silicon valley past, present, future russell hancock joint venture silicon valley silicon valley...
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Silicon ValleyPast, Present, Future
Russell HancockJoint Venture Silicon Valley
Silicon Valley Institute for Regional StudiesPublic Policy Program, Stanford University
3 August 2015
My Game Plan 1. A primer on Silicon Valley
• What is it? • How does it work? • Why have we been so successful?
2. Silicon Valley today• Current patterns of growth• Current strengths• Current challenges
3. Silicon Valley tomorrow• Important trends• future projections
Part One
What is Silicon Valley?
Common misperceptions
NOT a place you can point to on a map
NOT a place with a defined identity
NOT a planned phenomenon
No Silicon!
So, what isSilicon Valley?
So what is Silicon Valley?
A remarkably enduring hotbed of innovation and entrepreneurship
Our most important characteristic:
We keep re-inventing ourself
Silicon Valley’s Waves of Innovation
Milestone Silicon Valley Innovations
1940s Vacuum Tube
1950s Transistors
1960s Semiconductors, Defense Technology
1970s Integrated Circuit, Graphical User Interface
1980s Personal Computers, Workstations, Relational Databases, Biotechnology
1990s Network Computing, Packet switching, Internet Search
2000s Social media, Web 2.0, sharing economy, clean tech
However, the Valley’s edge doesn’t stem from innovation alone …
1950sDefense Electronics
Hewlett-Packard, Varian
1960sSemiconductors
National Semiconductor, Fairchild, Intel, AMD
1970sBiotechnology
Genentech, Genencor
1980sPersonal Computers, Workstations
Apple, Silicon Graphics, Sun
1990sNetwork Computing, Packet Switching
Cisco Systems, Sun
Internet
Netscape, Yahoo, eBay, Google
2000s
Social Media
Facebook, YouTube
Sharing Economy
Uber, Lyft, Air Bnb
… but also from entrepreneurship
Internet-based commerce (Netscape)
Free search, supported by advertising (Google, Yahoo)
Music downloads, streaming(Apple itunes)
Social networking (Facebook, MySpace)
A la carte television(Netflix)
On-demand delivery(Door Dash, Uber, Google Express)
The Valley also generates new business models
A permanent feature of Silicon Valley:
CHURN
1982 2002 1. Hewlett-Packard 1. Hewlett-Packard
2. National Semiconductor 2. Intel
3. Intel 3. Cisco*
4. Memorex 4. Sun*
5. Varian 5. Solectron
6. Environtech* 6. Oracle
7. Ampex 7. Agilent*
8. Raychem* 8. Applied Materials
9. Amdahl* 9. Apple
10. Tymshare* 10. Seagate Technology
11. Palm,* Google,* Cadence,* Adobe,* Yahoo*
Largest Silicon Valley Employers
*no longer existed in 2002 *didn’t exist in 1982
Source: Stanford Project on Regions of Innovation & Entrepreneurship
So what’s the secret?
A Habitat for Innovation
Results-oriented meritocracy.
Climate that rewards risks, tolerates failure
Strong markets (capital, labor)
Mobile, fluid workforce
Favorable government policies
University-industry collaboration
Specialized infrastructure (venture funding, lawyers, executive search, accountancies)
Quality of life
Part Two
Silicon Valley today
Silicon Valley was the last region to succumb to the Great Recession
The region was adding jobs through Q4 2008
Today Silicon Valley is the first to emerge from the Recession
JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014
JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014
JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014
JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014
+119,576+3.5%
TOTAL NUMBER OF JOBS9-County Bay Area
MAJOR AREAS OF ECONOMIC ACTIVITY
+40,096
+18,445
+12,294
-491
+57,951
2013-2014
AVERAGE ANNUAL EARNINGS
MEDIAN HOUSEHOLD INCOME
Innovation is thriving.
PATENT REGISTRATIONS
VENTURE CAPITAL
VENTURE CAPITAL BY INDUSTRY
INITIAL PUBLIC OFFERINGS
•Rapid job growth •Young, well-educated workforce•Accelerating patent registrations•Thriving startup community•Mega venture capital deals
San Francisco and Silicon Valley together: • $20.2 billion in venture capital• $2.8 billion in Angel investments• 16,055 startups• 76,000 new jobs
Is this a bubble?
We don’t think so.
Why not a bubble?
Five years of incremental growth
Profitable companies, serving proven customer bases
Venture community enforcing a high bar
Region’s portfolio extremely diverse
Economy still moving into promising new areas
Valuations are level-headed
VALUATIONS ARE LEVEL-HEADED
Price-earnings ratio of top-ten NASDAQ companies,by market cap
Source: Barrons
Part Three
Silicon Valley tomorrow
So what’s not to like?
It would appear that Silicon Valley is the world’s most prodigious regional economy.
Despite our strengths, Silicon Valley faces many challenges and has some structural flaws
One challenge:
Tech is no longer a tide that lifts all boats
DISTRIBUTION OF HOUSEHOLDS BY INCOME RANGES
HOME AFFORDABILITY
POVERTY & SELF-SUFFICIENCY
Growth is putting a strain on the region.
COMMUTE PATTERNS
Train travel in other parts of the world
Train Travel in Silicon Valley
Built in 1863
Another challenge:
Fiscal instability, failure of our government institutions
Our tax system doesn’t track with the 21st century economy; no political will to fix it
City Revenues in Silicon Valley
Other challenges:
• Loss of federal funding• Reversal of immigration trends• Sagging infrastructure• Poor K-12 education
Yet we expect Silicon Valley will continue its dynamism and move into promising new areas
One vital trend: convergence
Tech Convergence: Major Research Centers
Convergence firms in the Valley
Another major trend:
We are building new clusters in renewable energyand clean technology
CLEANTECH VENTURE CAPITAL
CLEANTECH VENTURE CAPITAL
Summary:Silicon Valley’s leadership will continue unabated
Silicon Valley is now joined in its leadership by other global regions
The region will have to face down internal challenges to stay competitive
The private sector will lead the way
Thank you for the honor of your invitation.
Russell HancockPresident & Chief Executive OfficerJoint Venture Silicon Valley Institute for Regional Studies100 West San Fernando Street, Suite 310San Jose, California 95113(408) 298-9330
Lecturer in Public PolicyStanford [email protected]
www.jointventure.org