The Next Silicon Valley

This is the Chapter 25 of my e-book Silicon Valley for Foreigners, that can be downloaded for free on www.siliconvalleybook.com or purchased for $2.99 on the iBookStore and Kindle. A new chapter will be posted on this blog every week.

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Many regions across the world wish to become the next Silicon Valley. In the last few years, the private and public sectors have awoken to the importance of fostering tech startups, innovating, and creating powerful entrepreneurial ecosystems. The number of executives and government officials flocking to the Bay Area has been growing steadily.

People from all continents come here with hopes of finding a magical formula to create their own version of Silicon Valley. With a few exceptions, these missions to the Bay Area are organized by companies with no useful connections in the region and no idea of how the ecosystem works.

Visitors follow a standard script of visiting universities, corporate incubators, large companies, and co-working spaces. Just a few focus on exploring the ecosystem on their own and meeting with students, entrepreneurs, and investors to learn from them.

When folks go back home, they arrive with a very superficial idea of how Silicon Valley really works. One common misconception is to believe that Silicon Valley startups are successful only due to an abundance of capital and good infrastructure. The result from this misleading conclusion is the formulation of myopic initiatives to jump-start local ecosystems.

Governments become convinced they will give birth to the next Silicon Valley by either throwing money at entrepreneurs or building fancy co-working spaces. Private organizations often decide to create an innovation department or sponsor a corporate incubator to find new ideas. They believe these actions alone will be enough to create world changing companies.

Executives and government officials get it totally wrong. As you have read in this book, the secrets of Silicon Valley rely on its unique history and culture, the ultimate respect for entrepreneurs, and the collaboration between all players in the ecosystem.

Building a new Silicon Valley is almost an impossible task. If similar conditions were to be recreated anywhere in the world, it might take decades to generate results even with the right government incentives, academic support, and private sector investments. Due to the exponential evolution of technology, the next Silicon Valley could likely be something totally different from the current iteration.

After having the opportunity to travel, talk to entrepreneurs, and evaluate tech ecosystems in many countries, my conclusion is that Silicon Valley is unique and cannot be copied. Cities and countries should look inwards to find their own competitive advantages if they want to powerful and unique tech ecosystems similar to Silicon Valley.

Shenzhen, in China, is a good success case. Nicknamed the “world’s factory,” the city decided to focus on hardware since its inception. Shenzhen ended up developing an unparalleled supply chain and hardware talent that is years ahead of Silicon Valley. If you want to build any kind of gadget, Shenzhen is the place to be. The city has given birth to many successful hardware companies such as Huawei, DJI, and ZTE. Even China’s most successful Internet startup, Tencent, was born out of the powerful Shenzhen ecosystem.

Israel is another great example. The country, surrounded by enemies and neverending wars, had to outpace rivals by investing in technology superiority. As all Jewish citizens are required to serve for up to three years, the first place they learn about innovation and new tech is in the armed forces. It is also where young men and women face scarcity, insurmountable challenges and, literally, near death moments.

After service, with fresh lessons learned from this hostile environment, and combined with a great education, Israeli entrepreneurs went on to create some of the world’s most successful startups and products such as Waze (acquired by Google), Viber, Mobileye (acquired by Intel), Fiverr, Wix, ICQ (the first instant messenger), the Kinect camera (on the Microsoft Xbox), the 8088 processor, etc.

It is no coincidence that China and Israel boast the most developed tech ecosystems outside Silicon Valley. Both countries did not try to copy the Valley and instead focused on their own strengths. In my view, Shenzhen and Tel Aviv are the benchmarks to be followed for any cities trying to create the next Silicon Valley.