FT – Inside Hacker Dojo, the soul of Silicon Valley

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The state of the American dream maybe under relentless assault, but at one tech start-up incubator it is still very much alive

The last time I visited Hacker Dojo, a co-operatively-run tech incubator in Santa Clara, I was surprised to find an Englishman sleeping rough in the car park outside. Simon Brooks, a Londoner by birth, had set off to explore the US, met a woman in Louisville, Kentucky, and stayed. For most of his nine years there he worked in sales, but when an idea came to him for a Words With Friends-style app-based game, he began to hear the siren song of the start-up.

And when he read an article about what Silicon Valley people know simply as “the Dojo”, he knew it was where he had to be. He sold his possessions in a yard sale that weekend, packed his two dogs into the car (the girlfriend was long gone) and drove to California on Monday. He wasn’t the first to find the Silicon Valley start-up game trickier than it looked. When I met him he’d been there for nine months and was still living in his ’99 Lexus SUV with his collie/lab crosses. “It’s not ideal,” he said. “But I’ve got something really good and my road map of products is right. I just need that break to get me to the next stage.” I left expecting that, by the time I returned, he would have slunk home like so many before him.

That was two years ago, and when I re-establish contact in advance of a second Dojo visit, I learn that things did indeed get worse for Brooks — to the extent that he agreed to take over cleaning duties in lieu of the $100 per month membership fee that allowed him to use the desks, office machines and kitchen. The thing was, he found that not only did he enjoy the job, but he was better at it than the previously contracted agency. He did some research, devised an algorithm that could provide potential customers with instant online pricings, and decided to start a business of his own, Squiffy Clean, based in Palo Alto. He now has 11 staff and a feel-good USP that includes green products and cleaners who receive equity in the company. The social network Pinterest and Pebble smartwatches also began at Hacker Dojo. No wonder people come.

These days, as Donald Trump and Bernie Sanders lambast globalisation from opposite ends of the political spectrum and as Britain’s new Conservative prime minister appears to endorse a perception that the bounty of US-led capitalism accrues to an entrenched elite, Silicon Valley is to the beleaguered American dream what Hollywood was in the 1930s — a repository for the promise that hard work and superior talent and ideas will rise in the marketplace. It’s a proposition without which neither the western model of capitalism, nor democracy, can presume legitimacy, but which the traumas of 2008 have thrown into doubt.

It is not that the current Big Tech boom (some say bubble) is without issues, surrounding overvaluation of companies and business plans that use private capital to demolish previously profitable industries and replace them with unviable new models or monopolies. Against all this, Hacker Dojo, a collection of featureless desks in a nondescript former warehouse on a bland industrial estate next to a highway, acquires an importance disproportionate to its size, as a place of real or misguided optimism, even idealism. The question is, which: real or imagined?

Part of the Valley landscape since 2009 (and so ancient, in tech terms) Dojo’s name is borrowed from the Japanese martial-arts word for a place of learning, although more direct inspiration came from Europe’s tradition of “hacker spaces”, where computer whizzes experiment and pool knowledge.

The place is already half-full at 10am when I arrive to meet Jun Wong, the co-operative’s 28-year-old interim executive director: Japanese students are cooing over each others’ screens and a few older men powwow over coffee in the open-plan kitchen, but the aura is one of quiet intensity. Yesterday, Wong tells me, two young men were busy reverse-engineering an electric car. Anyone can join and, within reason, do what they want. Machine-learning and VR are big at the moment, along with fashion and market research. The Chinese, Russian and Japanese governments and companies all send people over to experience the place, Wong says, but western Europeans do not, which seems odd.

Wong grew up in Brooklyn and tasted start-up and corporate life in New York, finding the former paranoid and the latter demoralising — a complaint I hear frequently at the Dojo. He dropped by once and was hooked, deciding to move west on the spot. “The big difference here is that people are more like yourself,” he says. “They’re all trying to build something and make the world better, not like outside where people are just trying to make money. If you’re motivated mostly by money, you’re in a very bad place, because the numbers don’t add up. In fact, if you arrive with that idea I think you’ll probably give up very fast — you have to love the process. A lot of members work for big companies and this is where they follow their enthusiasms and dreams.”

Even after more than a decade of the latest boom-time, driving around Silicon Valley still feels like you’ve lain your laptop on the ground and leapt into it. Around every corner sits another household name, and not just the big ones you expect, but the everyday others you seldom think about. For all the disposable architecture that seems to unbeautifully reflect the Valley ethos of “creative destruction” — as though exit strategy was integral to their construction — the Future is being made here.

Yet if Silicon Valley may be said to have a soul, it exists not in the marquee names but in the start-up culture, with its references to “making the world a better place” — even if, in this context, that often means a “better” way to order pizza. If you want to take stock of the Dream, at a time when some economists and even prominent tech figures such as the PayPal founder Peter Thiel are beginning to question its efficiency as an engine of innovation, it’s the start-up sector you need to interrogate. And Hacker Dojo is start-up culture’s triple-distilled essence.

One of the first Dojoers I speak to is 21-year-old Claire Li, a final-year computer science student at the University of California in San Diego. Her voice has the angular tone of a speech synthesiser, as if she spends a lot of time talking to machines — which, as I quickly learn, she does. A recent all-night session on her first trip to the Dojo turns out to have been nothing unusual for a young woman who had taught herself programming by the age of 11, made pocket money managing classmates’ MySpace pages, and was a freelance web designer in her teens. “I’ve been told my personality’s very Silicon Valley,” she says, with heroic understatement. She resumes work on a social network she is designing from scratch for a biotech client.

A twenty-something trio of Ed Choudhry, Emma Polster and Soroush Motahari (an Iranian technologist) quit their jobs two years ago to build a network of vending machines that allow companies to test products before going to market, using an app to unlock samples in exchange for feedback from early adopters. In classic Valley style, the team explains this is the third “iteration” of their idea, the first two having led up cul-de-sacs. They live on savings and casual work, but are optimistic. “It’s a $40bn problem,” Choudhry assures me. “And we’re tackling it head on.”

At lunch (the tech-land national dish of burger and fries), I meet Stewart Rap, a 35-year-old recent arrival from Tulsa, Oklahoma, who, in an echo of Brooks, sleeps in his van, though without dogs. His guiding vision is a machine that can custom-fill dietary supplement capsules, which health buffs go through the messy process of making themselves.

“I’m not aiming for unicorns,” he says, “just a niche thing I can grow slowly and steadily.” This is an ambition that, while hardly universal, proves more common than I had expected. He has only been at the Dojo for a month, but feels its benefits keenly. “It’s like some parallel dimension where the smart people went. There’s always someone who can show you what to do.”

The multiplication of start-ups and growing inward migration to the Valley underlines how the American dream remains powerful here. The number of companies identified by the US Census Bureau as having no employees — tell-tale sign of the start-up — has expanded at double the national rate since 2008, to almost 300,000, while figures provided by the Silicon Valley Institute for Regional Studies show strong increases in the number of residents aged 20-29.

Why has this happened? For one, the internet has demolished barriers to entering many businesses. Where once a start-up had to raise capital to pay for hardware, software, marketing and so on, now they store files in the cloud, use open-source software, distribute through the App Store, and use Twitter for customer service and Google and Facebook for marketing. More significantly, the celebrated Silicon Valley venture capitalist funding model relies on generating “unicorns” — online businesses that start small and grow to be valued at $1bn-plus.

The difficulty of identifying unicorns, which often look either arcane or insane at early stage, has at times encouraged a scattergun approach to capital allocation. Between 2012 and 2014, for instance, sky-high valuations of established start-ups and a lingering wariness of initial public offerings in the wake of the dotcom crash pushed more than half of all VC investment into early-stage companies, the highest level since 1985.

A sharp return to late-stage unicorns, via the headline-grabbing likes of Uber’s $62.5bn Series G round, has, perversely, only intensified the Valley’s gold-rush draw. No wonder Hacker Dojo is so beloved of its members, who would be forced to trade equity in their fledgling companies as a cost of access to most other incubators.

Towards the end of the afternoon, the crowd begins to transform, as day-workers pack up and go, to be replaced by a night-time hardcore. Clint Rogers, an endearingly nerdish African-American programmer, stands to shake my hand when we are introduced. He works in online security by day and designs games here by night. He confesses he would happily work on games for free if he could do it full-time; for him games are “a medium where you can tell a story and make social commentary and talk about the human condition”. To him, maths, which he learnt despite not having an aptitude for it, is “basically like an endless supply of crayons and white paper”. I also sit down for a long discussion with Brandon Byrne, a barn-sized former Merrill Lynch data analyst and (American) football player who was raised in Harlem, New York, and has degrees in maths and computer science from Stanford.

When Byrne grew bored of his job, he used the Dojo to develop a sophisticated system for analysing basketball players’ performance and now works with several NBA teams. The really hard part, he says, is “the financial stuff. I mean I come from a financial background so you’d think that would help, but you are just surrounded by horror stories in this area, of people signing bad contracts and being taken advantage of.”

He is not alone in talking animatedly about machine learning, which among an otherwise eclectic range of enthusiasms is the buzz pursuit of the moment, closely followed by robotics. The difference between start-up founders now and in the recent past, he suggests, is that as technologies have matured, specialisation has grown. Where 10 years ago one or two people could do everything, in 2016 they no longer can.

Hacker Dojo may prove to be an important prototype for other such spaces, as rents in the Valley rocket. Since the last time I visited, Dojo itself has been forced to relocate from its appealing Mountain View base after a quadrupling of its rent. The move prompted an existential crisis within the hackerspace, interim director Wong reveals, as a collective response to the rent rise was debated.

Some members pointed out that, by seeking corporate sponsorship, raising membership fees or charging the hosts of meetings, they could stay in Mountain View, while others argued vehemently that this would change the nature of the organisation, make it more like everything else in the Valley. In the event, the latter argument prevailed. Wong already thinks sky-high rents in the region are negatively affecting innovation. “The irony is that one of the reasons the tech industry grew up here is because land was cheap, and a big change is that with rents so high, you really need to make new ideas work within six months. So people who have odd or out-of-the-box ideas can’t take the time to try them any more.”

Questions are also being asked about the long-term benefit of the local funding model. Marc Andreessen, of the celebrated VC outfit a16z, has noted that of 3,000 companies he and his colleagues meet each year, they will invest in 15 on average, of which 10 will fail, four will survive and one might become a unicorn. Recent trends suggest that plenty of investors still want to buy US tech start-ups in the hope of saddling that unicorn — as of June this year 148 were valued at more than $1bn — but can this be relied on to continue? A sobering fact is that of the 18 companies valued at more than $1bn by VCs at the start of 2000, 11 subsequently imploded and are no longer in business.

Some, such as Fred Wilson of New York-based Union Square Ventures, have predicted the “gatekeeper” model of the past two decades being replaced by a crowdfunding-based approach. He may be right. In a rapidly changing scene built on disruption and creative destruction, the one thing in Silicon Valley I’d bet on staying the same in the near term is Hacker Dojo. Here, at least, is something that will of necessity survive the machinations of a global economy seen to have jumped the rails elsewhere: the simple joy of creation; of hope and the will to make things better, whatever the odds.

In a place full of stories, the most affecting I hear is one of the last. As a dreamy night-time peace suffuses the building, 31-year-old Jenny Jin tells me how she was born in China to parents who sacrificed professional careers for an escape to Canada, where only blue-collar work was available to them.

Neither she nor her parents spoke much English, so her first two years at school were tough, made worse by her parents’ struggles.

Later, unable to afford the tuition fees for university, she accepted a scholarship to study actuarial science, a course for which she had no love, and went into the insurance industry, where she found the culture uninspiring. After half a dozen years of dutiful slog, she landed a job as a data scientist at Apple, which enabled her last September to pay off her parents’ mortgage and finally leave to follow her own star. A start-up she conceived to help jobseekers improve their interviewing skills recently received a strings-free grant of $20,000 from the incubator Y Combinator.

“A lot of advisers tell people they should work on something they’re good at and which makes them money, with the third criterion being personal interest,” she smiles. “But unless you’re working on something short-term just to be acquired and make some fast money, I think it’s the other way around; I want to build something for the long haul — to build an empire. And what I’m passionate about is mentoring. I mean, if it was just for money, I might as well have stayed at Apple, right?”

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