John Hennessy shared his observations of the evolution in Silicon Valley with TMTPost Group's founder and CEO Zhao Hejuan in her live talk show.

BEIJING, December 11 (TMTPOST) － Google’s parent company Alphabet chair John Hennessy observed that the dynamics of Silicon Valley startups has changed dramatically in terms of financing scale, innovation model and failure rate.

In repsonse to a question from TMTPost Group founder and CEO Zhao Hejuan, Hennessy, the helmsman at Stanford University from 2002 to 2016, said that the financing a startup requires is many times more than it did over a decade ago.

Before Google floated its initial public offering in 2004, six years after it was founded, it received about US$20 million in its total financing. It was already profitable when the search engine startup received its first venture capital investment. In contrast, the ride-sharing startup raised about US$25 billion in a combination of debt and equity funding prior to its public listing in May 2019, about 125 times as much as Google reaped.

“So the scale of these companies and the rate at which they are being built has been shifted dramatically by the availability of capital and the amount of capital that's being deployed,” said Hennessy, a veteran of the computer industry.

A second shift in Silicon Valley is that many more companies are business model innovators, rather than technology innovators in the past. He regarded Amazon as a business model innovator primarily, although they've done a lot of technology since then. “They started out by switching to e-commerce and using that business model, while Apple and Google were both technology-based company,” he pointed out in an interview with Zhao in her live talk show program "He Why".

The third change is that more companies are being founded every time there is a new technology or business model and thus the chance of a success for a startup fell from 30% to less than 10% now, he noted 

“There are now five or six companiets being founded every time there's a new idea, so there are many companies rushing to the same space which means that lots of things may determine which ones are successful. How much capital do they have? How good is the management team? A lots of things beyond the initial idea of what they were going to focus on and that's a real change,” he elaborated on the level of competition between startups.

“The venture model has shifted over time. You know when I started my first company 40 years ago, roughly a third of the companies coming out of Stanford were successful at some level. Today probably less than 10% are successful,” he explained by giving numbers. “There are big successes but lots of, lots of failures and that's a real change in how the venture market operates over the last 40 years,” he added.

Hennessy has been chair of Alphabet Inc. since February 2018. Prior to that, he was an independent director at Google and Alphabet from 2007. He was Stanford University’s tenth president from 2002 until his retirement in 2016, leading the university to become more academically competitive in a rivalry with Ivy League schools including Harvard and Yale. He joined Stanford’s faculty in 1977 as an assistant professor of electrical engineering.

He is also a laureate of the 2017 ACM A.M. Turing Award, along with retired UC Berkley professor David A. Patterson.

John Hennessy is the chair of the Board of Google parent Alphabet Inc.

In addition to his outstanding academic and leadership achievements, Hennessy co-founded chip design startup Mips Computer Systems, which was acquired by Silicon Graphics International in 1992.