The Success Behind Silicon Valley
Exploring how technological hub of the world was established, what makes start-ups here so successful, and why it’s success is difficult to replicate?
Apple, Google, Facebook, Netflix. Sound familiar? These companies have taken over the world, our daily lives, and even our vocabulary. If you don’t believe me, just Google it. These are just a few of the major technology companies started and are headquartered in Silicon Valley. Others include, but are not limited to, Tesla, Twitter, Yahoo, eBay, Intel, Adobe, Uber, and LinkedIn. You may have heard of them. But what makes companies from Silicon Valley so successful?
Silicon Valley is a region in the south San Francisco Bay Area in California that is the hub for innovative technology companies and start-ups. It’s home to over 2,000 tech companies, the densest concentration in the world. It’s important in understanding how this was established to help understand why it’s so successful.
Silicon Valley: A Brief History
Frederick Terman, often regarded as the father of Silicon Valley, was a Stanford University professor from 1925–41. During his time here, he would go on to mentor, inspire, and invest in some of the founding companies and personalities of Silicon Valley.
William Hewlett and David Packard, who Terman encouraged to partner together, founded a company you may know called Hewlett-Packard (HP). They took his advice and became the original garage-startup in 1939 when they formalized their partnership and made electrical test equipment out of a rented one-car garage in Palo Alto.
Following this, many graduates began listening to Terman by founding their own companies in the area. This established the first set of companies that were bound together through Stanford, or even personal connections, while Terman continued to develop the academic program that would produce a growing pool of highly-educated workers who would be hired in turn by local companies founded by Stanford graduates.
From this, Terman developed the framework for an education program at Stanford that to this day continues to feed highly educated graduates to the biggest Silicon Valley firms such as Google and Facebook. This is what many attribute to the success of Silicon Valley. Today, there are a vast number of highly prestigious universities in the area which make up a strong pool of graduates including Stanford, Berkeley, Davis, UCSC, and SJSU.
This alone was not enough to jumpstart Silicon Valley in the way it was; many other factors contributed to its development including the Second World War, the invention of the silicon transistor, the launch of the Sputnik-1 satellite, and more. A more in-depth history of Silicon Valley can be found here.
Business through Innovation
There are three main innovation strategies which most companies follow, ‘Need Seekers, Technology Drivers, and Market Readers.’
Need Seekers focus on discerning user needs, figuring out how to meet those needs, then getting the necessary product or service to market as quick as possible. Technology Drivers take direction from engineering department rather than users to drive innovation. Market Readers watch their customers and competitors carefully and focus largely on creating value through incremental change and capitalizing on market trends.
46% of Silicon Valley start-ups follow the need seeker strategy, compared to the only 28% of the total US companies. Start-ups in The Valley rely on a strategy that strives for excellence that puts the customer needs at the center of its innovation and values fresh talent and new ideas over all else.
Success Breeds Success
Silicon Valley is the destination of choice for establishing technology businesses, but apart from their business models, why do these companies continue to succeed? Here are some additional reasons:
Location
Starting a tech business in a location such as Silicon Valley reaps the benefits of working in a location with an established business infrastructure, a talented resource pool, and a flourishing marketplace.
Here’s an example. If you were hosting your business on a cloud service that is based in The Valley, it provides much more confidence as your partners are in close proximity rather than hundreds of miles away.
Networking and Specialization
Silicon Valley brings with it the entrepreneurial environment that is characterized by innovation, collaboration, and risk-taking. It is this environment that provides the essential motivational framework for other start-ups.
With this, founding a tech start-up in this environment brings with it the expertise of industry professionals as it is much easier to network and connect with experienced mentors belonging to a similar field which can help guide an entrepreneurial venture moving forward with their knowledge of technological innovation.
Venture Capital
As Silicon Valley is an extremely high-cost location, it requires an abundance of capital to establish a company. Due to the prestige of the valley, it has established itself as the prime location to receive substantial capital funding for qualified business ideas. With an exciting start-up idea, it is easier to attract talent pools, partners, legal counsel, and most importantly, venture capitalists who are willing to provide support to a company.
Cultural Diversity
Between 1995–2005 more than half of Silicon Valley’s startups were founded by immigrants as The Valley attracts the top industry professionals worldwide. This is important as diversity drives innovation and boosts financial results.
Bottom Line
The bottom line is, the world continues to struggle in understanding the secret behind the success of Silicon Valley. Silicon Valley is home to highly educated workers, plentiful venture capital, and an entrepreneurial and innovative culture, but above all else, its success lies within their business strategy. So far, the special combination of top-tier resources and innovative mindset have proved it difficult if not impossible to replicate and it is safe to say that we likely won’t be seeing another Silicon Valley anytime soon.
