Archive This article is from our archive and might not display correctly. Download PDF
Business leaders and politicians across the world are seeking the creation of the next Silicon Valley, though commentators are split on how the original developed. This original, located in San Francisco, is famed for its leadership of the technological revolution of the past few decades that has reinvented the lives of most people in the Western world, and so the idea is gaining traction in developing economies, their policymakers and business leaders of how to recreate that environment for their own benefit.
In Britain, this has become a particularly pertinent issue since the 2008 recession; the Conservative government came to power in 2010 with a promise to reinvent British industry around growth industries such as technology - a policy which was mercilessly parodied in the political satire The Thick of It - but a crux of then government policy for economic growth and recovery.
However, fears of a brain drain to the United States - a phenomenon that some entrepreneurs have put down to a relative lack of respect for British innovation and creativity amongst Silicon Valley investors and the rather cautious investment culture of Britain - have led to public and private sector collaborations such as the 'Silicon Roundabout' in East London.
Major firms such as Cisco, Google, and Facebook have already been persuaded to guarantee £100m of investment in the scheme, as the sort of policy incentives and local advantages that have made Silicon Valley so successful have been granted by the UK government. Such policy initiatives seem to be gaining notice globally, with recently retired New York mayor Michael Bloomberg naming London as his city's chief competitor in delivering the next global hub of technological and business innovation.
Such noises have got many influential entrepreneurs, venture capitalists, and journalists interested in what has made Silicon Valley, once a sleepy suburb between San Francisco and San Jose in California, the epicentre of the 'Internet Age'. Over the course of three articles, I will to explore the reasons behind Silicon Valley's success and how it might be replicated in the future, whilst also analysing how the growth of major corporations such as Apple have impacted upon their host communities.
So to the first question: what are the reasons for Silicon Valley's success? Few dispute that its location in the vibrant San Francisco Bay Area of California is a major part of the attraction for thousands of young engineers and entrepreneurs looking to launch their big ideas. However there is a clear divide in opinions on why Silicon Valley has developed from into a technological and business powerhouse.
For some, the Valley is an historical product of the region in which it developed, catalysed by the presence of two world-class universities in Stanford and UC Berkeley. The presence of these two institutions, especially Stanford under engineering dean Frederick Terman, persuaded the US government to allocate large amounts of research funding to aerospace and electronics companies in the area from the 1950s.
Stanford has had a major influence on the computing world, with graduates including Hewlett and Packard in the 1930s to Sergey Brin and Larry Page, founders of Google, in the 1990s. Fairchild Semiconductors, creators of the first silicon microchip that is now almost ubiquitous in modern life, was founded by a group of scientists at Stanford. Technological innovation was imbued in the culture of the area, encouraging those who studied there to use the vast military funding on offer for engineering projects.
Undoubtedly, the brains attracted the enormous amounts of capital that were prepared to take risks on these ideas unlike anywhere else. However, these ingredients are clearly not enough, as numerous failed projects centred on the academic and industrial centres of New York and Boston over the last half century can testify. Many who have worked in Silicon Valley testify to a more ineffable ingredient - culture.
There is a 'frontier spirit', an openness to new ideas which encourages a huge degree of risk- taking from entrepreneurs and their investors whilst encouraging a 'community spirit' amongst those who work there. A culture of 'creative reassembly', where employees of technology firms routinely move jobs and link up with employees from other firms in a cycle of relentless innovation, permeates even the largest technology firms. Apple killed off the iPod at the 2007 peak in order to prevent a competitor from stealing a march on what became the iPhone.
Failure is considered an experience, not a sign of incompetence, with the only sin for a Silicon Valley worker being that they stay on a failing project or company for too long. On top of this is government legislation designed to encourage start-up businesses to flourish. The JOBS (Jumpstart Our Business Startups) Act passed by the American Congress in 2012 has enabled the flotation of firms such as Twitter since it's introduction by easing regulatory burdens and funding restrictions. The Mayor of San Francisco Edwin Lee hosts 'Tech Tuesdays', where he visits at least one technology firm every week in order to garner their views on the direction of business policy.
In short, the above ingredients for the next Silicon Valley sees London well placed to capitalise on the rapid growth of the technology industry, as Mayor Bloomberg predicted. Home to world-class universities who foster talented graduates, enormous foreign investment from the Middle East and China, and with an increasingly relaxed regulatory regime under the Coalition government, London seems like the ideal location for Europe's 'Silicon Valley'.