Silicon Valley is losing its X Factor

By Alex Barrera on May 29th, 2012

I love the Bay Area and I love start-ups. I finished my degree at UC Berkeley and I have a very special love for San Francisco. Ever since I finished school there, I’ve travelled to the Bay Area at least once or twice a year. It’s become my personal ritual to avoid the tendency towards suicide after having to navigate the European mentality – specifically, the Spanish one.

It’s always worked like a charm. After being burned out for months, it’s that part of the year where I get to experience the world from the other side of the mirror. It’s always felt like that. That place is such a talent and innovation magnet it’s hard not to feel the pull; to get your batteries charged. In essence, people in the Bay Area are doers, executioners. The Nike slogan is truer here than anywhere else.

Fast forward to my latest trip to the Bay Area, just two months ago. After going back and forth for six years in a row, I discovered myself slightly in shock. Abruptly I got the impression of little energy, buzz or passion left. At first I thought it was just me. There is a truth to the fact that when you go too many times to a place, you end up getting used to it.

But it wasn’t just me. The locals are feeling it too. Everywhere I looked, I saw a lack of creativity, with new start-up incubators simply replicating what had been done 10 years ago, new start-up programs replicating what Highland Ventures did with Summer at Highland some five years ago. Half-empty coworking spaces. What is going on?

I’ve never believed that the me-too mentality, so typical of Europe, existed all that much in the Bay Area before. But it does now, and it struck me like a thunderbolt. It’s like discovering Santa isn’t real. Truth is, most of my friends there told me they were looking for greener pastures. Some are relocating to Brazil, Chile, South Africa or looking for gigs in Europe, New York or Boston. I’m talking here about people involved in multiple start-ups, some serial entrepreneurs and even senior Google and Facebook engineers.

The funny thing is, most of the start-ups I bumped into during my trip, were funded by Europeans like Stereomood or Storify, or Brazilians that had just arrived to the Bay Area. Some are the product of the fever of soft-landing programs foreign governments are promoting as the solution for their local innovation crises. “Go to Silicon Valley and become rich” is their collective chant.

But something is happening to the fabric of Silicon Valley, now that a few people at the very top of it are making their winnings and getting out.

I talked with one prominent VC in San Francisco, just to make sure I wasn’t dreaming. He had recognised the same things I was seeing and pointed out a fact which I also believe to be true: Silicon Valley works in innovation waves. We just finished the social-local one, which means we’re now on the declining wave of the innovation cycle, characterised by a lack of ground-breaking startups, a lack of imagination and creativity and, in consequence, a load of of me-too products.

Also, it’s important to note that thanks to stringent immigration policy in the US, it’s getting extremely hard to find good talent in the Bay Area. This has launched a talent race that is harming the ecosystem.

Why would you want to do a start-up out of college when you are offered internships in top companies during freshman year? Why would you do a startup when you’re being offered six-figure salaries by the Facebooks or the Googles? In other words, there is no hunger because there are fewer opportunities.

Several years ago, I would have been happy to take nearly any start-up job that would get me to San Francisco. Not any more. Europe is way more exciting right now. Yeah, I’m seeing plenty of eyeballs rolling and, to be honest, if I wasn’t so into the European scene right now I would do it myself.

Does this mean Europe is better than the Bay Area in terms of startup ecosystem? Not at all. I’m not implying Silicon Valley has lost its touch: Europe is not even close yet, but what is true is that the current game of catch-up is making the scene way more interesting and fun here than in Silicon Valley.

It seems I’m not the only one seeing this: Sequoia did their first European investment some months ago. Some argue it’s their backup plan after failing miserably in China. Either way, I’m happy to see it. What about AirBnB? Well, they just acquired their competition in London. This follows their previous acquisition of one of their German competitors, too.

Finally we’re also starting to see many cross-country investments by Atlas and Index. Some US VCs are also setting their sights on some areas of Europe like Berlin or some eastern European countries such as Poland, Rumania or Bulgaria.

On the corporate side, Telefónica just unloaded their own home-brewed start-up accelerator program, Wayra, on two continents: South America and Europe. Correct me if I’m wrong, but I haven’t seen any US corporation playing such a worldwide start-up operation. On the coworking side, Mike Butcher is expanding the TechHub across Europe.

The start-up accelerator ecosystem in Europe is incredible. Ridiculous, even. Yes, it’s true that in most cases there’s a lot of cloning going on, but they’re thriving so much, we’re seeing real innovative programs. For example, Startup Bootcamp operates out of five cities in five different countries right now.

As far as I know, in America only Techstars is doing that, and it’s only in the US. It’s also striking how some accelerators are innovating and launching start-up exchange programs between different countries, such as Startup Pirates in Portugal and five other countries or, more recently, Springboard with Tech Wildcatters out of Dallas.

Want a tech conference? Come to Europe and take your pick: LeWeb, London Web Summit, f.ounders, The Next Web, Plugg, incredible conferences in Eastern Europe like e-nnovation founded by the Allegro Group, the Polish eBay, How To Web in Romania by our friend Bogdan Iordache… the list is endless. In the US? Not so much, besides Techcrunch Disrupt, SXSW, Launch and a couple more corporate ones.

In Europe, it seems everyone is running some kind of start-up event. In the Baltics, we’re experiencing a massive start-up revolution with Startup Sauna, Startup Wise Guys, Garage48 and great tech blogs like Articstartup and Balticstartup reporting on those scenes.

Europe is getting connected. Two years ago, it was hard to find start-ups operating outside of their local borders. Now, it’s easy to bump into companies that were started in Copenhagen, moved to Berlin looking for cheaper rent, but incorporated as a limited company in the UK. This is also allowing access to untapped talent pools of engineers in places like Estonia, Ukraine, Poland or Romania.

Don’t get me wrong. We’re not there yet. Europe is no Silicon Valley, dear God. But let’s take a moment to to realise how interesting and active Europe is getting at the moment and, perhaps more crucially, how moribund the Valley currently seems by comparison.

How long will it be before we see American start-ups copying European ones on a large scale? I believe it has already begun.