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Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program, Stanford University 3 August 2015

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Page 1: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Silicon ValleyPast, Present, Future

Russell HancockJoint Venture Silicon Valley

Silicon Valley Institute for Regional StudiesPublic Policy Program, Stanford University

3 August 2015

Page 2: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 3: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Part One

What is Silicon Valley?

Page 4: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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!

Page 5: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

So, what isSilicon Valley？

Page 6: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

So what is Silicon Valley?

A remarkably enduring hotbed of innovation and entrepreneurship

Page 7: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Our most important characteristic:

We keep re-inventing ourself

Silicon Valley’s Waves of Innovation

Page 8: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 9: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

However, the Valley’s edge doesn’t stem from innovation alone …

Page 10: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 11: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 12: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

A permanent feature of Silicon Valley:

CHURN

Page 13: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 14: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

So what’s the secret?

Page 15: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 16: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Part Two

Silicon Valley today

Page 17: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Silicon Valley was the last region to succumb to the Great Recession

The region was adding jobs through Q4 2008

Page 18: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Today Silicon Valley is the first to emerge from the Recession

Page 19: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014

Page 20: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014

Page 21: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014

Page 22: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

JOB GROWTHAnnual change in Total Number of Jobs, 2008-2014

Page 23: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

+119,576+3.5%

TOTAL NUMBER OF JOBS9-County Bay Area

Page 24: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

MAJOR AREAS OF ECONOMIC ACTIVITY

+40,096

+18,445

+12,294

-491

+57,951

2013-2014

Page 25: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

AVERAGE ANNUAL EARNINGS

Page 26: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

MEDIAN HOUSEHOLD INCOME

Page 27: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Innovation is thriving.

Page 28: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

PATENT REGISTRATIONS

Page 29: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

VENTURE CAPITAL

Page 30: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

VENTURE CAPITAL BY INDUSTRY

Page 31: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

INITIAL PUBLIC OFFERINGS

Page 32: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

•Rapid job growth •Young, well-educated workforce•Accelerating patent registrations•Thriving startup community•Mega venture capital deals

Page 33: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 34: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Is this a bubble?

We don’t think so.

Page 35: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 36: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

VALUATIONS ARE LEVEL-HEADED

Price-earnings ratio of top-ten NASDAQ companies,by market cap

Source: Barrons

Page 37: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Part Three

Silicon Valley tomorrow

Page 38: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

So what’s not to like?

It would appear that Silicon Valley is the world’s most prodigious regional economy.

Page 39: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Despite our strengths, Silicon Valley faces many challenges and has some structural flaws

Page 40: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

One challenge:

Tech is no longer a tide that lifts all boats

Page 41: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

DISTRIBUTION OF HOUSEHOLDS BY INCOME RANGES

Page 42: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

HOME AFFORDABILITY

Page 43: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

POVERTY & SELF-SUFFICIENCY

Page 44: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Growth is putting a strain on the region.

Page 45: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

COMMUTE PATTERNS

Page 46: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Train travel in other parts of the world

Page 47: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Train Travel in Silicon Valley

Page 48: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Built in 1863

Page 49: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Another challenge:

Fiscal instability, failure of our government institutions

Page 50: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Our tax system doesn’t track with the 21st century economy; no political will to fix it

City Revenues in Silicon Valley

Page 51: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Other challenges:

• Loss of federal funding• Reversal of immigration trends• Sagging infrastructure• Poor K-12 education

Page 52: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Yet we expect Silicon Valley will continue its dynamism and move into promising new areas

Page 53: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

One vital trend: convergence

Page 54: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Tech Convergence: Major Research Centers

Page 55: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Convergence firms in the Valley

Page 56: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

Another major trend:

We are building new clusters in renewable energyand clean technology

Page 57: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

CLEANTECH VENTURE CAPITAL

Page 58: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

CLEANTECH VENTURE CAPITAL

Page 59: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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

Page 60: Silicon Valley Past, Present, Future Russell Hancock Joint Venture Silicon Valley Silicon Valley Institute for Regional Studies Public Policy Program,

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


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