Why come to Silicon Valley?

The New York Times reports that "When It Comes to Innovation, Geography Is Destiny".  The author, G. Pascal Zachary, also teaches journalism at Stanford. He quotes several authorities and studies.

The thesis is that technology companies from Silicon Valley have a better chance of success than those form anywhere else in the world.  Maybe the the examples given are not the best available, and I am not quite ready to write-off European strength in wireless communications.  However, the conclusions ring true and add some additional ideas.

My simple explanation of the strength of Silicon Valley: a "critical mass" of ideas, networks, people and capital.

Mr Zachary's report suggests these reasons:

• the importance of face-to-face communication in generating ideas,
• increasing returns
• first mover advantage,
• a network of seasoned pros, and
• the ready availability of venture capital.

I am not sure exactly how increasing returns plays into the equation. Any ideas? I can see that the sheer financial strength of some tech behemoths can add additional advantage - either directly or through the ecosystems they create.

Bottom Line: What does this mean for those outside Silicon Valley? Start to network into the Valley, build bridges that tap into the ideas. people and networks. However, to get the Silicon Valley capital, you generally need to be within 50 miles of your investor. So come here!

Comments

[Justin Floyd]

I agree in parts with the above, but there are some other factors to consider. I am the Founder of B2B marketplace of EMEA origin that delivers finance to businesses investing in technology and we have worked with a number of up and coming European Tech companies backed by VC and they haven't needed to be in Silicon Valley, Skype being the obvious case. There is no shortage of talent, but in the past there have been three problems that have prevented European companies being as successful as their US counterparts.

The first has been that Entrepreneurship has been fostered far more successfully in the USA education system [ Ycombination, fantastic idea], however the balance is improving particularly in the UK, there are many more support forums being introduced at University level to spot and nurture talent earlier.

Second has been the lack of protection over patents and IPR, the EMEA legal system must overhaul it's laws to help protect young companies coming to market, and third has been the reliance of European VC's on syndication without the confidence to go in alone.There are some signs that European VC's are gaining in confidence particularly in the SaaS space,and their ideas have evolved considerably over the last three years.

Finally the internet is changing the status quo, it is bigger outside the US than inside of it, and arguably connectivity is more advanced in Europe.In any event and regardless of geography it is faster and easier to get your product to market, compete on a global level, and scale rapidly without huge investment.

So in summary it is changing, there are significant funding opportunities outside of the US having said that [I probably defeat my own argument here] I am from the UK and have moved to San Francisco to develop our business!

[Paul]

Thank you for the comments Justin. There are several areas where Europe is strong. You mentioned software as a service. Wireless and mobile applications is another.

In cleantech, the cultural and regulatory environment reinforces strong R&D and technical expertise. Indeed my last company was a US-based cleantech company (using Australian technology) that was eventually funded from Europe. It was tough to get US investors interested in cleantech 2-3 years ago.

So perhaps I am also an exception that proves the rule; or else a participant in a new wave from Europe and Asia-Pacific.

Many places have the ingredients: money, talent and ideas. The Valley just seems to be an incredible bio-reactor.