The ever-present debate around whether Silicon Valley will retain its crown as the most important tech hub got fresh fuel this past week, first from a piece by Adam Lashinsky (yes, it will), and then from a Financial Times report (sub. required) seemingly refuting his conclusion (no, New York wins!).
The research behind the FT report claims the most entrepreneurial cities in the US are, in order, New York, Boston, Providence, and then San Francisco. The FT headline – “How New York stole Silicon Valley’s crown” – leads one to believe that somehow the research was comparing Apples to Big Apples. Of course, it was doing nothing of the sort. In truth, the FT‘s uncharacteristic clickbait compared Salesforces to sandwich shops.
The Valley is known for tech unicorns, and Lashinsky posits that the Valley will always create proportionally more of them than any other region in the world. The FT story was based on research from the Kauffman foundation tracking an entirely different brand of entrepreneurialism – small businesses. Shame on the FT for the bait-and-switch headline, but maybe there’s a pony inside all of this.
I’ve been developing a theory for more than a decade that technology will one day be understood more as an economic enabler – infrastructure, if you will – and less of a vertical industry centered in a given region. It’s not that tech won’t be important and unique as an industry, but rather that this particular industry creates a set of products which live unburdened by geography. Slack may be a Valley company, but Slack the service is used by tens of thousands of businesses, most of which are not in the Valley.
Let me step back for a minute and define a couple of terms. First, the tech platform company. This is a company that develops technology as a platform to be used by others. These are the kind of companies that thrive in the Valley ecosystem, and as Lashinsky posits, most likely always will. They’re the computer and gadget makers (Apple, HP, Google), the massive consumer data platforms (Twitter, Facebook, LinkedIn), the hardcore software platforms (Github, Adobe, Oracle, Salesforce).
But a second kind of company is breaking out, thanks to technology’s evolution. I call these company tech-leveraged, or tech-enabled. These are companies which aren’t focused on building core technology platforms, rather they exploit the work of those platforms to create innovative new solutions to old problems, or imagine entirely new products and services.
My thesis is this: while it’s true that the best place to start a tech platform company such as Google, Apple, Twitter, or Tesla remains the Valley, it’s no longer true that the Valley is the only place to build a tech-leveraged company like BuzzFeed (NY), SilverCar (Austin), or Holaluz (Barcelona).
I think most of us confuse the two, because the first wave of tech-leveraged companies were concentrated in the Valley, in particular San Francisco. You can’t argue that Sprig or Luxe or Hired are at their core technology platform companies. The services they provide are food delivery, valet parking, and recruitment. But they naturally sprouted in San Francisco, because that was the closest urban center where tech-minded entrepreneurs could test this new breed of tech-leveraged company.
The migration of tech-leveraged companies from Cupertino and Mountain View to SOMA and Portero won’t end in San Francisco. Instead, it will march through all the world’s cities, and far faster than we might think. Consider the resources needed to start a tech-enabled company. You need access to a few good coders, to be sure. But you also need smart managers, enough capital, and access to markets. The supporting infrastructure of a major city is also crucial. But do you need the specialized resources of the Valley? Not really. You’re not building Apple or Google, where a huge percentage of your employees are engineers. To build a tech-leveraged company, you just need to be in a functioning, modern city, one with good colleges, decent access to capital, and reasonably good connectivity. And it certainly doesn’t hurt that nearly every city in the world is less expensive than the Bay Area.
We see this shift occurring in every NewCo city we light up. Just this year, I visited scores of tech-leveraged companies in cities as diverse as Istanbul, Amsterdam, Cincinnati, Boulder, and Barcelona. None of these companies could have existed ten years ago. They’d have required millions of dollars in capital to create back-end technological infrastructure that until recently simply didn’t exist. Now, they can light up AWS for processing and storage, Heroku and Github for development, Slack or Atlassian for workforce communications, and of course the distribution platform of ubiquitous smartphones and connectivity.
Ten years from now, I’d wager that of the top 100 companies considered paragons of entrepreneurship, less than 15% will be headquartered in what we’ve come to know as “The Valley.” In fact, someone should start such a list, and track changes to it over time. Hmmmm …
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