Silicon Valley: The new contenders

Silicon Valley – the world famous bastion for technological innovation – might have passed its glory days. Facing increasing competition from emerging markets such as China and India, the tech haven is suffering a ‘brain drain’ at an extremely worrying rate.
   
Any ‘brain drain’ experienced, however, would simply rectify the large influx of immigrant entrepreneurs that have flooded the sun-drenched region for generations. Reports indicate that as much as 52 percent of Silicon Valley’s start-up companies were founded by immigrants, and that non-natives contribute almost 25 percent of WIPO PCT applications filed.

The immigrants that have flooded Silicon Valley form an inherent part of the very essence of the world-famous institution. However, a shift has occurred. Turning their back on the spot they once considered the world base for technological developments, these brainy individuals don’t necessarily rate Silicon Valley number∞one anymore.» Many entrepreneurs have decided to take their practises back to their native countries, or relocate to other attractive tech havens – be it in China, India, Germany, France or elsewhere. According to a study carried out by researchers at Duke University, UC Berkeley and Harvard universities, many immigrant students are now planning to return to domestic shores, rather than settle in Silicon Valley, as per the norm until only a few years ago. Hence, the brain drain that has hit Silicon Valley is only set to worsen.

So where will the world find its new technological nexus? Countries such as China and South Korea have a definite head-start through the vast amounts of capital being pumped into their respective technology sectors. Experts however agree that it’s difficult to determine if these destinations really have what it takes to develop environments to rival the expertise and infrastructure already situated at Silicon Valley.

Boasting practical benefits that China and India might be lacking, European countries such as the UK could well pose a threat to Silicon Valley. Russia too, is rising in tech circles. 

Not one to give up without a fight, Silicon Valley spokespeople claim that the allure of the original tech hub won’t subside anytime soon. After all, there’s no escaping the fact that about $10bn is invested in budding entrepreneurial companies every year.

Where it all began 
Despite the increasing competition, Silicon Valley is still highly regarded in the tech universe and its heritage alone adds to the credibility of the region. Located in the southern part of the San Francisco Bay Area in northern California, the ‘valley’ is in fact a vast area, encompassing all of the Santa Clara Valley including the city of San Jose, the southern Peninsula and the southern East Bay. This area has served as the base for the electronic industry since its conception in the early twentieth century and has been behind practically every technological revolution since that time.

The area coined its famous moniker in the early 1970s by the entrepreneur Ralph Vaerst, who came up with the name in reference to the high number of silicon chip ventures that were based in the area at the time. These days, with the production of semi-conductors gradually moving overseas, the name has become associated with the high-tech businesses and software companies that swamp the area. So effective is the business culture that Silicon Valley has generated that it accounts for as much as a third of venture capital investment in the US, to the extent that the area has become the byword for the US’ entire technology industry. As such, this perennially sundrenched locale, the home to so many of the world’s largest technology corporations, has held the crown as the undisputed ruler of the tech world through the culture of high-tech innovation and development the area has nurtured. Now however, it is far from unique.

In a roundabout way
Silicon Valley is far from having the technological innovation field to itself. East London is rising as a tech location in its own right and could soon to morph into a bona fide silicon valley ≥ at least if Prime Minister David Cameron has his way.

The ongoing plan to transform the  area, which is also home to the Olympic Park for the 2012 games, into one of the world’s greatest technology centres, was unveiled by Cameron early last year. Speaking at a glitzy gathering targeting entrepreneurs and investors, the PM’s enthusiasm over London’s status as a ‘Valley in the making’ was palpable. “Right now, Silicon Valley is the leading place in the world for high-tech growth and innovation. But there’s no reason why it has to be so predominant. Our ambition is to bring together the creativity and energy of Shoreditch and the incredible possibilities of the Olympic Park to help make East London one of the world’s great technology centres. I want to show you how we can get there,” said  an enthusiastic Cameron.

Cameron is not alone in his faith in the area as a new tech Mecca, as he reflected in his speech: “For the past few weeks and months, we have had dozens of meetings with technology companies and venture capital investors from across the world. We said to them: ‘Here’s our » vision for East London Tech City – a hub that stretches from Shoreditch and Old Street to the Olympic Park. This is what local businesses are saying they need. What part can you play in making it happen?’ I have to say: the response has been overwhelming.”

That response has come from the right people as well. Firms including Google, Facebook, Cisco, Intel and British Telecom are all lending their expertise to the East London Tech City, along with a crucial host of start-ups and SMEs who will help contribute fresh thinking and innovation into the area.

East London’s rising status as the UK’s tech centre has been assisted by some key developments. The area has been subject to a remarkable makeover in preparation for the Olympic Games, most notably in terms of transport links. Now one of the best connected areas in the country, by 2012 east London will boast a fully operational terminal providing high-speed rail travel to the Continent as well as trans-continental air travel courtesy of City Airport.

On the back of the Olympic developments, an influx of new businesses and retail outlets have also helped improve the status of Stratford city. The colossal Westfield shopping centre is one of a number of high-profile ventures in the area that have already immeasurably improved the status of a once undesirable area. This is only likely to improve as all the features of the area become fully operational as the Olympics draws near.

The final draw for the area is the benefits of East London’s peripheral. Tech City is sandwiched between the heartland of London’s creative industries and the City of London, one of the world’s great financial centres. Factor in the close proximity of several widely respected universities as well, and the area has every amenity and stimulus it could possibly need to succeed.

Crucially, in addition to the conception of Tech City, the government is actively attempting to try to improve the climate and culture for technology and entrepreneurialism, much as Silicon Valley has done par excellence. “We are already doing a lot to support this new economy, from making reams of city data freely available to London’s technical talent for transformation into apps, websites or mobile products, to piloting public Wi-Fi on London Underground,” enthused Boris Johnson, the Mayor of London.

Much like Silicon Valley, Tech City is also targeting overseas investors and developers. The launch of an Entrepreneur Visa was brought about to encourage individuals with good business ideas to set up companies with ease in the country. Another scheme, the Entrepreneur First programme, was unveiled earlier this year targeting elite graduates.

Based on the Teach First programme designed to assist young budding teachers, the format is a two year programme headed by McKinsey & Company, through which graduates with promising business ideas will receive mentoring, business training and networking opportunities. When the two year scheme is up, the participating candidates will be given the option to either continue building their own business, or to apply to graduate recruitment schemes within some of the companies that are associated with the scheme. The glittering array of companies that form part of the graduate boosting system are a whose who of successful business, including Microsoft, Tesco, BNP Paribas, BT, Cisco, Qualcomm, Intel, Civil Service Faststream, L’Oreal, Allen & Overy, Diageo, Pricewaterhouse Coopers, Shell and RBS.

The UK is pulling out all the stops, it seems. But does it have a fighting chance to become the new Silicon Valley? Considering the UK set in motion the first industrial revolution about two centuries ago, a tech renaissance would simply reinstate its past glory as a leader in the field. Add in the strong educational framework and a forward-thinking and cosmopolitan population, and Tech City has a great deal going in its favour.

Rising in the east
In a bid to flaunt an innovation-based economy by 2020, China is advancing swiftly into the realm of technology, and is now considered one of the strongest contenders to seriously challenge Silicon Valley. Recognising the potential, foreign and native investors alike have raced to inject funds into the tech sector.

Although the Chinese tech environment is very much under development, its progress has passed the mere budding stage. Recognising the potential of the region, an increasing number of top-notch entrepreneurs and major technology companies descend on the country from across the globe, turning their back on the sun-drenched destination that previously held their attention. Indeed, if there is a country in the world revelling in brain gain, it’s China.  

Generous funding is not the only element that tempts the best in foreign minds to settle in China; the country’s culture of tech innovations is becoming a draw in its own right. China might be known as the copy cat above all others ≥ be it in the field of hand bag design, technology or otherwise – but there’s no doubt that the country has started to impress its surroundings with an environment that supports original ideas.

Already some native companies are rising to position themselves as world leaders in innovation. The Chinese internet conglomerate Tencent boasts a stock market value that hovers just below the names of leading lights such as Google and Amazon. Two other strong contenders are the leading e-commerce portal, Alibaba, and Huawei Technology, which has made its name pioneering next-generation mobile communication infrastructure. In the field of computer engineering as well, one of the fastest computers ever to be produced is the brainchild of Chinese engineers. Collectively, these forward-thinking companies and products have helped to boost China’s status to become viable forces in the tech sector.

As a way to flex its tech muscles to the world, China plays host to one of the world’s most important conferences on tech innovation and entrepreneurship. CHINICT is an annual event that has now been running for eight years and next set to take place in Beijing in May 2012. The conference attracts delegates from all over the world and the interest it generates is highly indicative of China’s growing status in the tech universe. As a result, the event has grown increasingly grandiose as the years have gone on.

However, what may ultimately hold China back in the zealous race to become the new Silicon Valley is its current indigenous lack of technical expertise, making it tough to rival the established culture of tech geniuses present in Silicon Valley, which has taken years to develop. Another disadvantage is presented by the somewhat rigid governmental regulations related to new business, coupled with the nation’s tricky and convoluted intellectual property rights. Furthermore, the country’s educational system is nowhere near as sophisticated and flexible as that of the US and Europe, although it’s under improvement. As an indication that China’s workforce is set to become more skilful, about four million pupils graduate every year in the country, and around 600,000 leave universities with a degree in engineering. Given time, China might well become a valley in its own right.

Russia reborn
Another country eyeing Silicon Valley’s throne is Russia. The country has significantly improved its credentials for business and intends to prove this with the completion of an awe-inspiring new technology park by 2014. Set to allow space for over 500 firms and costing in excess of $2bn, it’s hoped the investment will pay off in a new generation of entrepreneurs.

Serving as the inspiration behind the concept, the Zurich Technopark will provide the upcoming Skolkovo project with vital know-how. The two entities are said to be forming a collaborative alliance, with the CEO of the Zurich Technopark, Henning Grossmann, planning to conduct regular quality controls of the Russian site and assist in its business promotion. 

The park will be based in the Moscow suburb of Skolkovo, a sleepy and rural area about 20km west of central Moscow, where affluent Russians keep holiday homes. The man behind the initiative is the Russian billionaire Viktor Vekselberg, who will take charge of the project backed by the support of billions of dollars in government investment. To lure quality players ≥ individual entrepreneur and companies alike ≥ the Russian government will offer tax breaks as well as funding schemes for selected companies. Setting the bar high, the hope is that the tech park in Skolkovo will attract companies such as the international software firm Kaspersky Lab, along with other major names, both domestic and international.

Positive aspects that will help to boost the credibility of the project is that it will be largely autonomous, boasting its own water and power supplies to avoid problems companies can otherwise face when securing these types of amenities. 

It all sounds promising. Insiders fear though that with such large sums surrounding the tech park it may attract corruption, hiking up prices. Even if measures are taken to prevent this happening, the very perception of Russia as a less reputable location to do business will create hurdles for those trying to promote the Skolkovo park. As such whether Russia can create the next Silicon Valley remain’s to be seen.

Silicon Valley hasn’t lost its crown just yet. But neither is it still the definitive location for technology companies that it once was. As the world fully embraces the possibilities provided by the internet age, it’s conceivable that new developments could come from any corner of the globe. And any one of them could cause the sun to set on the illustrious valley.