Impressions from the Bay Area and Silicon Valley

For the last few days I've been traveling in the Bay Area, which includes San Francisco and Silicon Valley. Never before has a trip inspired me so much and shown me so clearly how small-minded we Swiss are.

Innovation everywhere

In Europe we often make fun of the fact that every entrepreneur in the Bay Area goes crazy and pretends to be a startup in stealth mode, even if they don't actually do anything. In my opinion, this is a complete misjudgment. Due to the proximity to Stanford University or Berkeley, among other things, nowhere else are there so many smart people in such a small space. The many tech companies based here have proven that research projects or business ideas can quickly become large companies with billion-dollar valuations. This unique mix of teaching and success stories creates an extremely innovative climate and attracts more entrepreneurs.

If you go out here in San Francisco, you can easily get into conversation with new people. Because everyone is in the tech industry, pitching is done immediately, business models are challenged and intros are made to suitable people. What a contrast to Zurich, where you have to regularly explain what a startup is!

From Silicon Valley to the Bay Area

Just a few years ago, all startups in Silicon Valley were located between San Jose in the south and San Francisco in the north. All the well-known VCs can still be found in Palo Alto on Sand Hill Road; in houses that seem more like holiday apartments in the country.

For about five years, more and more startups have been moving to San Francisco because most employees live in the city and can therefore shorten their commute. Twitter was one of the first large companies to present this.

As a result, prices in San Francisco are now rising; For example, with an average teacher's salary you can no longer afford a central apartment. You can see that in the city: until recently the Soma District was disreputable, but since Twitter came along it has experienced rapid upgrading and the poor are being pushed further to the periphery. Very young startups are now even setting up in Oakland, on the other side of the Bay, which can be reached from downtown San Francisco by metro in about 20 minutes.

Noticeable cooling since the beginning of the year

In times of the new economy around the year 2000, VCs were worth around USD 100 million, today they often raise > USD 1 billion, e.g. from pension funds. Since VCs also have limited capacity, they can only invest in a limited number of startups. Logical consequence: The financing rounds are getting bigger.

This has led to fantastic valuations of over USD 1 billion in recent years, and the circle of unicorns has continued to grow. Entrepreneurs and a startup lawyer unanimously told me that there has been a significant slowdown since the beginning of the year. There are fewer rounds, the investments are smaller and the valuations are less high.

Here, however, this is not interpreted as the bursting of a bubble, but rather as a necessary market correction that will make the business models more sustainable again and everyone a little more down-to-earth. A reasonable assessment, it seems to me. Startups no longer want to be unicorns, but instead strive for a lower valuation in order not to be devalued, as happened with some unicorns last year.

Europe also has its advantages

Of course, funding rounds here in the Bay Area are still much higher and more frequent than in Europe. A German entrepreneur told me in San Francisco that with USD 5 million you'll probably get further in Berlin than with USD 10 million in the Valley - that's how much the costs for employees, offices, etc. have risen.

In addition to the many advantages, there are also other disadvantages in the Bay Area. One is the infrastructure: Although public transport is relatively well developed, trains and buses in Central Europe are much more reliable. Due to the long distances, it is difficult to get around outside of San Francisco without a car. What surprised me most: Even in... Coupa Cafe, the "heart" of Silicon Valley in Palo Alto, where, according to legend, many financing rounds were closed, there is WiFi, but according to Google Reviews it works very unreliably. I've noticed this in other locations too: you're in the middle of all the internet companies, but you're constantly being thrown out of the already slow internet.

With the Swisscom Startup Challenge to the Valley

Looking back, I waited far too long to travel to the Bay Area because this is the absolute place to be for every entrepreneur. I can therefore only advise everyone to come here as quickly as possible and soak up as much entrepreneurial spirit as possible.

This could be a chance for this Startup Challenge be Swisscom: As in previous years, the telco is also organizing a competition this year, which it is running together with the IFJ. Selected, promising startups are invited to the Bay Area for a week. The Swisscom outpost in Palo Alto is preparing meetings for the winners so that they can benefit from the network.

I've never taken part in a Startup Challenge, but I can well imagine that it could be very useful for a Swiss startup to immerse themselves in the Bay Area's very own world.

The application deadline is May 15, 2016.