Panel, Conference Presentation
What's Silicon Valley Got to Do With It?
Milken InstituteAlec Ellison, Andrew Auerbach, Eric Drummond, Kate Mitchell, John Ruffalo, Eric Schmidt, Andrew Lovett
- Regional economies outside Silicon Valley can achieve prosperity by matching local assets with specific capital types and implementing mentor management systems, though currently, only Silicon Valley, Austin, and Colorado have fully formed ecosystems around these elements.
- Silicon Valley maintains a distinct advantage through a mature managerial ecosystem capable of guiding companies to public offerings, a capability that is difficult to replicate but can be constructed elsewhere through intentional network building.
- Growth equity models can support revenue-generating companies and "little i" innovation in various metro centers, reducing the necessity for venture capital support or physical location in Silicon Valley for success in sectors like AgTech, telecommunications, or FinTech.
- Company location decisions often shift post-seed stage to prioritize workforce stability, cost of living, and tax structures, with specific industries clustering in regions like St. Louis for AgTech, Houston and Denver for energy, and Southern California and New England for healthcare.
- High-growth potential exists in non-traditional hubs, with the speaker's firm already identifying three unicorns in Provo, Utah; Indianapolis; and Seattle, indicating that location is not a barrier to reaching billion-dollar valuations.
- Migration patterns suggest a continued emigration of tech workers from the Bay Area to regions with lower costs of living, such as Israel, to extend seed funding, while companies may establish satellite offices in New York, Boston, or Silicon Valley for sales and network access.
- Future innovation centers are expected to emerge based on unique local capacities, including the Rocky Mountains for medical devices and clean tech over the next 36 to 60 months, and China for consumer-related investments driven by pollution and food supply challenges.
- Government policies on immigration and tax incentives are viewed as critical drivers, with predictions that U.S. immigration reform could occur after Republican primaries in June or July, and that refundable R&D credits in Canada will act as non-dilutive financing for bootstrapping firms.
- Cultural factors, specifically the willingness to accept failure and the presence of immigrant clusters, are fundamental prerequisites for entrepreneurship, with the speaker's firm targeting regions like Canada, London, Berlin, and China where capital supply and demand mismatches exist.
- Investment returns are expected to diversify geographically, with potential for decreased returns in Silicon Valley if high capital density drives up deal prices, making stable workforces and better pricing in other regions more attractive.
- The healthcare sector is projected to show strong IPO activity in Southern California, New England, and Israel, while the decline in genome mapping costs is anticipated to become a more significant driver for the healthcare industry than Moore's Law.
- Specific regional initiatives like "San Diego Connect" and Utah's "Silicon Slopes" are expected to facilitate growth by convening communities, though San Diego's spatial geography may limit some companies from growing to larger sizes without mergers.
- New York is predicted to expand as a technology hub due to its density and lower income taxes compared to California, leveraging its strengths in media and content to generate sector-specific companies.
- Energy innovation and clean tech are expected to thrive in Houston, Denver, and the Colorado front range, creating opportunities that may not be supported by traditional Silicon Valley venture capital.
- Regulatory confusion in the U.S. healthcare system and government initiatives in Germany and Singapore are expected to stimulate growth in those specific markets, with Singapore and Ireland/Mid-Atlantic identified as key areas for med tech and life sciences.