Silicon Valley Forum was recently in Wellington, New Zealand for an incredible opportunity to learn about the tech ecosystem, speak with accelerators, VCs, universities and government representatives, and listen to that famously sexy Kiwi accent. Our hosts, the wonderful folks at Technology Valley Forum, are keen to be the glue that binds the greater Wellington region’s technology hub and welcomed Silicon Valley Forum’s input related to ecosystem building and startup development.
During our visit, I led several discussions on these topics, outlining some of Silicon Valley’s competitive advantages, the art of tech ecosystem building, and some of the pitfalls associated with creating a tech hub.
I was constantly impressed with the intentionality occurring in the development of “Technology Valley” – Wellington plus the neighboring Hutt Valley region. City officials, accelerators and other groups were keenly aware of the advantages that the region has to offer and its limitations. After a week of meetings I took the weekend off and had a chance to explore the nearby wine region of Martinborough for some tasty Pinots and Sauvignon Blancs. The train home made me reflect on ecosystem building.
New tech ecosystems like Technology Valley in New Zealand have the advantage of unprecedented foresight and hindsight. They can “build the train at the factory” – adding and taking away the necessary pieces to construct a model that meets the region’s needs, and no more. Additionally, Technology Valley can see the full landscape of tech ecosystems and analyze their comparative advantages in order to set the tracks towards the right future, without avoiding the considerable bumps along the way.
Top-down innovation strategies like this are often criticized for disincentivizing grassroots entrepreneurship in exchange for a prescriptive strategy. What would, for example, the train tracks look like if we allowed the company CEO design the tracks and not an engineer?
Silicon Valley was famously constructed from the ground up; what began as a collection of garage tinkerers and university researchers exploded into the multifaceted machine that churns out billion-dollar valuations and world-changing technologies – while simultaneously facing housing and environmental challenges of its own, make the future of the city on the bay a little blurry. Indeed, the Silicon Valley train was (and still is) constructed as it is rocketing forward. New track is being laid that allows it to change with the times. New carriages are being built (biotech dining car) and others let go (Silicon chip caboose), allowing it to stay cutting edge.
This strategy works for Silicon Valley, for the most part. The sheer size, resources and attention to the region has allowed it to grow with little motivation. Much like the “network effects” that allow for promising startups to take flight once they attain a user base (think: facebook only exists because you know people on it), Silicon Valley is fortunate to have a huge number of startups and venture capitalists, which in turn incentivizes more to come. Ecosystem builders like incubators, accelerators and Silicon Valley Forum emerge naturally.
Cities all around the world claim to be building the next Silicon Valley, but the design is much more intentional and usually far more focused. These regions in fact shouldn’t be aiming for that goal, but instead chart a different course that allows for intentional growth in the tech sector that speaks both to the competencies of the local economy as well as the economic, social and environmental objectives of the region. New tech ecosystems have the ability to think strategically on their direction forward and shouldn’t miss on the opportunity in an effort to become the “next Silicon Valley.”
So – as tech hubs emerge, what should they have on the top of their mind?
Focus on turning good ideas into products people want to buy. While monetizing innovation is not the sole goal of research programs, government-sponsored R&D programs should ensure that appropriate commercialization strategies are kept in mind. This include incentivizing universities to train students and researchers to think with an entrepreneurial mindset and test ideas.
Be brutally honest about your comparative advantages and limitations. No new tech zone can be everything for everyone. Cities must reflect on what sets them apart as a hub of innovation and focus on building out those competencies. These advantages can range from tangibles such as existing R&D capabilities of local companies and a favorable regulatory environment, to intangibles such as quality of life and a vibrant, multicultural society. One helpful tool to measure an ecosystem was created by the Kauffman Foundation a few years back.
Copy Silicon Valley in one way: Pay it forward. Silicon Valley is widely known as being highly collaborative. New founders regularly receive advice from established rivals; entrepreneurs share ideas and cheer on each other. The heart of the “pay-it-forward” mentality is that when one of us wins, we all win.
Educate your money. New tech hubs usually lack the institutional know-how that arises when a group of successful startups sell their business and begin the second stage of their careers as investors. Venture Capitalists bring not only their money but also years of experience in the trenches of startup development and have seen it all. New tech hubs will rely on other pools of capital; educating these early investors on how to properly support entrepreneurs is key.
Look for tech ecosystem models with shared traits. The explosion of tech hubs has given us multiple variations of the Silicon Valley model, which will most likely be better suited locally. A few models to follow:
- “Keys to the city” – Argentina has created the majority of South America’s unicorns due in part to the favorable policies coming out of Buenos Aires. President Mauricio Macri was formerly the mayor of B.A. and poured resources into infrastructure, security, and tax breaks. Slowly, these policies crowded in not only startups but other ecosystem players -nonprofits, accelerators, and investors – that make for a well-rounded tech hub.
- “Value-for-money” – Louisville, Kentucky has not been known as a tech hub but that is slowly changing. With a vibrant culture and affordable housing, a startup here can hire a team of developers for a fraction of the price of San Francisco, making scaling much cheaper. Plus, they have differentiated themselves with the largest cluster of aging care businesses in the country, making themselves America’s aging capital.
- “Leveraging Unique Capabilities” – Austin, Texas’ tech scene known locally as Silicon Hills has much to offer for budding entrepreneurs, with over 5,500 calling ATX home. With a university that pumps out experts in data science, legacy companies such as Dell providing training and expertise and South by Southwest offering cultural legitimacy, Austin has become a hub for data scientists and highly creative innovators.
Learn from but don’t imitate Silicon Valley. Not only are new hubs not equipped to be Silicon Valley, but there are far better models attempting to fix some of the ills befallen the bay area. Sky-high housing prices is the first indicator of a model in need to work and has led to a drastic rise in “super-commuters” (those traveling more than 90 minutes to get to work). Many are being priced out – others are seeking calmer waters to raise children. These problems will only be exacerbated in 2019, as the region will produce 6,000+ new millionaires with the slate of IPOs. New tech hubs have the unique ability to intentionally design the place of tech in their cities – keeping in mind not just the infrastructure needs to keep the it growing, but also the negative externalities.
Director of International Relations