Failure: How it powers Silicon Valley and handcuffs Japan | Hacker News Reader

Failure: How it powers Silicon Valley and handcuffs Japan

blogs.berkeley.edu

85 points_b8r021 comments

Failure does not power Silicon Valley. Failure is only a byproduct of a rich entrepreneurial culture whose overriding goal is success. That culture understands that startups inevitably will have a non-trivial failure rate and factors this into such things as equity structures, company valuations, decisions to fund or not to fund particular ventures, decisions to leave secure employment situations in favor of joining startups and the like. But failure is never the goal. It is only a byproduct. To me, therefore, it is not accurate to say that failure "powers" Silicon Valley.

Apart from some overstatement about the concept of failure (e.g., its being regarded as a "badge of honor" in the Valley), this piece makes some good observations about how the Valley has grown and prospered through continued flexibility and experimentation in contrast to the relative rigidity that has hampered Japan's startups.

Silicon Valley is beautifully set up to encourage risk taking but the goal of all risk takers is success, not failure. The United States, like Japan, once had a mindset by which the goal of every responsible working adult was to have a "steady job" and there have been cultural factors aplenty that have discouraged people from leaving such jobs to take a whirl with a startup. The move from that mindset to that of the risk-taking entrepreneur is driven by the hope of an extraordinary return for one's efforts. In Silicon Valley, it has been proven over and over again that such extraordinary returns are possible for those who are smart and enterprising and that historically has been the main draw for joining a startup. Today, with the low barriers to entry, the reasons for taking the leap into startups can be more complex (personal growth, etc. can now factor in). But the overriding goal is still money. Silicon Valley provides a fertile ground for those who are driven by that desire and provides all that is needed for success with a startup (as do other centers of startup activity).

What drives the Valley, then, is not failure as such but rather the large number of smart, disciplined, talented people who want to do something special in hopes of getting large rewards. Those people are not afraid to fail but their very essence is to try to avoid it at all costs while chasing after the prize of success.

A better premise for the article would be that tolerance of failure is an enabler in Silicon Vally and that intolerance of failure is debilitating elsewhere.

If the Japanese market for start up companies is open, but the culture is a problem, there could be an opportunity to run a start up from Silicon Valley but targeted at Japanese market. Especially if it is an internet service start up with minimal physical presence. I understand not being immediately present in the target market means that you can become out of touch with it; also some legal issues might arise, but an opportunity is there.

I won't say that is impossible, but anyone wanting to execute on it needs to have a team where everyone speaks a lot better Japanese than I do, and your odds of recruiting that team stateside are pretty slim.

I was thinking more of a team of entrepreneurial native Japanese who simply decided to do it in US in search of better start-up culture.

Feel free to talk to Japanese entrepreneurs about their sorrows sometime, because I don't want to speak for them, but I don't think moving to the US addresses the concerns of the three stakeholders who I generally hear mentioned: girlfriends, parents, and prospective future employers.

Maybe some US funds could offer a good "cover story" for Japanese immigrants if they fail?

Ginzametrics has a relatively high percentage of customers in Japan and I run the company from Silicon Valley. But I also spent 2.5 years in Tokyo making connections and building relationships.

Without that time spent, selling into the Japanese market with no local presence or understanding of how things work there would be exceedingly difficult.

Just fyi, this was originally on techcrunch: http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-h...

This doesn't make sense to me. Doesn't that mean, that Japanese (and German, and Indian and anywhere else in the world) markets are completely open to (and from a certain point of view desperate for) startups? I understand problems with getting funding or the right people, but can't you import those?

From the article:

In Germany, for example, company founders are held personally liable for unpaid debt for up to 30 years—even after they declare bankruptcy.

Surely Germany has limited-liability corporations. How is it that a startup there can't use such a structure?

Can anybody expand on what he talks about with regards to the German bankruptcy laws?

Yes, I´m interested too... Germany has nothing like as a Limited Liability company ???

They do, of course. There's the GmbH ("Corporation with limited liability"), which is pretty much exactly like a LLC. Recently, they also added the UG ("Unternehmergesellschaft") which is the same thing save for less statutory base capital.

But, as seems to be usual in Germany, everything is more complicated here. To found a GmbH, you basically need a lawyer and a notary. Oh, and 25k€. AFAIR founding a LLC is easier. However, thanks to the EU, you can of course found a UK Limited (Ltd.) with relatively little trouble.

Supposedly you can found a GmbH without a notary now. I don't know how well that works in practice, though.

In theory you can use a sample contract and found without a notary, in practice I have never seen it done and people I know used to recommend against it, but I haven't checked in a while.

Don't believe everything a random pundit on the Internet says. Yes, Germany has something like a Limited Liability company, since recently even without any required capital (beyond 1 Euro).

http://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4nk... (literally: Company with limited liability)

I don't know how it works exactly, and whether it's significantly different in Germany, but to register as a (foreign[1]) sole trader in Austria, I had to show proof of no convictions in my home country and declare that I had no history of bankruptcy. I vaguely remember this to be 5 or 6 years, not 30, however. If you're Austrian, they already have this information on you. As far as I can tell, either precludes you from being a managing director, sole trader or partner unless you have someone who will effectively run the business on your behalf (!).

Setting up a limited liability company (GmbH) is an expensive and complicated process here, any decision by the board of directors must be witnessed by a notary public, etc. I suspect this is why so many companies have a non-fulltime lawyer in their founding team here.

Starting a UK limited company and operating it from Austria or Germany seems to be the main way to avoid all this cruft these days. The filings required in the UK are much less bureaucratic and arcane, plus there's no lower limit for starting capital. (Austrian GmbH require €35k initial capital, at least half of which must be cash)

That investors here are super conservative and don't "get" technology is pretty much common knowledge. Being so conservative, I can see how a company where some of the founders had previously been involved in a failed startup wouldn't stand much of a chance raising capital.

[1] I'm a UK citizen.

"In Germany, for example, company founders are held personally liable for unpaid debt for up to 30 years—even after they declare bankruptcy."

As far as I know, this is not true and hasn't been true in many years (since 1999). You can declare "private bankruptcy" and basically get clear of debt after six years. The German Wikipedia article might be of help, using Translate: http://de.wikipedia.org/wiki/Privatinsolvenz

So the industry is "wide open" but if you fail you can be arrested? I'm not sure there are many convincing ideas to take a shot at Japan until the laws change.

Quick summation: Cargo cults don't work.

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