May 8, 2014 12:00 am JST

Silicon Valley reels in talent and pumps out innovation

KEIICHI MURAYAMA, Nikkei senior staff writer

SILICON VALLEY -- Soujanya Bhumkar, CEO of San Francisco-based Cooliris, is typical of thousands of aspiring Asian IT entrepreneurs drawn to Silicon Valley.

     He grew up in Mumbai, watching his parents struggle to raise funds for their business. Looking to escape India's stultifying bureaucracy, he studied management at the University of Chicago in the late 1990s before making his way to the West Coast. One of the things that drew Bhumkar to the U.S. high-tech mecca is its openness to "crazy" ideas, he says, citing the example of corporate lawyers who are willing to offer their services to startups even before they begin turning a profit.

     Cooliris, which has developed a photo-sharing app of the same name, has forged tie-ups with global Internet companies including Yandex, a Russian search engine operator, and Tencent, the big Chinese social network. Its backers include Kleiner Perkins Caufield and Byers, a renowned Silicon Valley venture capital firm and an early investor in Amazon.com and Google.

     Stories like Bhumkar's abound in the area. In Mountain View, south of San Francisco, works Yi Li, CEO of Orbeus, a company that is drawing attention for its image-recognition technology that identifies faces, scenes and objects.

     Yi was raised in a coal-mining town near Beijing. In 2009, she went to the U.S. to see what was happening outside China. She got a job on the East Coast and later started a business with friends.

      Silicon Valley's climate is one of its attractions, Yi says. The sunshine helps her deal with the pressures of the job. And with so many other entrepreneurs around, Yi does not feel alone in her struggles. She says Orbeus does not have to worry about making money right away because Silicon Valley respects "cool" technologies.

We built this valley

According to the 2014 Silicon Valley Index, 36% of the roughly 3 million people living in the area are foreign born. Of those, around 60% or 600,000, hail from Asia. Nearly 60% of the area's Asian adults have bachelor's degrees or higher qualifications. In short, Asian talent, whether at venture businesses or big companies, plays a crucial role in the innovation that has become synonymous with Silicon Valley.

     The Mozilla Foundation, developer of the open-source Firefox Web browser, is headquartered in Mountain View. The office, with its many conference rooms, embodies the foundation's collaborative ethos as it works with IT engineers around the world to improve its product. Mozilla has turned to Asia for help with its fledging smartphone platform.

     Andreas Gal, who oversees development of the Firefox OS mobile operating system, said Mozilla decided to open a research center in Taipei two and a half years ago because it realized it could never have gotten Firefox smartphones to market from Silicon Valley alone. The Taipei facility, with its 130 or so developers, now serves as the organization's main research hub.

     Chinese startup Spreadtrum Communications will supply the chipset for a smartphone Mozilla plans to sell at the eye-poppingly low price of $25. Taiwan's Hon Hai Precision Industry, which made its name assembling Apple iPhones, is teaming up with Mozilla to produce mobile devices.

     The "Firefox economic bloc" thus owes its existence to the Silicon Valley-Asia connection.

From cog to linchpin

Quanta Computer of Taiwan makes servers used in data centers at leading U.S. Internet companies, including Google and Facebook. Although Quanta has taken a hit in its contract notebook-computer manufacturing business, Toshiya Otani of TransLink Capital, a Silicon Valley investment company, says Quanta is an expert at producing cutting-edge cloud computing systems and has a "considerably high level of technology." 

    Asian companies can no longer be dismissed as easily replaced subcontractors, and their importance in the IT industry is growing. But since the invention of paper and gunpowder, Asia has not been known for world-changing innovations.

     In 1999, in the wake of the Asian currency crisis, the government of Hong Kong set up Cyberport, an IT research hub in the western part of the island. The idea behind the center, which was created with the support of local business leaders, was to foster venture companies that can prod the economy along.

     The government thought that the island city, with its relative lack of political and social constraints and top-flight educational institutions such as the University of Hong Kong, would be an ideal setting for the creation of innovative companies. The metropolis also allows free flows of people and capital and integrates technologies and cultures from East and West. But despite high expectations, 15 years on Cyberport has yet to produce a single global company.

     Nevertheless, it would be a mistake to write off Asia's capacity for innovation. Just ask David McClure, founding partner of 500 Startups, a company that invests in and gives guidance to new enterprises.

    For about half of the year, McClure is surrounded by entrepreneurs from the 30 or so venture businesses operating out of his company's office in San Francisco. The other half of the year he spends overseas, visiting around 20 countries to meet up-and-coming entrepreneurs. China and India are important stops on his itinerary. McClure's company invests in some 70 Asian concerns and hopes to raise that number to 100 by the end of the year.

     Not all innovations have come out of Silicon Valley, and it is only a matter of time before Asian companies start spearheading innovation themselves, McClure said, citing as an example Chinese-born WeChat, now a leader in the field of chat apps.

     Noting that it took Silicon Valley 50 years to foster its risk-taking culture, McClure said Asia, with its huge population, holds vast potential for technological development.

Directing the drive

Fostering that potential is one aim of The Indus Entrepreneurs, a nonprofit organization in Santa Clara, California. Founded in 1992 by successful entrepreneurs from the Indus region of southern Asia, TiE now boasts more than 10,000 members worldwide and is helping entrepreneurship filter into India.

     Five years ago, TiE President Venktesh Shukla said, ambitious young people in Bangalore wanted to join big companies such as IBM, Cisco Systems, Microsoft and Google. Now they join startups or launch their own businesses.

    The emergence of local heroes such as Flipkart, a cross between online retailer Amazon.com and logistics company United Parcel Service, is also inspiring the next generation of innovators and helping Indian companies shed their image as subcontractors in the IT sector.

     Improvements in Internet access and other recent developments have significantly lowered the hurdles facing would-be entrepreneurs. With the startup bug biting more people, the next challenge for Asia is figuring out how to harness its innovation potential.

    A look at Cooliris offers a pointer: CEO Bhumkar describes his company as a "global team," with 18 workers carrying 11 different passports among them, including those of Australia and Germany.

     Innovation is triggered by bringing together different cultures and different ideas. To attract top-notch global talent, Asia must overcome the barriers hampering innovation, including political repression, social rigidity and a pervasive disregard for intellectual property rights. Only then can the region prove its real strength.