For decades, governments and economic-development organizations around the world have tried to recreate the success of Silicon Valley by attracting venture capital, launching startup funds and building accelerator programs.
But a new analysis by Forbes contributor Dileep Rao argues that this approach may be putting the emphasis in the wrong place. Instead of starting with venture capital, entrepreneurial ecosystems may need to focus first on developing capable founders and allowing business performance to identify the companies that deserve more capital.
Venture Capital Is Only One Part of the Silicon Valley Formula
Silicon Valley is famous for its deep pool of venture capital. That visibility has encouraged governments to assume that increasing access to VC will automatically produce more successful startups.
However, capital alone doesn’t create strong companies.
Rao points to a 2026 National Bureau of Economic Research study examining more than 100,000 venture capital professionals. The research found that just 5% of VCs generated 90% of investment profits, highlighting how heavily venture-capital success is concentrated among a relatively small group of investors.
This suggests that simply creating more venture funds may not reproduce Silicon Valley’s results.
What If Entrepreneurs Matter More Than Capital?
A successful startup requires much more than funding. Founders must recognize market opportunities, understand customers, develop competitive advantages, manage cash flow and build organizations capable of growing.
According to Rao’s analysis, governments could therefore benefit from developing these founder capabilities before focusing primarily on providing investment capital.
The idea is straightforward: develop entrepreneurs broadly, allow their businesses to demonstrate real-world performance and then direct financing toward ventures that show genuine potential.
