silicon valley past, present, future russell hancock joint venture silicon valley silicon valley...

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 Universityrhancock@stanford.edu

www.jointventure.org