Finding the 'next Silicon Valley'

With contenders lining up to become the potential home of the next billion dollar startup, it's cities like Canberra with a world class university and access to innovation dollars that could end up taking the prize.

Tech trends in 2011 included cloud computing, seed accelerators and everything Apple, including the sad loss of the company’s co-founder, Steve Jobs in October. Another trend one surely couldn’t help noticing in 2011 that is likely to continue in 2012 is the endless proclamations that this city or that is “the next Silicon Valley.” In 2011, hubs both large, small and in between were at various times touted in the press as the next place where innovation and investment will come together in a magic potion and poof! – create the next Silicon Valley.

New York, Moscow, Berlin, Jakarta, Shanghai, Dunedin, Canberra and Chattanooga all came across the news feed this year as contenders for the next potential birthplace of a billion dollar startup (or two). Many were first mentioned on the website that has capitalised on the craze and seized the domain name The Next Silicon Valley.com. But just as quickly as one place pops up as “the next”, it is replaced by another. The phenomenon, says Viki Forrest, CEO of ANZA Technology Network , a business accelerator that works with companies migrating to the real Silicon Valley “only proves that the model here continues to be the standard that all other places with talented tech-savvy populations and those willing to take some risks want to emulate.”

Big cities around the world are full of smart people, rich people and risk takers. Cities like New York, for example, have always been a magnet for talent and high achievers, drawing people from places like say, Chattanooga to increase their odds and opportunities for success. But why might Chattanooga or Canberra have a better chance at being “the next Silicon Valley” rather than New York, Berlin or Shanghai, for example?

“Big cities have too many distractions,” Forrest says. “In the past year, here in Silicon Valley, we’ve seen San Francisco, and to a lesser degree, Los Angeles, both make claims to actually be part of the Valley.” (San Francisco is less than an hour’s drive and Los Angeles is less than hour’s flight from the headquarters of Google, Facebook, Apple, Yahoo! and the rest.) “But the reality is that these cities are no more a part of Silicon Valley than are other big cities saying they are ‘the next’ Silicon Valley.”

While San Francisco and numerous other big name cities will continue to be a place young entrepreneurs with great ideas for a new app, game or online service will launch, it is the smaller, nondescript areas to watch. Places in proximity to a world class university and capital earmarked for innovation have the best chance to develop underlying technology and combine that with the necessary business culture to really be like Silicon Valley.

Silicon Valley spun out of US government funding for military projects during World War II and was taken to the next level of innovation due to its proximity to Stanford University. The initial government investment led to innovators from companies like Bell Labs and Hewlett-Packard along with researchers from the university to increasingly take each new technological development up a notch. Along the way, some of these people got rich and re-invested into the community.

“If Silicon Valley took the 10 or 12 towns that make up its sprawl and called itself a city, it might be easier for those places calling themselves ‘the next Silicon Valley,’ to better understand if they really have a shot at that title or not,” says Forrest.

“Canberra actually comes closest to the model,” she says. “It has a world class university and it is positioned closest to Australia’s biggest source of investment in innovation – government.”

Unlike Sydney, which has also been touted in recent years as “the next Silicon Valley,” Canberra, and its surrounds – the Australian Capital Territory (ACT) – is ground zero for Australia’s innovation dollars from the federal government. While there have been recent upticks in small investments from Sydney- and Melbourne-based VCs and angels and larger ones from the States, the majority of investment comes from the government.

And like Silicon Valley, there is not as much distraction in Canberra as there is in San Francisco and Sydney.

“Let’s face it,” says Forrest, “It takes a really disciplined entrepreneur to devote themselves 24/7 to building a business. It’s easier to do that in a place where there is limited nightlife and no beach.”

This article was first published on the ANZA Technology Network blog. Republished with permission.