Reputation as a Currency in Silicon Valley

This is the Chapter 13 of my e-book Silicon Valley for Foreigners, that can be downloaded for free on www.siliconvalleybook.com or purchased for $2.99 on the iBookStore and Kindle. A new chapter will be posted on this blog every week.

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Reputation is Silicon Valley’s main currency. Everything you do in this ecosystem depends on it, from raising money from credible investors to attracting talent to partnering with large companies. Usually, the more achievements you get, the more your reputation goes up.

Some of these achievements may be earned in a more traditional way such as graduating from a top university or accelerator, or by having a job at a credible company. Achievements that really boost your reputation require superb realizations such as leading a startup to a big exit, IPO or by having a high-level position at a large tech giant. Reputation goes hand in hand with one’s ability to get results and is directly proportional to the quality of your networking. If the Silicon Valley ecosystem were a game, I would separate its reputation rankings into three different categories.

In the top of the pyramid are entrepreneurs such as Elon Musk, Mark Zuckerberg, Larry Page or Jeff Bezos, creators of huge innovative companies disrupting many industries. High caliber persons such as Tim Cook, CEO of the largest company in the world; Peter Thiel, the most prolific angel investor in the Valley; Jessica Livingstone, founder of Y Combinator, the world’s most successful accelerator; Sheryl Sandberg, COO of Facebook; and Tony Fadell, considered to be the father of the iPod and who later on founded and sold Nest Labs to Google for $3.2 billion, are also in this category. Having any of these names attached to startups or projects would increase their chances of success by one or two orders of magnitude.

In the second tier, there are entrepreneurs with smaller exits or who are managing potentially disruptive startups, non-founder director or VP level executives at large tech companies, top academics at Stanford or Berkeley and prolific investors. Examples: Ryan Hoover, founder of Product Hunt; Stuart Russell, professor of computer science at UC Berkeley; and Dave Morin, founder and partner at Slow Ventures.

The third reputation tier is reserved for the rest of the ecosystem, including entrepreneurs with no exits, mid-management executives with no big accomplishments, professors, consultants, and the fifteen-year-old kids with apps being used by millions of people. People can be upgraded or downgraded to a different tier in real time depending on their recent accomplishments or failures.

Entrepreneurs arriving in Silicon Valley after graduating from most foreign universities would fit into a fourth tier. They are virtually unknown in the Valley and thus, are not recognized by the ecosystem. It helps to have achieved success in their country of origin, but foreign entrepreneurs’ reputation will directly correlate to the magnitude of their achievements in the Valley. These founders, regrettably, will take a long time to build their reputation in the Bay Area.

There are some exceptions though. Foreign founders who sold or IPOed a company for more than a hundred million dollars, anywhere in the world, are seen as impressive folks. However, they still need to prove they can do it again in a more competitive environment.

Entrepreneurs coming from countries with lots of exits, a burgeoning tech ecosystem, and positive soft power such as China, Israel, Sweden or Finland tend to be well respected in the Valley. Latin America, Southeast Asia, the Middle East, and Africa are believed to be great markets, but entrepreneurs from these countries are seen as less sophisticated and, therefore, more prone to failure in the super competitive valley landscape.

The good news is that reputation can be built with hard work wherever you come from. If you are smart, capable of creating something people want to use, and can deliver results, then people will respect you and will not care about your previous life. On the other hand, destroying a reputation is super easy and can happen overnight. Sexual harassment, fraud, lying to investors or overpromising and under delivering are seen as career destroying moves.

Pundits love to focus on the flaws of the Valley’s reputation system by citing examples of bad behavior perpetrated by founders such as Uber’s Travis Kalanick. Travis, allegedly, created a toxic culture inside Uber that fostered sexual harassment, lack of transparency, and unethical behavior.

Since he has been accused of malfeasance by the press, employees, and competitors, Travis started to suffer immense pressure from other founders, friends, and investors to apologize, fix the problems, and grow up as a leader.

I would argue that Travis is actually a textbook example of how reputation is taken seriously by Silicon Valley. I bet that, if Uber does not change soon, it will lose even more top talent and will have its valuation crushed. No one will want to be associated with a company that has dubious ethics.

The truth is that it does not matter if you believe or not in Silicon Valley’s reputation system. One of the closely guarded secrets of this ecosystem is to focus on building your own reputation. At some point in time, it may become more important than money or success.