If you’re an actor, you go to Hollywood. If you’re in tech, you go to Silicon Valley.
There are very few other industries who share such a geographical concentration to its influence across the world.
Silicon Valley took many decades to become what it is today, and for many years this was the only place you could build a tech company from. You simply had no other options. But recently that has changed. Silicon Valley is no longer the only place. You don’t have to come here to become Julia Roberts or Brad Pitt of tech. The truth is, Silicon Valley has peaked.
The “tech ecosystem”
What Silicon Valley really is, outside of an overexplicit tv show on HBO, is an ecosystem. The elements which defines Silicon Valley is a combination of the following:
- An entrepreneurial culture that cherishes innovation and risk taking. 👑
- Access to a unique and diverse talent pool. 🤓
- Mentors who have done it before who can share advice and learnings. Mudita FTW! 🤝
- Capital to fund innovation from ideas throughout scale.💰
- Established tech companies who respect innovator’s dilemma and realize all innovation cannot happen from within and therefore partner and acquire tech companies. 🏢
- Other supportive infrastructure such as fast (…ok, it’s only decent) internet connection, not too much regulatory friction or government intervention, legal and media. 🏛
For a long time Silicon Valley seemed to be the only place in the world where all of these elements existed. Anyone who wanted to be part of the tech world therefore gravitated to the only place where it made sense to be.
The black swan of the Valley
However, in recent years the barriers to entry for starting a tech company significantly came down, much thanks to cloud computing, digital distribution, lean startup movement, and crowdfunding.
At the same time as this was happening, we had a new generation of entrepreneurs taking the mass media spotlight. Mark, Elon, Larry, Sergey, and more started becoming household names because the products they produced touch so many millions of people. Role models inspired people globally, and entrepreneurship and engineering became considered viable and cool careers.
The combination propelled a huge number of new companies to get started all over the world. The culture and tools to start a company became widely available all over the world. This became the black swan event needed to break Silicon Valley’s network effects and kickstart new ecosystems into formation. Most of them started small and it took years, but eventually they grew strong… which brings us to today.
Today, all technology innovation is not longer centralized to Silicon Valley and the world is significantly more balanced.
In the US cities like NYC, LA, Boston, Austin and Boulder have vibrant tech communities.
In Europe London, Berlin, Stockholm, and Paris are usually mentioned as the main hubs.
And let’s not forget Beijing, Shenzhen, and Hangzhou who have gone from domestic to global influencers.
Across the globe talent and passion for starting and building companies is more mainstream than ever. People who have been through a few successful tech lifecycles are looking to share learnings with next generation entrepreneurs. Angels and institutional venture investors are becoming more sophisticated. And in addition to Mark, Elon and Sergei only in Nordics we have people like Daniel, Sebastian, Niklas and Ilkka.
Silicon Valley has gone from a “must have” to a “nice to have” for people starting a company. Peak Oil is predicted happen sometime between 2010 and 2030. Peak Silicon Valley happened sometime around 2011 to 2016…
So now what? Well, first of all, at Creandum we have benefited from up-close witnessing the development and maturity of some of the major tech hubs in Europe. In particular Stockholm which has become a creator of a disproportionate number of BUSD companies. We’re very excited early stage investors in the European market, and everyday we pride ourselves from being close to some of the companies who lead the charge.
Secondly, having peaked is simply a relative comparison against others. It doesn’t at all mean being insignificant or irrelevant. So even though the relative importance of the Silicon Valley in the world may not be as great it once was, it’s still by far the largest and most important ecosystem for technology in the world. It homes the best technical skills in the world, but maybe more importantly within sales and marketing you will have to search wide and long to find people outside of Silicon Valley who have taken software companies from $1m to $100m in revenue or 1M to 100M in users.
And when it comes to M&A no other region comes close. Most other ecosystems have one or a few local larger tech companies present, as a best case, who search for innovation through startups. In Stockholm, we are fortunate to have Spotify, Klarna and King as active acquirer of technology. But even when looking across all of Europe there are very few organizations who can acquire businesses north of $100M EV. Within a few kilometers of Silicon Valley you have an almost endless number of them creating a much healthier competition for innovation. This is the reason why Silicon Valley is home for almost 40% of the global exit value created within tech.
I’m fortunate to be based in Creandum’s Silicon Valley office and to see all of this up close. My main priority is to help our portfolio access the unique elements of this region and to optimize the chances of our entrepreneurs maximizing their value creation. I believe Silicon Valley has peaked, but I also believe access to certain elements of this ecosystem is a huge advantage for startups.
The big question is how long Silicon Valley remains relevant? Will a European VC like us continue to have a presence here in 5 years from now? Most certainly. Will we be here 10 years from now? Probably. 15 years from now? Who knows, the singularity is near... 💪 👊