Before: Two partly-inflated balloons, connected by a pipe.
After: One balloon is fully inflated and the other fully deflated.
We thought we knew everything, but when we went to Silicon Valley we realized that there are thousands more trying to solve the same problem.
Network effects heighten the differences between “mainland” ecosystems of robust innovation and “island” ecosystems with subcritical populations.
Many American Internet businesses deliberately limit their user base to the US. There are good reasons: fraud, currency value, ease of payment, and the cost of internationalization support and customer service in multiple languages and multiple timezones. Financially speaking, there is little investor pressure to go global, because the American market is big enough to support billion-dollar exits; expansion to the rest of the world is left as an exercise for after the IPO.
As a result, many potential islands of innovation are disconnected from the mainland. Singapore is one such island, literally and figuratively. Because American startups generally prevent foreigners from signing up, the culture of American Internet media does not make the same impression on an island that, say, Amerian music or American movies do. This distinction is exacerbated by network effects.
On the mainland, in Silicon Valley, what PG calls the antidote to startup poison is freely available. Immersed in Silicon Valley with other geeks, hackers, and innovators in a serendipity-rich environment, where early adopters form a mass market of their own, entrepreneurs are naturally exposed to the leading edge: keeping up with the state of the art is as easy as going out for drinks.
On an island, would-be innovators fall into the position of Ramanujan before Hardy. Without firsthand experience of Internet innovation, seeingly only through TechCrunch darkly, they reinvent the wheel or vastly misjudge market dynamics. They see a startup on the mainland building something and attempt to clone it on the island, missing the crucial fact that the mainland startup has a business model premised on a hundred million Internet-savvy users.
Singapore and India are in a particularly interesting place: the market can speak English. Other markets like China and Indonesia decisively follow their home languages. Singapore is caught in the uncanny valley between West and East.
- Move to the mainland. The mainland is full of immigrants who prospered. Silicon Valley is home to many of the world’s best and brightest because life is easier and more interesting among like-minded people.
- Grow the island into a mainland. This is harder but more authentic. If American startups choose to ignore the rest of the world, does that doom the islands to be eternal laggards, forever a generation or two behind what the US rolls out? That’s colonialism, which has been deprecated in favour of regionalism and globalization.
- The Satellite Model means a close relationship with the sponsoring mainland. Businesses are built with Western markets in mind. Consider Israel: since the 1980s over 250 Israeli companies have listed on NASDAQ.
- Regionalism means that startups on the islands should participate in building authentic regional hubs of value, building products and services which arise from genuine local demand, and which may take very different forms – adaptations rather than clones. Indonesia does this, with indigenous innovations like Go-Jek.
- Globalization means that startups should, following in the footsteps of the best opensource software, aim to support a global userbase from the start. This requires the creation of a collegial environment (but not necessarily actual universities), a culture of inquiry, experimentation, and free expression, and many other factors. Skype and Facebook did this.