Eric Ries: ‘Silicon Valley wouldn’t exist without immigration’

On April 8 SpaceX, the American rocket company founded by Elon Musk wrote history. Following a smooth cargo launch, a reusable Falcon 9 rocket booster touched down successfully on a drone ship in the Atlantic.

In the weeks before SpaceX’s extraordinary feat Andy Grove, the former CEO of Intel, died. In reaction to the death of Grove, Tim Cook tweeted: “Andy Grove was one of the giants of the technology world. He loved our country and epitomized America at its best. Rest in peace.” VC Ben Horowitz dubbed Grove as ‘the man who built Silicon Valley.’

What do Musk and Grove have in common? They are both immigrants. “If the USA had not pursued a liberal immigration policy in the past there would absolutely no Silicon Valley today. Many of the folks that are powering the ecosystem wouldn’t be here”, says Eric Ries in this double interview with Neelie Kroes, the special ambassador for Dutch startups who leads the publicly backed startup initiative StartupDelta. “Walk down the streets of Silicon Valley and you will find the children and grandchildren of immigrants everywhere, myself included”, adds the pioneer of the lean startup movement that has captured the startup world by storm. 

Immigration policy is just one of the measures Ries advises Kroes, who will soon finish her tenure, and her successors to focus on in creating a thriving startup ecosystem. The aim should be on confronting the stigma on failure, reducing red tape, diversity, but most importantly on doing ‘the actual work’ to create a nurturing environment for people that are most likely to become entrepreneurs.

StartupJuncture (SJ): How can a country foster entrepreneurship?
Eric Ries: “Many of the political and business leaders claim to build a startup hub, but very few seem to be interested to do the actual work that is required to do that. When talking about public policy that encourages entrepreneurship, the first question we need to ask is: 'what are people doing 5 minutes before they become entrepreneurs?' Right before entrepreneurs become entrepreneurs they were a student, employee or an immigrant. Global CEO’s don’t tend to start a company that often. It tends to be people on the margin of society. So the first thing I always ask people to think about is how does our public policy encourage those people to take a risk, to try something new.”

Neelie Kroes: “I agree with Eric Ries that disruption won’t come from the parties with vested interests, but from startups or the bright minds that make a difference and help us tackle problems with regard to climate change, our aging population, the increasing population and urbanization. That’s why I encourage startups to take risk and see failure as part of our learning curve to see how we can be successful. Highlighting successful role models such as HackerOne and Elastic will to change the negative European attitude towards failure and risk taking.

Eric Ries: “The other thing I would like to say is part of free enterprise system is that people are able to take a risk and bear the consequences of failure. But the consequences should not be extreme and disproportionate. So I know in some cultures there's a stigma: a failure in your resume makes it hard to find a job. So it feels like they are risking their whole career when they do a startup. Also bankruptcy law is a problem in a lot of places. A Dutch entrepreneur told me about the problems that they had with a lot of laws requiring them to reserve capital to deal with liquidation. This is just not doable for startups. There are so many famous startups that used every ounce of available capital. They were a day or two from going bankrupt before they managed to turn the company around.”

Neelie Kroes: “If you have failed you have learned valuable lessons that will increase the chances of success with a second or third attempt to start a business. Besides policy changes we’re also addressing institutional investors, like for example pension funds to get involved in the startup ecosystem. And we’re also challenging corporates to become less risk averse in opening up to innovation with startups. .”

SJ: What kind of policies need to be in place to enable people at the margin of society to become entrepreneurs?
Eric Ries: “There is IP protection and trade secrets laws that tend to be overly restrictive. This is considered a pro-business legislation in which companies can control their IP, and sue their employees. But actually that’s an anti entrepreneurship policy, because of course it’s much more likely that their employee will start a business. Here in California we have benefited immensely from having a very worker friendly anti-compete, non-solicitation trade secrets trade laws.” 

SJ: In the Netherlands there is a big stigma on failure. If you fail as a startup you fail as a person. Changes in culture tend to take extended periods of time. How can that be resolved?
Eric Ries: “If people in Silicon Valley would think like that we would be all be out of business. We would be all waiters. There is actually an historical, unprecedented discontinuous opportunity. Any city or country that wants to can jumpstart it’s entrepreneurial ecosystem by starting to really make the investments in fostering that kind of risk taking and innovative culture we where talking about. You need a diverse group leaders of successful entrepreneurs, failed entrepreneurs, investors, folks on the policy side, give them the cover of some kind of political leadership and say we believe this is the direction we need to move this country in and we need to demonstrate that this can work. You don’t need to change the whole culture and whole country overnight. You can incubate the culture in startup hubs and create a bubble of support for founders and use that as a proof point that that is the way to go.”

Neelie Kroes: The Dutch are too modest about their successes. We need to think big. We need to go from ‘good’ to ‘great’! We must push ourselves to compete with Stanford, for example in the niche fields of Quantum Computing or Photonics. Even saying this out loud will seem preposterous to some Dutch people. And that is thé impeding force: thinking small. Entrepreneurs shouldn’t be discouraged by the people that have forgotten how to think in terms of opportunity and possibilities. Too often I hear “we can’t” or “we don’t have these types of startups here.”

SJ: Due to the political turmoil in the Middle East immigration policy is a hot debated issue in the Netherlands. Kroes is one of the few proponents of a liberal immigration policy because it’s positive effects on entrepreneurship if implemented in the right way. What’s your take on that?
Eric Ries: “It’s hot debated issue in the USA also and we have quite a nativist backlash. If the USA had not pursued a liberal immigration policy in the past there would absolutely no Silicon Valley today. Many of the folks that are powering the ecosystem wouldn’t be here. Let me put in this way: people in silicon valley have many different political views. We have hardcore conservatives, hardcore libertarians, crazy hippies, communists, but you will not see any anti-immigration people in the industry anywhere. I have never met a single person who has nothing but the most glowing things to say about the possibilities of immigration as an engine of the economic growth that unities us as much as our love for technology.”

Neelie Kroes: “After travelling through Europe for 10 years, I now see a whole new generation which is making a difference in Europe. The internet has brought us all closer together and provided us with numerous opportunities to tackle the most important problems we face. Together. We need to invite more bright minds to Europe. I have launched a proposal for all the European member states to create a European Startup Visa for founders. This will make it possible for founders from outside the EU, to choose residency in one member state and from there on expand into Europe without going through the same procedure 27 times. Every member state should provide a startup from, for instance, Brazil or the US with a visa that will also give access to other member states. The Netherlands already has such a visa for startups.”

SJ: Studies demonstrate that cultural diversity breeds entrepreneurship.
Eric Ries: “Absolutely. It’s been very well studied. It’s a easy case on the merits, but it’s very challenging emotionally. I think it requires the political and economic leadership of a country to stand up and say that this is the path forward for dynamisms and economic growth and if our neighbouring countries are being afraid then we have a chance to eat their lunch.”

Neelie Kroes: “To me it’s evident that diversity contributes to a more creative and powerful workforce and ecosystem. Diversity is of course not only a matter of culture and background, but also gender. Therefore, I have been supporting the position of women in business. In addressing the issue of a lack in female founders and women in tech you need to be creative. I have recently collaborated on a book called Project Prep. It’s about a girl, interested in the fashion industry but learning to use tech and coding to become good at what she does. The book is currently a bestseller in the Netherlands and is appealing to many young girls who would have otherwise never been introduced to the notion that tech can be creative and sexy. So, it’s how you communicate that makes the difference.”

Eric Ries: “Eliminating gender bias is a topic I am very passionate about. We do a very poor job today of living to the idea that technology is a meritocracy. The most important thing is to adopt specific policies that counteract the implicit bias in hiring not just for tech companies, but all companies.”

SJ: StartupDelta has been quite successful in promoting the Dutch startup. Kroes has also been focusing on getting rid of red tape. What can the successors of Kroes do besides focusing on these measures?
Eric Ries: I think making a long-term commitment to this is important. Startups take 5 to 10 year to be successful. Even the overnight successes. I think you want to make sure that everyone in the ecosystem and the public too understands that this is not a passing fad, this is going to last. So I would be thinking of ways to reassure and commit to it on a long-term basis. That’s the only suggestion I have.
Neelie Kroes: “Even before StartupDelta started, the Dutch government was involved in creating a climate that is empowering to startups, and it will continue to do so after StartupDelta has stopped. StartupDelta has put startups and scale-ups high on the political agenda and connected the parties and hubs in the Dutch startup ecosystem. These parties, for instance our incubators, hubs and accelerators are specialized in building great ecosystems. That is their specialty and they’ll push on to lift the Netherlands to remain a top 3 player in Europe.”

SJ: You’re a part of the circle of influencers of StartupDelta. How will you help to promote the Dutch startup ecosystem?
Eric Ries: I am standing by to help however I can. Ultimately this is a change that needs to be led and pioneered by the people who are in the country, who know it well. But to whatever extent I can be of assistance and lean startup idea’s can be helpful to the folks of the ecosystem than I am standing by.

Neelie Kroes: Keep inspiring us with your vision and placing female entrepreneurship high on the agenda. It would be great if you could join us at Startup Fest Europe later this month along with Tim Cook, Jack Ma and Travis Kalanick.