Silicon Insider: The Republic of Entrepreneurs

Same Valley, different game.

I spent last week in the England, first in London -- having dinner just a few blocks away from where the Russian dissident was eating polonium -- then on to the sixth annual Silicon Valley Comes to Oxford. SVCO is an event that began with a speech I gave about entrepreneurship at the Said Business School there (it was also one of my first columns) that has slowly turned into an annual institution, and one of the most popular events at the school.

The format is pretty straightforward: we invite a dozen-or-so leading Silicon Valley executives and entrepreneurs, typically on the cutting edge of new technologies or running hot new companies, to come and sit on a couple panels (one at lunchtime to the MBA students, the other in the evening to business executives from around the Thames Valley) and teach master classes in-between. There's also a cocktail party, high table dinner in one of the venerable colleges (this time it was Oriel), tours, etc.

For the students -- Said is rapidly becoming the heart of entrepreneurial education in Europe -- it's a chance to learn about the latest business opportunities, network with important industry players, and dream about starting your own company (and maybe move to Silicon Valley). For business attendees, it's a chance to learn about the hot new markets and the businesses pursuing them -- and sometimes about your new competitors (the Guardian newspaper, for example, held a private meeting with the panelists to discuss the future of newspapers).

For me, as the moderator of the luncheon roundtable, it's a chance to ask questions of tech's next superstars and get an early glimpse of the Next Big Thing, good or bad, in tech.

Last year, for example, though the theme was "social networks", the real story for me was the growing backlash against the success of Google. Watching Google's very smart new-business guy, Chris Sacca, fend off tough questions from the crowd, offered an early heads-up that the marketplace -- especially in Europe -- was beginning to fear the sheer financial, social and cultural power of the, until then warm and fuzzy, Google. Over the last twelve months, we've only seen that reaction grow in Europe, where the company's growing hegemony is not only seen as Microsoft II, but unlike here in the States, also evokes the standard anti-Americanism that lies just under the surface of European life these days.

This year, the theme was "mass collaboration", though it was barely discussed, perhaps because the subject has so completely penetrated Web reality in such a short time, that there wasn't really much to discuss.

Instead, the topic shifted to something even more interesting -- and far more exciting. It is that buried beneath all of the news about MySpace scandals and YouTube megabuck buy-outs, and all of the excitement about places like FaceBook and Yelp, there is a quiet business revolution going on in places like Silicon Valley. A unique nexus of a new competitive medium, changing entrepreneurial attitudes and an evolving business environment is leading to the rise of an entirely new entrepreneurial business model -- one that is likely to transform the entire world electronics industry over the next few years.

Put simply, almost everything you know about the creation of new high tech companies is now probably obsolete. And what is replaced it is a remarkable combination of the old Hewlett and Packard type bootstrap garage start-up model that started the electronics industry seventy years ago, mixed with the very latest ideas about viral marketing and social networks. The result is a new business strategy – indeed a new vision of entrepreneurship -- that is open to just about anybody . . .including you. The story of the rise of the United States in the 20th to unprecedented prosperity and global leadership is ultimately the story of entrepreneurs. It was entrepreneurs who devised the new technologies and products (radar, the computer, transistor, integrated circuit, television, airplanes, etc.) that defined the century, and entrepreneurial start-ups that created most of the jobs that absorbed the astonishing population growth of those decades.

And if entrepreneurship is the story of modern American, the story of entrepreneurship is one of increasing democratization. Silicon Valley and the high tech economy were largely created by men (and a few women) with PhDs and MBAs from top schools, backed by big government money and large private funding. Each generation since -- minicomputers, personal computers, software, games, e-commerce -- has required less expertise, less money, and less education -- to play.

As I wrote in this column during the boom, by the end of the century it was possible, for the first time, for liberal arts majors with a few years of corporate experience but a deep expertise in their field to go out and find millions of dollars of venture capital money and start their own enterprises. Many of them failed, of course, but looking back now it is apparent that their failure rate was no greater than their Harvard MBA and CalTech PhD predecessors -- and, like them, they managed to build some great companies.

At the time, that seemed just about as egalitarian as high tech entrepreneurship could possibly get. But the news here in Silicon Valley -- and on stage at this year's Silicon Valley Comes to Oxford -- is that the process has taken yet another evolutionary step forward to even greater democratization of entrepreneurship.

The new business model looks like this: Inhabit the Web and its various social networks deeply enough that you not only understand its strengths, but its weaknesses.

Within those weaknesses lie needs (i.e., college kids want their own, more sophisticated MySpace; people want to know what their neighbors think of local restaurants and businesses; folks want to organize and share their files of digital photographs). And some of those needs can be turned into businesses that offer solutions.

Okay, so far that sounds like every tech business of the last half-century. But now, here's the twist: let your users do all of the work. Keep your operation small -- and thus your expenses low. The Web, with its low cost of entry and operation lends itself especially well to that. Devote all of your time and energy to developing robust and intuitive tools, then set up shop on-line. Don't waste your money on advertising or marketing -- just show the product to a few influential bloggers, friends and acquaintances and let viral marketing take over from there. If you've got a good service, the number of users you have will grow exponentially.

Don't staff up. On the contrary, keep your operation small and nimble. If you've developed the right tools, your users will build you site for you -- and rather than complain, they'll thank you for the opportunity and beg for new challenges. Also, unlike traditional companies, don't worry about a follow-up product; or, for that matter, a long-term strategy. You won't be around that long. In fact, don't even worry about revenues and profits. Instead, work on perfecting your service, building user numbers and loyalty. Most of all, try to be the cool new thing that everyone is talking about.

Now, here's the biggest twist of all: don't worry about building the business. Don't go out and take on a lot of venture capital investment -- indeed, trying to keep from taking any VC money at all. And abandon that traditional entrepreneurial dream about building a giant company and taking it public. Rather, think of your company's service as a 'feature', best suited to be part of a larger existing service such as Google or Yahoo!

In other words, position yourself for a fast sale to a big, established Web company. You may not make a billion (though the YouTube guys did just that), but the millions you get will be almost all yours -- and you won't have to worry about shareholders, post-IPO lockouts, SEC investigators, vesting periods, etc. You just take your money, pay Uncle Sam his capital gains, and go start your next company.

It's that easy. And that democratic. And if you have any entrepreneurial dreams at all, now is your moment. That was the message of the SVCO panelists this year -- and many of them were living it. Bob Goodson, director of sales and business development at Yelp, was working on a masters degree in medieval literature when attended SVCO three years ago. Alex Welch, CEO of the hot new image sharing company Photobucket, graduated from Colorado State just a couple years before co-founding the company. Matt Cohler's company, Facebook, where he is VP of strategy & business operations, was founded just two years ago for $500,000 and is reported to have recently fielded a buy-out offer from Yahoo! for $900 million.

For us who cover the industry, this new business model raises some questions about the growing power of acquirers like Google and Yahoo! But that shouldn't be your concern. The great news from this year's Silicon Valley Comes to Oxford is that high tech entrepreneurship is now open to everybody. And you have to be crazy not to be thinking about how you too can play.

TAD'S TAB -- Evan Williams, founder of, and a hero to young entrepreneurs everywhere for his recent re-acquisition of his troubled company Odeo (he paid $2 million to buy out his venture capitalist investors, renamed it Obvious Inc., and set it off in a different business direction), has created a cool new site called Twitter. It is basically a social networking service where you post a small headline about what you are doing at that moment, and send to all your friends via sms. The simple interface and design help make Twitter a fun and easy way to keep in touch. It's like an hour-by-hour diary of your life.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone, once called the Boswell of Silicon Valley, is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is best-known as the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the "Silicon Insider" columnist since 2000.