Over the almost 40 years that I have worked and lived in Silicon Valley—and observed and studied this amazing, dynamic, and complex innovation ecosystem—I have heard many times the view (mostly from visiting delegations) that Silicon Valley, although interesting and important, especially from a historical perspective and perhaps even currently, would soon be in decline and be eclipsed by other regions. (I regularly get a newsletter entitled “The Next Silicon Valley” so I keep an eye on competing regions around the world). Today, I learned (from a Facebook posting and an article in the Norwegian Innovation Magazine—that a Norwegian “investor guru”, Steinar Hoel Korsmo, President and CEO of the Seed Forum Network, which organizes pitching sessions and training around the world—thinks that Silicon Valley “will be irrelevant in 30 years” and perhaps even in 20 years or before! This prediction was given in his presentation to the Change Makers conference in Oslo, Norway.
Unfortunately, VERY little evidence is presented in the InnoMag article for why Mr. Korsmo feels Silicon Valley will start going into decline and become “irrelevant”, except for basing his prediction/speculation on things like:
- The growing numbers and quality of entrepreneurs he sees at the Seed Forum pitching sessions around the world, including in the Middle East and Africa
- The emergence of “new” industries that are emerging or will emerge—which he seems to feel, I guess, that Silicon Valley will, for some reason (not mentioned in the article), not be participating in (and driving) to any significant degree.
An important piece of Mr. Korsmo’s thinking, it seems, is that the emergence of “new Silicon Valleys” around the world will be driven in part by entrepreneurs in developing countries funded by aid programs of countries like Norway, as these will take the place of traditional development aid (for infrastructure and other more traditional development projects). And one of the important arguments behind such new entrepreneurship programs is that they will bring jobs and economic growth to the Middle East and Africa and thus slow, or ideally stop, the “migration crisis” facing Europe (According to Organization for Migration (IOM) and the UN Refugee Agency (UNHCR) estimates, around one million migrants and refugees arrived in Europe till 21 December 2015, three to four times more than in 2014, but dropping by around half or so in 2016).
Shifting development some of the (traditional) development aid towards funding entrepreneurship programs—and thus supporting programs like Mr. Korsmo’s Seed Forum—may make good sense, to both alleviate the humanitarian crisis resulting from the migration crisis, and to stimulate new development paths in Africa and the Middle East. It will be interesting to see whether other Nordic and European countries change their economic development policies and aid programs towards support of entrepreneurship, and if so, to what extent this will create significant new jobs and growth in the Middle East and Africa.
Yes, the growth of entrepreneurship has been fascinating to watch, in almost all countries around the world, including the Nordics which has seen a disproportionately strong growth in: Number of entrepreneurs, successful startups, amount of seed and VC funding raised, and number of so-called unicorns. (Very well-informed people like Neil Murray, Nordic Web, regularly publish updates on this—for more info on this and other information sources, please see the Silicon Vikings FAQ session on our website). But it is not clear, yet, that this growth in entrepreneurship around the world will undermine the future of Silicon Valley, which Mr. Korsmo assumes/predicts. While it is far beyond the scope of this brief article to describe and analyze the current trends in Silicon Valley that will help shape its future, or lay out a detailed view of what the future of Silicon Valley will be, I will point to a few things that I think will be important factors determining its future viability. In a separate post, I will address some of the challenges the region will have to address if it wants to keep its role as the premier innovation ecosystem in the world.
Here are a very few of the trends that help strengthen the regions innovation ecosystem—both in absolute and relative terms (i.e. relative to other regions that Mr. Korsmo feels will overtake Silicon Valley). If you are interested in more depth of the Silicon Valley ecosystem, you can find a number of past posts I have made in the Silicon Valley blog (listed in a box at the end of this post), and a Google search will no doubt surface numerous books that should be of interest.
Depth and diversity of talent. The Valley has been, and continues to be, a magnet for talent from around the world. While Chinese leaders feel their population of 1.4 billion gives them an important edge in building their innovation economy for the future, the US has traditionally been very successful in tapping top talent from the world’s 7.6 billion people! (And the self-selection of these people to come and start, often from scratch, in Silicon Valley, point to their determination and recognition of the resources, both money and knowledge (about building companies) that are available in Silicon Valley. Even though the Trump Administration policies are undermining the “talent attraction engine” of Silicon Valley, this is hopefully only a temporary setback and will be reversed once Trump is gone! (and hopefully soon!) Talented engineers and scientists who get educated at UC Berkeley, Stanford and many other excellent universities and colleges in the greater Bay Area often want to stay and start their own companies here, and many others come with dreams of finding cofounders, funding and customers here. The large Indian and Chinese population in Silicon Valley—as well as sizable groups from most countries around the world (including the Nordics!)—play a very important role in building new and innovative companies (which Vivek Wadhwa and others have written about), including in the future and not-yet-identified industries of the future that Mr. Korsmo refers to.
Open innovation brings startups and large enterprises together. Silicon Valley has long been a very densely populated region, consisting of large numbers of small and large, world-class tech companies across a variety of industries and sectors, especially in high tech—spread across a relatively small region (enabling easy direct access). The region also is the home for large number of well-established incubators and accelerators, many of which now have interesting programs which bring startups together with larger, established corporations (often in specific “verticals” like these offered by Plug and Play: Internet of Things, Fintech, Brand & Retail, Insurance, Health, Travel & Hospitality, New Materials & Packaging, Mobility, Food & Beverage, Supply Chain & Logistics, Energy & Sustainability, and Cybersecurity). Similar programs are offered by Rocketspace in SF and others. Foreign firms coming in to Silicon Valley, or the Greater Bay Area, sometimes take advantage of the existing accelerator infrastructure, as it enables the new entrants to quickly find a way into the Valley’s complex innovation ecosystem.
Silicon Valley innovation outposts (SVIOs). This is a topic I have written a bit about in the past—see information in box at the end of the blog post—and this part of the Valley’s innovation ecosystem continues to strengthen and grow. Depending on how you define SVIOs, there are probably between 150 and 300 of these scattered around the Bay Area. In my third SVIO post (in the box), I included a graphic showing a number of automotive, or mobility, related SVIOs that now form a hub of “next generation mobility companies”, so this is an example where the future is now being created in the Valley, BUT obviously the large incumbent players in Detroit, Stuttgart, and across Japan, Korea and soon in China, will also help shape the new auto or mobility industry. But since software and AI/machine learning—plus big data—will be crucial elements of this emergent industry, Silicon Valley is very well positioned to continue to play an important role, far more so than the emergent entrepreneurial hubs in the Middle East and Africa that Mr. Korsmo suggested, or implied. One of the more interesting elements of the SVIO picture, especially as we look to the next decade or more, is what the role of large Asian, and especially Chinese, companies—including the “Big BATs” of Baidu, Alibaba and Tencent—will play in contributing to the evolution of Silicon Valley. This quickly becomes complex as these large Chinese “platform companies” are increasingly competing globally with the “Big 5” US platform companies, three of which are in Silicon Valley (Apple, Facebook and Google) and 2 in Seattle (Amazon and Microsoft). Some of these issues were dealt with in an excellent new report published by the Bay Area Council Economic Institute, BACEI (Chinese Innovation: China’s Technology Future and What it Means for Silicon Valley, is available for free here). A likely scenario will involve both collaboration and competition among these large players as well as smaller companies here and in China, some of which will benefit from needed capital coming from China, and others will face tough competition from growing number of Chinese startups. Other Silicon Valley companies will find new ways to enter the Chinese market through collaborative ventures, but these could also be challenging, as they need to protect Intellectual Property and learn how to operate in less transparent and increasingly politically-driven high tech environment in China. (Some of these issues will also be addressed in the Silicon Vikings event on November 29 at Stanford University)
Networking: Life blood and knowledge sharing system of Silicon Valley. It is interesting to see the explosion in incubators and accelerators in the Nordics and elsewhere, and the associated growth in events and (informal) networking that has long been the life blood of Silicon Valley. Large number of Meetup and other events—including at the many incubators and accelerators throughout the Bay Area—offer interesting events, typically with a focus on particular technologies and often with pitching sessions with local or international startups. In my blog post on Innovation Outposts: A Growing Element in Silicon Valley’s Dynamic Innovation Ecosystem; April 6, 2015 (see box below for links), I listed 10 software-related Meetup Groups in Silicon Valley, the top 3 with a total of 40,518 members. The same three Meetup groups today have 66,119 members, including 32,720 members in the Silicon Valley Entrepreneurs & Startups group, an increase of 84% in about 2 1/2 years! And don’t underestimate the value of these informal events and networking opportunities. They serve many roles, all helping to “oil the innovation engine” of Silicon Valley:
- Learning what are new and interesting projects that give you an idea of what is “trending” in the world of tech and entrepreneurship and what is getting funded, etc
- Connect with people (including investors, of course—and 30-40% of all VC funding is still located in Silicon Valley—and has remained pretty stable over many years) and get their business cards to you can connect with them when and if you are looking for a job or funding.
- Gaining insights and learn what people are thinking about and hearing perspectives of people from different background (and, usually, from other parts of the world)
Such groups and networking phenomena are now common in many parts of the world and on the rise all over, especially in the emerging hubs of entrepreneurship in Europe. But the extent and intensity of intensity in Silicon Valley is still ahead of most other parts of the world. (For a good report and listing of what is happening on the entrepreneurial front, please see another excellent BACEI report, Innovation Bridge: Technology, Startups, and Europe’s Connection to Silicon Valley. This report also clearly demonstrates the close connections of Europe to Silicon Valley, something that will not go away anytime soon and thus will keep supporting, and likely strengthen, the position and role of Silicon Valley. A subset of this picture of the SV-Europe connection is of course the growing and strengthening—NOT weakening!—connection between the Nordics and Baltics and Silicon Valley, something we in Silicon Vikings are seeing “up close and personal.” And again, there are NO signs of this weakening.
Links of my SVIO posts:
1. The New Transportation Ecosystem and The Role of Silicon Valley; July 20, 2015 — http://siliconvikings.com/blog/2015/7/20/the-new-transportation-ecosystem-and-the-role-of-silicon-valley
2. Silicon Valley Innovation Outposts: Update; June 20, 2015 — http://siliconvikings.com/blog/2015/6/20/silicon-valley-innovation-outposts-update-1
3. Innovation Outposts: A Growing Element in Silicon Valley’s Dynamic Innovation Ecosystem; April 6, 2015 — http://siliconvikings.com/blog/2015/4/6/innovation-outposts-a-growing-element-in-silicon-valleys-dynamic-innovation-ecosystem
4. Silicon Valley Innovation Outposts: Mini-Case Studies; April 6, 2015—http://siliconvikings.com/blog/2015/4/6/silicon-valley-innovation-outposts-mini-case-studies