Chasing the Silicon Valley dream is harder than you'd think
The CNET News crew hit the road and the skies this summer to see how far Silicon Valley’s influence has spread.
Pretty far, it turns out.
Programming schools have sprung up in Vietnam, a high-speed Internet project has turned former railway hub Chattanooga into a 3D printing hub and Minneapolis has quietly created an incubation center so attractive that Google (Alphabet) Chairman Eric Schmidt has invested in it.
Our itinerary also took us to Israel, where we checked out the growing startup scene; Southern California, where we visited a drone creator; and Detroit, home to a test track for Motown’s intelligent cars.
Sure, few locations have been as successful as Silicon Valley, which boasts 53 of the 131 startups valued at more than $1 billion, according to PitchBook, a venture capital research firm. But the technology epicenter is influencing global innovators, including an Israeli museum that’s digitizing priceless artifacts and the Vietnamese developer of the Flappy Bird game.
Many of the folks we spoke with want to replicate Silicon Valley’s self-reinforcing cycles of success. Small companies, seeded by venture capitalists, get bought or go public. That provides capital to invest in new ideas and companies. The proximity of those companies matters, too. Apple executives can be at Alphabet’s headquarters in 10 minutes. Entrepreneurs in other places are trying to re-create that coziness.
What does it take to replicate that feedback loop outside Silicon Valley? Some tech communities have specialized in certain types of businesses in order to attract specialists. Others have worked closely with their surrounding communities, partnering with large businesses nearby to work both as customers of and ambassadors for their products.
Finding talent outside the Valley remains a challenge, particularly because many promising programmers are heading to California. Once they make it out West, they tend not to leave.
“It’s so far away,” said Peter Vidani, creative director for New York-based blogging site Tumblr.
Manufacturing and coding skills in Vietnam
Vietnam might not seem to have much in common with Silicon Valley, but it’s trying to foster a culture that gives life to technology companies that want to change the world while boosting the local economy.
One business the country has attracted is manufacturing. But tech giants including Samsung and LG are finding it hard to scare up employees with the right education to do more than simply assemble devices. The companies want local employees to do research and development for new products, but the education system in Vietnam focuses more on book learning instead of training needed for projects.
Many people are trying to change that. Foreign tech companies are partnering with US and Vietnamese universities to make sure prospective employees have the right skills. New startups, like Rockit Online, are meanwhile helping workers learn English online.
The Vietnamese government is funding startups and connecting them with customers. And more established startups, such as online education company Topica, are helping entrepreneurs get their businesses off the ground by providing mentorship and helping them find funding.
“The young generation now in Vietnam, they have big dreams and ambitions to be successful entrepreneurs, to get money from technology,” said Pham Hong Quat, director general of the National Agency for Technology Entrepreneurship and Commercialization, a branch of the Vietnam Ministry of Science and Technology.
Then there are companies like BKAV, which makes money selling antivirus software but earlier this year launched the first made-in-Vietnam smartphone. BKAV aims to rival Apple and Samsung in the competitive mobile market by first appealing to its home base of Vietnam. Misfit, one of the world’s top makers of fitness wearables, says it will house about half its employees in Vietnam by year’s end. Misfit CEO Sonny Vu is Vietnamese and recently moved his family to Ho Chi Minh City.
“What we’ve done is optimized our hiring to be in places where we have unfair competitive advantages,” Vu said. “So in Vietnam, we have an unfair advantage here. Why? Because we’re just the coolest company to work for…People want to work for companies like us.”
Israel’s tech scene reaches higher
Israel’s startup scene, long known as a hub of innovation, is showing signs of growing up, after entrepreneurs there have for years sold off their firms to bigger companies for a quick buck.
Inspired by Silicon Valley’s huge success, many Israeli founders now are looking to go bigger and are staying independent longer. That road is riskier, but this new mentality could result in Israel creating more major tech companies and becoming an even bigger influence on the tech world.
Acquisitions by big multinational corporations continue to dominate the local market, so there’s still a long road ahead before the Israeli tech scene matures.
“It requires great entrepreneurs, capital and patience,” said Arnon Dinur, a partner at Israeli venture capital firm 83North. “We’re at a time when all these three things are coming together.”
In Seattle, searching for success in Amazon’s and Microsoft’s wake
A walk around the Seattle neighborhood of South Lake Union is enough to prove the tech economy is booming. The cranes, construction pits and traffic detours are hard to miss. And while most of it will become Amazon offices, some of the development is condos and work spaces for a growing community of tech-focused entrepreneurs.
Startup Hall, a program at the University of Washington that rents office space to startups and hosts an annual business accelerator program, has neighborhood development on its mind. Its startup manager, Nathan Daum, hopes the program will draw job opportunities and prosperity to the neighborhoods near the school, which are largely residential.
On the other hand, he hopes the famous strip of shops and restaurants near the school keeps its character, with two and three story buildings and a few family owned boutiques that have survived the surge of e-commerce over the last two decades.
The city of Seattle is also working to make sure that tech benefits a diverse range of people. Its two recent hackathon events yielded a traffic app to make travel easier for people in wheelchairs, as well as an app produced in Seattle’s historically black Central District that rates local politicians on how well they keep their campaign promises.
Detroit hopes to build bridges to San Francisco
As the center of the US auto industry, the Detroit area houses decades of experience in developing technology and bringing it to market. Now, with the marriage of computing and cars, the auto industry is grappling with technology like vehicle-to-vehicle communications and self-driving cars.
Even though Detroit isn’t embracing the startup culture and venture capitalism of Silicon Valley, many carmakers are opening labs in the San Francisco Bay Area. And the computer jocks are taking over. “It used to be that mechanical engineers controlled the conversation at auto companies,” said Amit Jain, Verizon’s director of corporate strategy for Internet of Things work. “Then a decade ago it transitioned to electrical engineers. Now the computer engineers are gaining the upper hand.”
Moving beyond ‘Silicon Alley’ in New York
Years ago, New York had a name for its tech scene: Silicon Alley. Set in Manhattan, the area was littered with high profile startups like the photo website Shutterstock and social-networking company Meetup. That all collapsed.
Now when you chat with people in New York’s tech scene, they talk about how the industry has found ways to work with other giants, such as banker Citigroup or communications titan Verizon.
“There’s no tech industry per se as a separate industry,” said Jessica Lawrence, executive director of NY Tech Meetup, which holds a monthly gathering of tech-minded individuals for startups to pitch new ideas. “It’s so integrated into other industries.”
Tech companies in the area say that because New York has such a mix of businesses, it serves as one of the best markets for a startup looking to test the mettle of its product or service.
“I don’t think startups in Silicon Valley have as many customers in their backyard,” said Alex Iskold, managing director of Techstars, another program that fosters local startups. “That’s an interesting and distinguishing thing for companies that start in New York.”
Minnesota re-creates itself
We ventured to Minnesota, aka Silicon Prairie, where Silicon Valley ideas are mashed up with Midwestern values. The result of that mix: a low-key collaborative community of startups and older tech companies that stands in sharp contrast to the in-your-face, cutthroat lifestyle in California.
Entrepreneurs in Minnesota are also convinced they have a better chance of getting investor funding, because of less competition. The state ranked 20th in the nation last year in startups five years old or younger that received venture funding, according to research firm PitchBook.
“I’ve lived in both California and Minnesota and found it easier to raise funds here,” said Clay Collins, whose 2-year-old Minneapolis-based software company, LeadPages, has received nearly $40 million in funding, all without Valley backing. And what about the siren song of Silicon Valley? “Hell no,” said Collins, “we’re not leaving!”
Going for a jump-start in Tennessee
Chattanooga may seem like an unlikely place for a tech hub, but a long history of progressive thinking and a strong manufacturing legacy have helped the midsize southeastern city, two hours north of Atlanta, cultivate a thriving startup scene, especially for 3D printing.
At the heart of Chattanooga’s tech renaissance is its so-called gigabit broadband network, an industry term for a network able to connect to the Internet through a faster fiber-optic cable at 1 gigabit per second, or 50 to 100 times faster than your average US Net connection.
Leaders in the startup community aren’t shy about highlighting the benefits of starting a company in Chattanooga versus the West Coast.
“One of the biggest reasons companies come here is that it costs three to four times less than operating a business in Silicon Valley or New York City,” said Ted Alling, a partner at Lamp Post Group. “We may not have all the same resources, but we can build that infrastructure to support successful startups.”
Southern California wants to entertain
About an hour’s flight from San Francisco are the sunny counties of Los Angeles and San Diego. They’re home to startups like messaging service Snapchat, valued at more than $16 billion. There’s also Oculus VR co-founder Palmer Luckey, who based his company there while he kickstarted a multibillion dollar wave of investment in virtual reality technology.
Juan Bruce, head of Epoxy, a maker of online-media tools, said the tech community surrounding his company’s Los Angeles headquarters has seen a “massive change” in growth over the last three years. More capital is starting to flow down to Southern California from the Bay Area, he said, and he believes the existing industries in LA will play a key role in online video, social networking and virtual reality, among other areas.
This newfound tech energy has even caught the attention of LA’s mayor, elected in 2013 on a platform promising to make the city a tech hub. “We’ve been pleasantly surprised by how much support there is,” Bruce said. “He’s a tech-forward mayor in a real way.”
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