The decentralization of innovation and entrepreneurship, and the competition from rival tech-hubs are not new to Silicon-Valley startups and venture capitalists. The question is whether this time is different, or whether critical masses are forming outside the Valley. During the last five to six years, 80 percent of the funding rounds of unicorn companies came from emerging markets. This represents a tidal change, as previously the largest tech company initial public offerings (IPOs) were almost all from Silicon Valley. Fifty million active internet users seem to be the magic threshold, in terms of market size, for tech companies or even a tech company ecosystem to survive. Markets like China, India, Indonesia and a few others easily pass that test. Their models are all somewhat reminiscent of Silicon Valley’s. Therefore, the trajectory of Silicon Valley can be used as a reference for investors to gauge where things stand in those markets. Some of Silicon Valley’s own creations have enabled a more distributed tech workforce around the world, further blurring the lines between Silicon Valley and non-Silicon-Valley enterprises. Another headwind for Silicon Valley is the flow of talent. The pace of tech talent flowing into the U.S. is lacking, and there is also an increase in talent outflow. Some feel that in terms of public policy (from immigration to net neutrality) the current U.S. administration has made it more difficult for Silicon Valley to compete globally. Others feel that perhaps the globalization of new company formation, or a democratization of tech entrepreneurship, are positives for the global economy.
The world of venture capital investing is also changing. One hundred million USD funding rounds are now called Series D, when it wasn’t long ago that the same dollar amount represented IPO opportunities. In effect, IPO-sized funding is being replaced by more rounds of venture funding. The advent of Softbank’s Vision Fund further disincentivizes IPOs, not to mention its potential to create dislocations in the industry. For early stage investors, new entrants like the Vision Fund could be seen as a positive. However the industry evolves, it would seem that successful venture capital investors are also those who embrace a long-term investment mindset.
Talent Strategies in the Entertainment Industry
Understanding the entertainment industry, a collection of intensely talent-dependent business models, is an exercise of studying the changes in consumer behavior and consumer demographics in different markets. Contrary to common misconception, the entertainment industry is actually not a global business. With few exceptions, media content is mostly local. Companies like Netflix and Amazon have to invest aggressively in local content by hiring or partnering with local creative talent when they enter new overseas markets.
In the U.S. market, the average American now spends 80 hours a week consuming media—a 16-hour increase from ten years ago. This increase stems from more screens—mobile and tablet devices—and their ability to help viewers multi-task. Families no longer gather in front of their living room TV. Instead, individuals get all sorts of tailored content streamed to multiple personal devices. The viewership problem of some live TV programming, such as American football, is less of a generational problem than it is an attention deficit problem, as younger viewers are distracted by other media content.