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Some Takeaways from Silicon Valley

Two weeks ago I was fortunate enough to travel with about 30 business and community leaders from Greater Baltimore to Palo Alto, CA. This trip is part of a series of executive "field trips" organized by the Economic Alliance of Greater Baltimore with a purpose of learning first-hand about the success and secrets of other regions. I've put together some key themes that were discussed on the trip including some personal observations relating to Baltimore.

Two weeks ago I was fortunate enough to travel with about 30 business and community leaders from Greater Baltimore (GB) to Palo Alto, CA. This trip is part of a series of executive “field trips” organized by the Economic Alliance of Greater Baltimore with a purpose of learning first-hand about the success and secrets of other regions. Last year a delegation from Baltimore travelled to Austin, TX and returned with a wealth of ideas for realignment which later included the creation of InvestMaryland – a $70 million fund meant for state-wide venture capital investment.
I’ve compiled a chronology of Tweets, photos and more from our trip on our “Reactions during #GB2SV” post.
Those on the trip included senior representatives from state and local government and higher education, along with chief executives from the finance, legal, cyber/IT and life sciences sectors. Right about now you’re probably wondering how I ended up in this group. Short story: I made a case that the information gained on this trip needed to be digested and shared in a relatively real-time manner and forwarded to the community that this blog targets: early-stage entrepreneurs and tech in and around Baltimore.
Beyond the climate, we wanted to learn what makes Palo Alto appealing as a destination for young entrepreneurs and how its industry, venture capital community and universities nurture and support such activity.
It was also important to establish partnerships with companies and investors that can lead to new partnerships and business development opportunities for GB.
I’ve put together some key themes that were discussed on the trip including some personal observations relating to Baltimore.

Investors are less risk-adverse

We’ve got a lot of growth capital around Baltimore but most of it seems to invest in already growing companies. This is inherently problematic for those needing seed capitalization or simple validation when starting something new. More and more technology companies today in Silicon Valley (SV) are accelerating incredibly fast with small, ~$50k seed investments.
This observation was validated when we visited the office of 500 Startups. Initially, this was an early-stage venture fund headed by Dave McClure and purposed with the hypothesis that you can make a larger return on many (500) micro-investments containing high risk versus fewer normal investments with less risk. The fund now has an incubator program and space for each of the funded companies. As Paul Singh, Principal of 500 Startups, told us during our tour, the space helps to attract the companies to apply rather then 500 having to seek them out.

Mentorship is everywhere

Doing startups in SV is considered a respected primary occupation, not a fallback for when you lose your job. Those that have attempted a startup and failed are much more respected than those with MBA’s and no battle wounds from their own startup attempts.
More important than money in SV (and arguably in Baltimore) is mentorship. Every new business needs validation and direction, networks and connections that help grow the company through failure as quickly as possible. Entrepreneurs that have made their fortunes out there are rolling up their sleeves and actively reengaging with the ecosystem. Receiving an investment from 500 Startups isn’t about the $50k. That’s just the guarantee that you’ll get exclusive access to one of the best rosters of mentors in the region.
Another interesting spin on mentorship is the idea of reverse mentorship. I first learned of this concept when we visited IDEO’s office in Palo Alto. They make it a requirement that all employees, including the CEO, have a reverse mentor that is younger than them. As product developers they see younger people being on the front-lines of innovation and trends and it’s important that they use that to their advantage. They also believe that younger people think differently about problem solving so it’s equally important that they tap into this. See more about reverse mentorship in this American Express OPEN Forum article.

Treating engineers like celebrities

I get goosebumps when I brush shoulders with Paul Palmieri or Chris Brandenburg of Millennial Media at Starbucks in Canton. They’re celebrities to me because I’ve taken the time to learn their stories. There are literally hundreds of thousands of people just like them in SV that inspire others to follow their lead of creating successful companies, including the late Steve Jobs. This is an important requirement to have in an entrepreneurial ecosystem. Part of the reason these people exist as celebrities in SV is because they’re treated like celebrities. Newspapers and main stream media write about them. Outlets like TechCrunch vie to be the first who breaks a story of the next big thing. Likewise, celebrities in Hollywood wouldn’t exist if it wasn’t for the tabloids.
Without getting led too far away from the trip I want to really illustrate the need for Greater Baltimore to provide more media coverage of our entrepreneurs and the daily struggles and successes they face. One of the main reasons this blog was created was to provide a bit of a newspaper for those interested in Baltimore’s tech and startup communities. Our region is big and there’s a lot of exciting activity happening in our small city’s ecosystem. Activity that would be hard to notice or keep up with otherwise. By creating a publication, those on the outside can easily see whose doing what and possibly connect with things that interest them. It also helps to create a culture that’s attractive for prospective talent to come be a part of.
Quick plug for support: Interested in supporting Startup Baltimore? Please contact me. I’d love to meet you.

Consider a company’s full lifecycle

It’s not enough for our region to have some incubators, only 2 of which are in Baltimore. We need to provide for the full lifecycle.
Right from the beginning of the cycle we need to invite idea conception from places like coworking spaces. While in SV we got the chance to tour the HackerDojo. It’s a typical coworking space which means it invites freelancers and entrepreneurs to use a shared office space. Everybody is allowed to work on whatever they want but the underlying theory is that by putting a bunch of likeminded folks in the same room, you’re going to accelerate serendipity; what could happen naturally is now accelerated by the creation of nearby individuals and common space. In fact, it’s very similar to a gym membership. I could put some gym equipment in my house or I could pay a small monthly fee and use a shared gym possibly meeting new people and building better workouts.
Coworking spaces are early in the lifecycle. Accelerators like 500 Startups are next in that they accept and fund back-of-the-napkin ideas with small, talented teams. Shortly after accelerators come your traditional incubators, accepting a small team of product developers that are willing to pay a serious fee for office space and support services. Unless revenue is being generated early on, it’s unlikely for an early-stage startup to consider the benefit of an incubator because of the seemingly unnecessary fee. This is where angel investment is incredibly important and where SV sees a lot of activity and inflection. Our angel community is almost non-existent and if we can stimulate smart folks with money that are used to larger investments to take many more higher-risk but smaller investments, I think we can see similar trends in activity.

This trip was an awesome experience for me and I’m incredibly thankful for people like Jen Gunner and Tom Sadowski of the Economic Alliance for including me. More importantly, I’m thankful for their shared vision in understanding that the information learned on the trip needs to be shouted from the rooftops (including this small rooftop called Startup Baltimore). The first dot-com period was the largest creation of wealth in history and seeing a rise in national opportunity for another technical boom makes it more important then ever that we learn what makes SV work. I’m not saying we should try to be Silicon Valley but we should most certainly be putting some of their good ideas to use.

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