We are interviewing entrepreneurs, venture capitalists, and academics, from the world’s most influential ecosystems to understand what they have in common. By discussing regulation, investments streams, universities’ influence, and entrepreneurial mindsets with these experts we are trying to identify what really nurtures organic innovations. In our research, one of our assumptions is that innovation ecosystems are structured around three main pillars: Money, Talents and Culture. In this interview with SRI International (Stanford Research Institute), we discuss the specificities of Silicon Valley related to these three pillars.
Csaba Szabo is a pure product of Silicon Valley. After graduating from a university in Cluj, Romania, he came to the US to study at Stanford. Following executive roles in large companies, he is now in charge of global partnerships at SRI International (former Stanford Research Institute), a nonprofit and independent research institute behind the creation of the computer mouse and more recently Siri.
We discussed how government funded research projects are a catalyst to innovation, and how the workforce’s model in Silicon Valley is unique.
I. A federal regulation that primed the R&D pomp
To our own surprise, Csaba started our discussion by sharing that one of the key moments in the history of Silicon Valley was linked to a regulatory change made in Washington, DC. Indeed, adopted by the Congress in December 1980, the Bayh-Dole Act was crucial to creating an environment fostering growth in Silicon Valley. It stated that universities, small businesses, and nonprofit institutions such as R&D centers, were able to pursue ownership of inventions made with federal funding. It concretely means that these players are able to commercialize IPs coming out of government funded research projects. The new law redistributed economical value created with public money to innovation ecosystems, and in the case of innovations in the computing world, to Silicon Valley’s ecosystem.
Siri: The perfect case study
A great example of the implementation of this regulation is Siri. It started as the US government commissioned the SRI International to create a AI cognitive assistant. The program was a $150M budget over the course of 5 years. During the project SRI developed a Cognitive Assistant that Learns and Organizes (CALO), and concurrent with the legislation mentioned above it was still able to patent and use the technology they developed for commercial purposes. Thus in 2008 it took the technology to market by launching the start-up Siri, which was acquired by Apple in 2010 for a couple of hundred million dollars.
R&D breakthroughs were leveraged by emerging tech giants
Many universities and the venture community benefited from the Bayh-Dole act, especially in the bay area where there is a dense network of research one universities including UCSF, UC Berkeley, Stanford, UC Davis. Moreover, it attracted top talent of people who wanted to work on funded applied research projects, which later could be spanned out or licensed.
Finally, it contributed to the development of the Silicon Valley eco-system. Tech entrepreneurs and large tech companies found this pool of talent attractive and strived to transforming government funded and thus de-risked / proven technology into concrete applied R&D projects and new innovative products. As mentioned by Csaba, large tech companies emerged as they leveraged these technological breakthroughs, such as robotics surgery (Intuitive Surgical, Verb Surgical) speech to text technologies (Nuance, SIRI), etc. Even Facebook was able to scale where many thought it wasn’t possible and that is because they leveraged cloud computing unlike Myspace.
A model where capital and R&D incentive converged
It is interesting to observe that this regulation, in early 1980’s, arrived at the same time as the maturity of venture capital. Each element complementing each other, it created a good breeding ground for upcoming waves of tech companies. Now, of course, venture capital is seen as one of its main assets in Silicon Valley but it is important to be reminded that it is not the unique match to light the fire. Regulation was also a key component.
II. Talents are a scarce and liquid resource decided to solve big problems
Workforce is required to be a liquid asset in the innovation sector as you need different skillsets at each phase of technology development, for example for research, early feasibility and proof of concept you need top notch research scientist with advanced degrees. These are hard science problems that only few minds can crack. While for prototyping, testing and validation you need less Principal Investigators and more Systems Engineers and Product Development people. The labor market in Silicon Valley has adopted to this need as tech companies acquire or hire or acquihire specific skillsets in a finite amount of time to solve hard challenges. However, once the challenge is solved, people move on to fund their next venture or join another team on the bleeding edge, rather than stick around and support the same product for the next 5-10 years. For example, some members of the original SIRI team left Apple in 2014 and while some came back to SRI others went on to fund Viv a next generation Personal Assistant, which was acquired by Samsung in 2017.
Tech engineers as a rare commodity
As the technical skills’ offer is low and demand is really high, people have the possibility to move around a lot in Silicon Valley. The average time of an engineer in a company is 2 years. Csaba gave another clue of why this is the case. In the tech industry, technical jobs do not evolve much over the years. An engineer who joined Facebook in 2010 would still be working on the same core project in 2017. There is a willingness to apply the same technology, but to a different problem set, vertical or environment. Just think of FinTech, EdTech, ConstructionTech, etc. start-ups often leverage the same Machine Learning technologies to solve different data problems.
The importance of solving big challenges
In Silicon Valley, the choice to work for a company is mainly based on the type of projects that will be offered. To attract top talent, it needs to have a large enough problem, whether it is a technical problem or to executing a large vision. Silicon Valley is a magnet that attracts talents from all around the world because companies here are able to offer the most exciting problems and the right environment to solve them.
Analyzed through the lenses of Talent, Culture and Money, Silicon Valley is the richest and the most powerful innovation ecosystem in the world. Entrepreneurs and technological experts are converging to the Bay area to find the financial supports they need and the required entrepreneurial mindset to build disruptive innovations. For each of these pillars, we found top-notch players. Stanford, Berkeley and UCSF are among the best universities. IDEO, the agency behind the Design Thinking methodology, was founded in San Francisco. The open source movement started among coders here as well as the makers movement. Lastly, Silicon Valley invented the venture capitalist model 60 years ago and now hosts the most powerful VC firms. A key information that was brought by Csaba during this interview is the importance that regulation had to initiate the change in the structure of the ecosystem. It explains its current reign.
More about Csaba Szabo:
Csaba holds a B.S. degree in economics and an M.S. degree in corporate finance from the University of Babeș–Bolyai, as well as an M.S. degree in management from Stanford University. he’s a senior manager of global partnerships at SRI International.
His role at SRI International leads him to identify large corporate’s pain points and see how SRI’s pool of PhDs and experts can build a solution that would provide them with a substantial ROI. As part of a non–profit research institute, he is at the center of the ecosystem where private – tech companies, Stanford, industry leaders – and public players – government, universities – are gathering to build innovative projects.
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