How to Be Silicon Valley -->
May 2006
(This essay is derived from a keynote at Xtech.)
Could you reproduce Silicon Valley elsewhere, or is there something<br>unique about it?
It wouldn't be surprising if it were hard to reproduce in other<br>countries, because you couldn't reproduce it in most of the US<br>either. What does it take to make a silicon valley even here?
What it takes is the right people. If you could get the right ten<br>thousand people to move from Silicon Valley to Buffalo, Buffalo<br>would become Silicon Valley.<br>[1]
That's a striking departure from the past. Up till a couple decades<br>ago, geography was destiny for cities. All great cities were located<br>on waterways, because cities made money by trade, and water was the<br>only economical way to ship.
Now you could make a great city anywhere, if you could get the right<br>people to move there. So the question of how to make a silicon<br>valley becomes: who are the right people, and how do you get them<br>to move?
Two Types
I think you only need two kinds of people to create a technology<br>hub: rich people and nerds. They're the limiting reagents in the<br>reaction that produces startups, because they're the only ones<br>present when startups get started. Everyone else will move.
Observation bears this out: within the US, towns have become startup<br>hubs if and only if they have both rich people and nerds. Few<br>startups happen in Miami, for example, because although it's full<br>of rich people, it has few nerds. It's not the kind of place nerds<br>like.
Whereas Pittsburgh has the opposite problem: plenty of nerds, but<br>no rich people. The top US Computer Science departments are said<br>to be MIT, Stanford, Berkeley, and Carnegie-Mellon. MIT yielded<br>Route 128. Stanford and Berkeley yielded Silicon Valley. But<br>Carnegie-Mellon? The record skips at that point. Lower down the<br>list, the University of Washington yielded a high-tech community<br>in Seattle, and the University of Texas at Austin yielded one in<br>Austin. But what happened in Pittsburgh? And in Ithaca, home of<br>Cornell, which is also high on the list?
I grew up in Pittsburgh and went to college at Cornell, so I can<br>answer for both. The weather is terrible, particularly in winter,<br>and there's no interesting old city to make up for it, as there is<br>in Boston. Rich people don't want to live in Pittsburgh or Ithaca.<br>So while there are plenty of hackers who could start startups,<br>there's no one to invest in them.
Not Bureaucrats
Do you really need the rich people? Wouldn't it work to have the<br>government invest in the nerds? No, it would not. Startup investors<br>are a distinct type of rich people. They tend to have a lot of<br>experience themselves in the technology business. This (a) helps<br>them pick the right startups, and (b) means they can supply advice<br>and connections as well as money. And the fact that they have a<br>personal stake in the outcome makes them really pay attention.
Bureaucrats by their nature are the exact opposite sort of people<br>from startup investors. The idea of them making startup investments<br>is comic. It would be like mathematicians running Vogue-- or<br>perhaps more accurately, Vogue editors running a math journal.<br>[2]
Though indeed, most things bureaucrats do, they do badly. We just<br>don't notice usually, because they only have to compete against<br>other bureaucrats. But as startup investors they'd have to compete<br>against pros with a great deal more experience and motivation.
Even corporations that have in-house VC groups generally forbid<br>them to make their own investment decisions. Most are only allowed<br>to invest in deals where some reputable private VC firm is willing<br>to act as lead investor.
Not Buildings
If you go to see Silicon Valley, what you'll see are buildings.<br>But it's the people that make it Silicon Valley, not the buildings.<br>I read occasionally about attempts to set up "technology<br>parks" in other places, as if the active ingredient of Silicon<br>Valley were the office space. An article about Sophia Antipolis<br>bragged that companies there included Cisco, Compaq, IBM, NCR, and<br>Nortel. Don't the French realize these aren't startups?
Building office buildings for technology companies won't get you a<br>silicon valley, because the key stage in the life of a startup<br>happens before they want that kind of space. The key stage is when<br>they're three guys operating out of an apartment. Wherever the<br>startup is when it gets funded, it will stay. The defining quality<br>of Silicon Valley is not that Intel or Apple or Google have offices<br>there, but that they were started there.
So if you want to reproduce Silicon Valley, what you need to reproduce<br>is those two or three founders sitting around a kitchen table<br>deciding to start a company. And to reproduce that you need those<br>people.
Universities
The exciting thing is, all you need are the people. If you could<br>attract a critical mass of nerds and investors to live somewhere,<br>you could reproduce Silicon Valley. And both groups are highly<br>mobile. They'll go where life is good. So...