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Silicon Valley: the home of the biggest names in technology and the undisputed centre of the start-up universe. But for how long?
Gaining prominence ... New York City.
The hype around being the "next Silicon Valley" is almost unavoidable of late; New York, Tel Aviv, LA, Seattle and even our home town, Sydney, are attempting to do what only "The Valley", has accomplished so far.
Curicon's recent trip to New York to attend Comic Con NY and the Diamond Comic Awards gave me the opportunity to peek inside the rise of one such contender for the title - New York: Silicon Alley.
How did Silicon Valley come to exist?
The establishment of Stanford University in 1891, a determination to separate from the influence of the east coast and a navy heritage dating back to the 19th century formed the primordial soup necessary to evolve the unique culture of Silicon Valley.
During the 1930s and 1940s, the two most crucial ingredients required in creating Silicon Valley: a passion for new technology ventures and venture capital were championed by Stanford University. Through the stewardship and nurture of Frederick Terman (widely regarded as the father of Silicon Valley), several amazing companies would emerge. One of the key successes of the time was a young Hewlett-Packard, which is now one of the world's largest technology companies.
The world changed in 1948 with the invention of the transistor by a team at Bell Labs led by William Shockley. Unsurprisingly, Shockley is also regarded as a father of Silicon Valley (perhaps making Terman the grandfather). The Silicon Transistor, from which Silicon Valley gets its name, would appear in 1954, developed by Texas Instruments.
While not invented in Silicon Valley, this invention, coupled with the culture fostered in Palo Alto, would allow the region to begin its most rapid leap towards the Silicon Valley we know today.
Shockley's employees would go on to found Fairchild Semiconductor and later, Intel Corporation, one of the most ubiquitous players in home and business computing. Throughout the 1970s, 80s and 90s the thriving semiconductor industry and burgeoning venture capital funds would give rise to what most people think of when they hear the words "Silicon Valley" – Software and Internet businesses.
Most of the biggest companies to come out of Silicon Valley in the last 20 years have been software businesses: Yahoo!, Adobe, eBay, Salesforce, Facebook, LinkedIn, Twitter, and Google to name a few.
The formula is simple in theory:
People with the desire and drive to innovate and take risks + Educational Institutions that support these people + Risk friendly, early stage capital markets + A support network of people who have done it before = Silicon Valley
There are many, many people on this planet smarter that me, so if I can see what is needed, that means a lot of really, really smart people do too.
The problem however, was never in knowing the formula; it is by no mean elusive, but instead in implementing an unquantifiable formula, which itself expresses very complex human, technology and business relationships.
The questions are: can there be another Silicon Valley? Would the current Silicon Valley have to lose for another to exist? Does a focus on establishing a new Silicon Valley blind us to any unforeseen benefits or opportunities that arise in each localised attempt?
These are the questions a lot of people in tech and venture capital around the world are asking themselves.
A lot has been written about New York's bid to put itself on the tech map of late, from pure investment comparisons to articles focused on the differences between the two coasts. The question for New York, as it is everywhere else, is why?
The future is software
There is no doubt that hardware; the silicon that gave Silicon Valley its name is now the uninteresting part - It has been commoditised. As the world's hunger for software increases, so do the business and investment opportunities.
Each contender wants it for the same reasons. The region benefits include positive local economy effects from greater employment, growth in complementary support industries and reinvestment of capital gains.
As software eats the world, it becomes obvious.
What is New York's take on it all?
New York's position as the centre of world commerce, as opposed to technology has given things a slightly different flavour in New York. While many elements are straight out of Silicon Valley 101, there is a distinct feeling that the lens is focused a little differently there.
California is known for a very heavy focus on early adopters and a psychology and ecosystem that can support very strange businesses. The problem is, sometimes the reality distortion field of Silicon Valley mistakes a fad/feature as a real business. In New York, I got the impression that the focus was directed more towards mass market, consumer businesses.
Most if not all of the serious start-ups I encountered were highly business oriented and as a result, revenue model focused. Marketplaces, e-commerce businesses & consumer subscription services make a strong showing.
New York's varied services and business ecosystem has created a start-up environment more focused on solutions than game changing, paradigm shifting or finding a market for a technology after the fact. These start-ups focus on solving existing day-to-day problems: this I respect.
Since no one cooks their own food in New York, Seamless.com is a no-brainer.
Is the venture capital there?
It sure is. Union Square Ventures, Founder Collective, IA Ventures, Venrock, Thrive Capital, First Round Capital, Spark and FirstMark represent just a few funds present on the East Coast.
Venture Capital on the East Coast covers all the same areas as the west, including: Consumer web, hardware, B2B and enterprise.
Do start-ups in New York wish they were in Silicon Valley?
While in New York, the city was pitched to me by people in tiny start-ups, big start-ups and even someone from Google. There was an overwhelming enthusiasm – It was as if the NY government was paying them.
The key advantages mentioned by everyone were:
Cheaper hiring costs and no "brain drain".
More opportunities for Venture Capital due to smaller start-up pool.
Better living and office expenses.
New York is the best city in the world.
Was I convinced?
The first three are true for as long as the number of start-ups is relatively low and the last is purely subjective.
I am more interested in the overall psychology and its general feeling towards technology businesses in a region. I want to be in the best city possible to build my business. I certainly felt the start-up buzz while I was in New York, but that was mostly while I was speaking with other start-ups and technology focused businesses.
What I really enjoyed was the focus on solving real problems, using technology effectively and rather than for the sake of it and having a more business focused mentality are all things I loved about New York.
In Silicon Valley, the buzz of activity is pervasive, it is built into everything. Can anywhere else ever compete? Yes, but only when we believe it can.
Silicon Valley is akin to the stockmarket; it is mostly a belief system.
For New York, or indeed anywhere, to become the next Silicon Valley, people need to believe in that place. Financial markets move up and down largely on the beliefs, fears or expectations of people with little alignment to business metrics.
The same market sentiment effect exists in Silicon Valley. As long as we believe that there can only be one Silicon Valley, it will be true.
Do I believe in New York? I didn't before, but that is changing.
Matt Byrne is CEO of Curicon.