in New York, London, and Singapore. Come to think of it, how many tech success stories have come from these cities? There is intense competition for employees in Silicon Valley too, but we’re using the same currency: the upside of equity, not high starting salaries.

Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.