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10 January 2000

Silicon Valley? That’s showbiz

Richard Thomson finds that, with its stars, fixers and website blockbusters, the capital of the Inte

By Richard Thomson

Before I came to Silicon Valley a few months ago (an entire age in Internet time), I sincerely believed that the Internet revolution was all about technology and innovation. I realise now how laughable that notion was. It took me several weeks to understand the truth: that the Internet revolution is essentially showbiz, and that Silicon Valley is, in the way it works, in its priorities and attitudes, Hollywood’s richer twin.

Silicon Valley folk get furious when they hear this comparison. They take themselves more seriously than that. They believe that they are changing the world. But consider this: is Yahoo!, the world’s most popular website, more like the Space Shuttle or the latest Schwarzenegger flick?

My first inkling that websites are close cousins of the Hollywood blockbuster came about a week after I arrived in Silicon Valley. I was invited to observe a supper club meeting in a large international hotel near San Jose. Around 200 people turned up to eat dinner and listen to three young men give a presentation about setting up an Internet company.

In my naivety I went expecting to hear a discourse about how their technology would open up possibilities that had never previously existed. Instead we were treated to a 45-minute discussion of how to raise capital, construct a business plan, choose the right partners and market a company. It had elements of a religious revivalist meeting, a self-help class and a sales presentation. The audience listened with bated breath, gasping in admiration when someone pointed out that one of the young men had given up $10 million in share options when he had left a job at Yahoo! to join the start-up venture.

Once the talk was over I discovered that the men sitting on either side of me were looking for seed capital for different Internet ventures. As a mere journalist I was not much use to either of them, except perhaps as a source of free publicity at some point in the future. They quickly started working the room for contacts, and it dawned on me that every single person there was a wannabe entrepreneur looking for inspiration and cash.

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Not a word was said about technology. There is plenty of brilliant technology in the valley, but the brilliant geeks who produce it are not the people who have become stupefyingly rich and whom you read about in the newspapers. This is no accident. In general, they simply don’t have the necessary social skills to make big money. They are skilled artisans, but their work bears much the same relationship to an Internet business as special effects do to a film: it draws the audience, but it’s not how or why the film got made.

Perhaps it is no accident that Silicon Valley shares so many physical characteristics with Los Angeles: the endless urban sprawl, the bad architecture, the constant traffic jams. But it’s what they share deeper down that makes them two sides of the same coin: Silicon Valley is no more about technology than Hollywood is about high culture. Both places are above all about business, which means money, marketing and personal contacts.

Like Hollywood, Silicon Valley has its stars, fixers, mavericks and corporate suits. The stars are the successful entrepreneurs, like Jim Clark (the only man to found three $1 billion companies), or whoever the latest twentysomething start-up millionaire happens to be (quickly forgotten as soon as the next one comes along). The agents and producers are the venture capitalists, the shadowy, somewhat sinister and spectacularly greedy individuals who put together deals, finance young companies and take most of the profits. The studio heads are the big corporate executives from Intel, Oracle, Apple and others who can make you a millionaire overnight if they buy your start-up company or squash you like a bug if they decide to compete with you head-to-head.

As in Hollywood, everything depends on who you know. Deals are made beside the pool, at the barbecue, over breakfast. At its heart, Silicon Valley is a tight little clique. If you break into it, you’re made. If not, your chances of becoming a millionaire are slight because you won’t be able to raise the capital to start up the brilliant little Internet business that will be a $500 million company next year.

You need rare skills to succeed. By far the most important of these is the ability to network. To do this effectively, you must have the stamina of an ox, be equipped with at least 150 business cards at all times and understand the rules of the game.

As you become more of an insider, your conversations at every social event will turn quietly and urgently to the subject of share options – yours and other people’s. Share options, as we now all know, are the true path to unimaginable wealth. You will become expert at assessing the relative merits of different options packages. You will gossip about them with the same avidity with which people in the real world gossip about their neighbours’ sexual proclivities.

You slip off the networking treadmill at your peril: for, at the next party you go to, you may meet that key person who decides to give you a break.

The other skill you must have in spades is supreme salesmanship. Like any Hollywood producer or scriptwriter, you must be an expert at telling your story, briefly and compellingly, to sceptical moneymen. In Silicon Valley parlance, you must master your “elevator pitch” – selling some jaded venture capitalist on your idea in the 90 seconds it takes the elevator to reach his office on the fourth floor. You must conjure up the images that will most beguile him. The plot: you will take the company from zero to fabulously successful initial public offering in almost no time. The audience: everyone in America with an income of over $70,000. The payoff: the venture capitalist will turn a $10 million investment into $200 million in 18 months. If you can win the support of legendary figures such as John Doerr, of the venture capital company Kleiner Perkins Caufield & Byers, your success is assured.

Venture capitalists, like Hollywood executives, are rumoured to be human. You may catch one in a benign mood, or when he’s under pressure to make a new investment. But by far your best chance lies in the combination of a great sales pitch and your boast that you worked at Yahoo! in the early days, or are a personal friend of Jeff Bezos (founder of Amazon) or your dad was a pal of Bill Hewlett (co-founder of Hewlett-Packard and, some say, of Silicon Valley itself). If you succeed, your company will become the venture capitalist’s next great production and you’ll be cast as the leading character – at least for the first year or two, until he decides to fire you.

Once you have got your finance and constructed your website, you must go out and get an audience. Just as any given $100 million Hollywood blockbuster will spend at least $50 million on marketing, any self-respecting Silicon Valley website will spend anything from 30 to 100 per cent of its entire budget on advertising and branding. As (although based in Seattle, it is the archetype to which most Silicon Valley start-ups aspire) never tires of explaining, if it stopped spending hundreds of millions on its marketing, it would actually make a profit. What it is less willing to admit is that it cannot stop the spending for fear that its audience would drift away to more heavily promoted online bookstores. It is in the same bind as a Hollywood film in the midst of the summer movie season: there is a brief window of opportunity to grab an audience, but intense competition makes expensive marketing mandatory.

Like the star of a new film, the head of a new website must give endless media interviews. He can boost the marketing by being photogenic and good at the sound-bite. Jerry Yang, a founder of Yahoo!, and Jeff Bezos of are so expert that they have managed to turn the development of their companies into a form of soap opera. Every month there is a new plot twist – an acquisition, for example, or the hiring of some Internet star – while Yang or Bezos appear all over the media commenting on their latest moves.

In appearance, the denizens of Silicon Valley cultivate a homespun casualness, with their khakis and button-down shirts, which seems a world away from Hollywood’s glitter. But the difference is only skin-deep. Steve Jobs, computer-land’s original pin-up boy, for instance, has always exuded film-star glamour. The cars of choice, in Silicon Valley as in Hollywood, are Mercedes and Porsches. The houses of the rich and famous in both places are enormous, secluded and protected behind high walls. They even cost about the same, since Silicon Valley narrowly overtook Beverly Hills in 1999 as the most expensive real estate in the US.

For all their similarities, however, there are still a few important differences.

One is the amount of money involved. We have been taught to think of Sylvester Stallone as fabulously wealthy because he earns $20 million per film. If he makes one film every two years, he earns $10 million a year. This, frankly, is chicken feed to a successful 30-year-old Silicon Valley entrepreneur who might be worth $200 million when his company goes public two years after being founded. And what Hollywood studio is worth anything close to the $40 billion stock-market valuation of, which isn’t even four years old? Silicon Valley is Hollywood’s rich relation, and since both places revere money above all, they both accept the right of the former to look down on the latter.

If Silicon Valley scores on money, however, Hollywood scores on sex. Hollywood is stuffed to the gills with beautiful people who find each other irresistible. Coveting thy neighbour’s wife is a cherished way of life. The casting couch and cocaine-fuelled bacchanalia are among Tinseltown’s enduring symbols.

But sex in Silicon Valley – especially if you’re heterosexual – can be difficult. In 1999, the place had the dubious distinction of replacing Anchorage, Alaska, as the spot in the US with the highest concentration of single males. It is unclear whether this is because the men who live there are working too hard to bother with women, or whether they work so hard because there are so few women to bother with. What is clear is that wife-swapping is not a way of life. Indeed, for thousands of men unable to find mates, legitimate wholesome monogamous marriage isn’t a way of life either.

Which is why, if one was offered a Faustian alternative between living in Hollywood or Silicon Valley, the choice would be quite simple. Given that their devotion to money, status and the business deal is about equal, lifestyle would be the deciding factor. In this category, at least, Hollywood still wins hands down.