The Recipe for Creating a Silicon Valley

Every region wants to create another Silicon Valley. It's not only the prestige -- it's the jobs, the wealth creation, the excitement of innovation, the ripple effect on businesses nearby and most importantly, the future.
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Forget the hoodies and foosball tables.
Forget the mythology.
Forget the lucky breaks.

Two guys working in their garage living on Cheetos and Mountain Dew changing the world makes for a great story. Tech success in 2015 is a more complex story but one still within if the right ingredients are in place. Communities who want to build the "next Silicon Valley" would be wise to study Nurture, not Nature, according to two studies from MIT and the Brookings Institute. The research announced earlier this year identifies some of the secret recipes for success. News flash: it takes a stew of existing tech businesses, mentors, networks, higher education, government and venture capitalists working together as geographically close as possible. It doesn't hurt if all the elements that attract smart young people to an area are in place. Think restaurants, bars and lots of things to do.

Every region wants to create another Silicon Valley. It's not only the prestige -- it's the jobs, the wealth creation, the excitement of innovation, the ripple effect on businesses nearby and most importantly, the future. Control the next wave of innovation and you're the captain setting the course for the economy.

Many have tried. Boston's Route 128. The Research Triangle in North Carolina. Austin's Silicon Hills. Utah's Silicon Slopes. Silicon Beach in Santa Monica-Venice. Some are getting close, some not so much. Some have created a variation on Silicon Valley that works. According to a new study by the Brookings Institute, "America's Advanced Industries," other regions are all still trailing the original, Silicon Valley by a lot. San Jose and San Francisco are always at the top but things can change quickly based on one or two rock star companies that hit it big or hitting the latest trend just right.

The Silicon Valley is now the entire strip between San Jose and San Francisco. Not coincidentally, San Jose is tops for worker income followed by San Francisco. There are many lessons for communities to learn from this laboratory of success. Here are the ingredients for tech sector growth:

  • Corporations do much better than non-incorporated firms (six times more successful)
  • Locate your business near universities with research centers
  • Be close to colleges and universities with engineering and S.T.E.M. talent
  • Set up shop near other successful companies
  • Short names do better than long names for companies
  • Don't name your business after the founder
  • Locate in areas where governments are friendly towards start-ups
  • If several prominent Venture Capital firms are located nearby, that's a very good sign

The MIT study published in Science magazine, is titled "Where is Silicon Valley." "The entire ecosystem is nurturing and helping companies within Silicon Valley realize their promise on a more guaranteed basis than anywhere else in the state," said co-author Scott Stern of the Massachusetts Institute of Technology and the National Bureau of Economic Research in Cambridge, Massachusetts.

Noting the research, the San Jose Mercury News reported, "Great technology ideas can come from anywhere, they note. but the Bay Area has two advantages. First, 'there is a higher initial quality of startups -- people are being drawn there, they graduate from its universities, they are more ambitious,' Stern said. And, "Silicon Valley supercharges that effect, helping them along, so they deliver on their promise." They found that the highest-quality startups are centered around research institutions, such as universities and national laboratories. Stanford, UC Berkeley, Lawrence Livermore, Caltech, UCLA and UC Irvine each host regions of entrepreneurial quality."

The reporters noted that super-sectors have other things in common. "They invest a great deal in research and development -- more than four hundred and fifty dollars per worker -- and they employ high proportions of people from the fields of science, technology, engineering, and math, collectively known as the S.T.E.M. fields."

In the New Yorker, the magazine profiled cities in Utah that have grown exponentially thanks to companies like Novell. The story relied on findings from the Brookings Institute.

"Utah turns out to also have features in common with other places involved in the super-sector: local universities that graduate a lot of S.T.E.M. students (most notably, Brigham Young University); policies and infrastructure that attract businesses (for instance, tax breaks and a light-rail system that connects the state's biggest cities); and strong relationships among local companies (Utah's state and local governments, along with an economic-development organization, facilitate partnerships, and, because many of Utah's businesses are home-grown, and the state's population is small, densely located, and tightly knit, its businesspeople tend to get to know each other well)."

And don't count on teenagers and 20-somethings wearing fedoras over their ironic hipster T-shirts for all your growth. A study in the Global Entrepreneurship Monitor concluded those over age 35 contributed to 80 percent of the entrepreneurship activity from 2009. It's simple, networks grow with age and the network of a 35-year-old is just plain bigger than that of a 22-year-old.

There is another Apple, Facebook or Twitter on the horizon, but it won't happen in a vacuum.

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