Case Study: Adapting the SiliconValley model to the Philippines

Economic Growth through TechEntrepreneurship

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Why is tech entrepreneurship important? Economic growth!

“If the companies founded by MIT graduates and faculty formed an independent nation, the revenues produced by the companies would make that nation the 24th largest economy in the world. The 4,000 MIT related companies employ 1.1 million peopleand have annual world sales of $232 billion. That is roughlyequal to a gross domestic product of $116 billion, which is a little less than the GDP of South Africa and more than theGDP of Thailand.”

“MIT- the Impact of Innovation”, 1997 BankBoston report

A 1997 study done on the economic impact of companies launched from one university’s ideas (MIT) shows that :

• 1.1 million jobs were generated• annual sales of $232 billion USD• more than the GDP of Thailand

What is Silicon Valley anyway ?

• hotbed of technopreneurship• a region of Northern California south of San Francisco• started in the 1930’s, when Dean Terman of Stanford built the Stanford Industrial Park• has Stanford, UC Berkeley, lots of tech companies, venture capital (Sand Hill Road)• most innovative region in the world• copied by many countries around the world

• Hsinchu Science Park – Taiwan• Bangalore – India• Multimedia Supercorridor – Malaysia• Shenzhen, Zhongguancun (Beijing), Pudong (Shanghai) - China

Source : G Hu, “Innovation and Growth in Hsinchu Science-based Industrial Park, Chinese Taipei”, November 1998, ITRI

Taiwan’s economic growth took off with the opening of Hsinchu Science Park !

•Founded in 1973, Hsinchu is now the heart of Taiwan's technology industry

•221 companies with 60,400 employees

•Top science and engineering universities relocated to Hsinchu

•Located outside Taipei, to insure that “new thinking” would dominate

•Helped to drive Taiwan’s GDP growth to an annual average of 6.3%

•Responsible for some of Taiwan's most successful companies

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6,000

8,000

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GDP/Capita (in USD) 360 2155 7244 11163

Number of Companiesin HSIP

0 7 121 180

1970 1980 1990 1995

Hsinchu Science Park Opened

What makes Silicon Valley work ?

Silicon Valley = strong universities +

plenty of scientists + entrepreneur stories +

culture of risk taking + venture capital

located in one place!

Locating everything in one place insures a critical mass of scientists/engineers; helps merge the financial, technical, industry social circles; and creates a culture for that place.

academe

Putting all these groups/institutions in one place insures that their social circles converge, creating more relationships, encouraging more funding and more entrepreneurs to come out!

capital entrepreneurs

industry

“It is no surprise that nations and regions around the world seek to replicate the Silicon Valley experience, to capture the economic benefits of technological advance. Yet most of these efforts have foundered. Planners and policy-makers typically adopt some variant of the "high tech recipe," believing that if they combine a research university, a science park, skilled labor, and supplies of venture

capital in a nice environment they can "grow the next Silicon Valley." What they fail to recognize is that the relationships that Terman created in the region are as essential to Silicon Valley's continued dynamism as the presence of educational institutions or supplies of skill and capital…

The geographic proximity of the region's firms facilitates these high rates of inter-firm mobility. Moving from job to job in Silicon Valley is not as disruptive of social, personal, or professional ties as it can be elsewhere in the country. Silicon Valley executives joke that "people can change jobs here without changing car pools….

The geographic concentration of skill and know how in the region enhances the viability of local start-ups. Moreover, several decades of entrepreneurial experimentation has generated a rich and highly diversified technological infrastructure….

The large firms in Silicon Valley have organized themselves to exploit the regional advantage provided by location in a rich technological infrastructure. By focusing on what they do best and purchasing the remainder from other specialists they have created a network system that spreads the costs of developing new technologies, reduces product-development times, and fosters reciprocal innovation. …

Innovation in Silicon Valley is thus an inherently social process: it is only through participating in a community that entrepreneurs pioneer the technological and commercial breakthroughs that have fueled rapid regional growth. And yet without opportunities for intensely competitive and single-minded individuals to achieve personal status and wealth, this self-organizing and technologically dynamic industrial system would simply grind to a halt. Frederick Terman's brilliance lay in his ability to envision and foster a technical community that transcends the boundaries between individuals, firms, and other local institutions- -and one that balances the ongoing tension between individual autonomy and collective endeavor.”

Some quotes from Silicon Valley expert AnnaLee Saxenian:

“Creating a Twentieth Century Technical Community: Frederick Terman’s Silicon Valley”, by AnnaLee Saxenian, November 1995.

Route 128, MA

Hsinchu, Taiwan

Zhongguancun, Beijing

Bangalore, India

Other places like Silicon Valley

© 1997 BusinessWeek

BW: I want to reel back again to the beginning, which is talking about what makes Silicon Valley work. What makes it special? What's so unique about this place?

ELLISON: Well, it's like Hollywood. It's a huge concentration of technology companies. So there is incredible cross-fertilization in the orchard.

It's just not apricots anymore. And the fact that there's this incredible proximity, and people run into each other a lot. There is tremendous bandwidth of communication…

Larry EllisonCEOOracle

Andy GroveFormer Chairman/CEOIntel

GROVE: … When Intel started and for some years after that, I think, the most important

factor was that the whole ecosystem was concentrated in a short distance. You know, we didn't have a machine shop, so we drove a few blocks and found a machine shop.So it was very easy to start a non-vertically-integrated company. And it's very difficult to be a startup if you have to do your whole vertical integration job. So it was a lot easier to do a startup because you did not have to do everything, because all of these things were available, as if you had them all under one roof.….and there proximity helps. If you are located in Japan, you are a ten hour plane ride away from a meeting -- it's a lot easier to do business with people that you can get to fairly rapidly.

Geographic proximity is important!

Technology and money are not enough.

A culture of risk taking and networkingis essential.

It’s about success stories that get passed around.

“It is no surprise that nations and regions around the world seek to replicate the Silicon Valley experience, to capture the economic benefits of technological advance. Yet most of these efforts have foundered. Planners and policy-makers typically adopt some variant of the "high tech recipe," believing that if they combine a research university, a science park, skilled labor, and supplies of venture capital in a nice environment they can "grow the next Silicon Valley ." What they fail to recognize is that the relationships that Terman created in the region are as essential to Silicon Valley 's continued dynamism as the presence of educational institutions or supplies of skill and capital.”AnnaLee Saxenian, “Creating a Twentieth Century Technical Community: Frederick Terman’s Silicon Valley”, November 1995.

HP founders Dave Packard and Bill Hewlett posing in front of their famous garage in Palo Alto, CA(photo from the BBC website)

Steve Jobs in front of his garage,where he made the first Apple computer.

Fancy buildings may help, but it is the stories that really matter…

We need stories of successful tech entrepreneurs that can be handed down from generation to

generation• Who is Peter Valdes ?

• Native of Olongapo, Pampanga• IE graduate from UP; taught Operations Research at DLSU• His mother asked him to get a better paying job• Moved to the US to study for a PhD in Computer Science (UoM)• Worked for IBM doing systems development work• Founded Tivoli Systems with a few colleagues from IBM• Got venture capital funding from Kleiner Perkins Caulfield and Byers • Tivoli Systems eventually sold to IBM for $743M

• Who is Leo Yau ?• Native of Cebu, Philippines• Graduate of the University of San Carlos, University of Illinois• Retired, in the 1990’s – one of only 20 Intel Fellows• Well known international scientist, 20 US patents.• Developed the “Yau Model” for semiconductors

• Who is Dado Banatao ?• Native of Cagayan, Philippines• graduated from Mapua, moved to the US• pursued his MS EE at Stanford University• founder of S3, Mostron, Chips and Technologies, etc.• founder, Tallwood Venture Capital

Informal venues (e.g. watering holes, hobbyist clubs) help facilitate information exchange and networking

“Every year there was some place, the Wagon Wheel, Chez Yvonne, Rickey's, the Roundhouse, where members of this esoteric fraternity, the young men and women of the semiconductor industry, would head after work to have a drink and gossip and brag and trade war stories about contacts, burst modes, bubble memories, pulse trains, bounceless modes, slow-death episodes, RAMs, NAKs, MOSes, PCMs, PROMs, PROM blowers, PROM blasters, and teramagnitudes, meaning multiples of a million millions.”

Tom Wolfe, "The Tinkerings of Robert Noyce: How the Sun Rose on the Silicon Valley " Esquire (Dec. 1983) 346-374.

“The Homebrew Computer Club, for example, was started in 1975 by a group of local microcomputer enthusiasts who had been influenced by the counterculture ethic of the sixties. They placed a notice on bulletin boards inviting those interested in computers to "come to a gathering of people with like-minded interests. Exchange information, swap ideas, help work on a project, or whatever." The club became the center of an informal network of microcomputer experts in the region, and eventually more than 20 computer companies, including Apple Computer, were started by Homebrew members.”AnnaLee Saxenian, “Creating a Twentieth Century Technical Community: Frederick Terman’s Silicon Valley”, November 1995.

Business Plan Competitions can help (MIT Philippine Emerging Startups Open

http://www.pesochallenge.org)

A technology business plan competition open to mixed teams composed of Filipino techies and friends here and abroad.

Also helps bring out the “support ecosystem” of VC’s, IP lawyers, mentors, policymakers, etc.

Venture Capital, Mentors and the Markets

• Angels are just around us, even in the University• VC’s are in the financial district, we need to attract them here• Mentors for tech startups just as important (e.g. technopreneurs, advisers)• Access to markets is also important (e.g. Japanese, US, Europe)

Diliman-Loyola Heights Innovation Zone

Diliman – Loyola Heights Innovation Zone

KATIPUNAN

AVE

Ateneo de Manila University

CP GARCIA AVE

University of the Philippines

ACADEMIC OVAL

KEY RESEARCH LAB/EQUIPMENT

LEGEND

KEY INCUBATION ACTIVITY ATENEO INCUBATOR

UP NEC SHONO WAFER FAB

NAT’L INST OF PHYSICSElectronics

Engineering

UP AYALA TECHBUSINESS INCUBATOR

ATENEO PHYSICS/ECE/CHEM/MATH

UP NEC SHONO WAFER FAB – named after Sony Japanese researcher Dr. Shono, who donated the lab to UP. Equipment includes

• Plasma etchers• Lithography tools (Photo, E-beam)• SEM / Transmission Electron Microscope / E-beam writer• Etching tools (RIE, Wet Etch)• Ion Doping• Spin coater, Crystal Grower• Furnace (Thermal, LPCVD)• Sputtering tools• Vacuum Evaporator

UP EEE – Chip Design, specializing in RF, low power RISC and Digital Logic, Wireless, DSP, etc.

• Software tools : Cadence, Exemplar, Xilinx• Other tools : wafer test prober, Agilent precision measurement rack, anechoic RF chamber, robotics lab, DSP lab, network analyzers, etc.• Actual fab runs at TSMC 0.25 micron process• Embedded systems, robotics, firmware

ASTI

UP NIP –research includes Instrumentation, Photonics and Compound Semi Fabrication. • Lasers (Nd:YAG, Hydrogen Raman, Femto, Tunable CW laser, Argon ion lasers• Laser scanning microscope systems (all built at NIP)• Computer cluster• Plasma-based deposition devices (built at NIP)• Liquid Phase, Molecular Beam Epitaxy• Diagnostics Facility for Superconductors• Scanning electron microscopy• Raman, Photoluminescence spectrometer system

ASTI – Research on wireless (Bluetooth) protocol stack, open source software, PCB development, etc.

UP TMC

UP TMC – Policy development / technology management.

UP AYALA TECH PARK – Technology Biz incubator.

ATENEO – New incubator in development. Strong research in Grid Computing, Computer Science, Math, Chemistry, Physics. New thrusts include Wireless services convergenceHybrid Fiber / Wireless ArchitecturesRain effects on microwave linksBiomedical devices / telemedicine networks

Has an Atomic Force Microscope, etc.

KEY VENTURE CAPITAL ACTIVITY

A group of VC’s have agreed to hold office part time in the general area (0.5 days x 2/month).

WATERING HOLE FOR TECHIES AND VC’s

UP ENGINEERING

SUPPORT STRUCTURES

UP LAW(legal)

UP BAA(accounting)

Science

MathCSRC

ComputerScience

COMMONWEALTH AVE

UP AYALA NORTH S&T PARK

NOTE:Map is not drawn to scale.

KEY TECH POLICY CENTERS

CICT

NCC

CP

GA

RC

IA A

VE

UNIVERSITY AVENUE

Diliman – Loyola Heights Innovation Zone

Thank You