Silicon Valley’s rule book is starting to show cracks, says Alexandre Lazarow

Alexandre Lazarow is a jack of many trades. He is a teacher, investor, and recently-turned author. His book Out-Innovate was born out of his lectures and experiences as an investor. He worked in the Omdiyar Network and is currently an Investment Director at Cathay Innovation, a global venture capital fund. 

In a conversation with YourStory, he expresses his belief that startups are going to change the world. According to him, 40 percent of the publicly traded companies listed after 1979, in the US, were once startups. He loves visiting India and believes startups from India are not only going global, but are changing the world. He says that startups ecosystems are popping up all over the world and there are 480 hubs worldwide, with 10 percent of the global unicorns situated outside the US. He proposes that startups in other parts of the world must challenge the Silicon Valley-style of building business.

He spoke to YourStory about the future of technology and the startup community. Here are the excerpts of the interview.

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YS: In your book, you outline why we have to question the Silicon Valley-style of building a company, especially when it has been so successful for several years. Why?

Alexandre Lazarow: When one looks at the Valley, it has created the startup code. It has created a blueprint for startups and how they should scale. From that foundation have stemmed the narratives in the form of books, blogs, TV shows and movies about how great the Valley ecosystem is. Over time this has become associated with the lifestyle of founders and has drawn flak for bringing incremental innovation rather than striving towards path-breaking technological innovation.

Now look at the ecosystems in China, India and Israel and you will see new models emerging to challenge the Silicon Valley. Startups are beginning to build for their local ecosystems. See how Detroit, which was once the global hub for all automotive innovation, was challenged by ecosystems in Japan and Germany and finally lost its innovativeness. The Valley will have the same moment.

YS: You talk about new innovators in the world, who are they?

AL: Yes these new innovators have to fight local challenges in their country. They do not have the same infrastructure in their home country and they have to build it themselves. They use tech to change education, healthcare, financial services, energy and even infrastructure. These new innovators will be supported by the local VC ecosystems too. In my book, I call them creators rather than disruptors.

Think about it: a Silicon Valley ecommerce startup takes for granted addresses that are available, but, in many parts of the world, house addresses may not be accurate. Then the startup has to solve for that situation and there are startups which have done it. Kenya’s OkHi has done a great job of solving the lack of address problem in Nairobi. The creators are able to call on people to work for them because they are changing the world and it is not always about rewards.

YS: What according to you makes a successful ecosystem?

AL:The new ecosystem, or even Silicon Valley, needs diversity in hiring. There are very few women on the list. We also need to be able to hire immigrants and repatriates. For example, in Bengaluru, the first set of founders came back from the US and set up successful businesses. There is data to prove that immigrants are very important too. More than 50 percent of US-based unicorns were founded by immigrants. There is a whole host of companies founded by immigrants in the US. It includes Houzz, Stripe, Uber, Tesla, WeWork, and Zoom.

YS: Do you see a rise in social enterprises?

AL: A lot of founders today are socially conscious. The old model of social enterprise was to take grants from large institutions. But today, for-profit startups are motivated by social impact from the start.

In the book, I highlight how Rivigo is able to attract truck drivers on to the platform because it gives them a full load for both onward and return journeys. When the business model itself is aligned with impact thenthat is the future. In the past companies announced CSR-type programmes because they had to do so. It was not built into their business DNA.

A business should change the life of an individual in the course of running its business, and it is never about giving money to change an individual’s life after making profits. One only has to study businesses like Branch, M-Pesa, M-Kopa, OkHi, and Zola to understand how the impact is linked to product adoption and how customers use the product.

In the end, one must give back their learning to the startup world where a whole bunch of entrepreneurs are going to change the world. That’s why I wrote the book Out-Innovate: How Global Entrepreneurs from Delhi to Detroit are rewriting the rules of Silicon Valley.