Austin, Texas Bangalore, India Boise, Idaho Boston, Massachussetts Cambridge, England Champaign-Urbana, Illinois Salt Lake City, Utah Seattle, Washington Tel Aviv, Israel Washington, D.C.
CAN ANY PLACE EVER HOPE to match the awesome success of Silicon Valley? To answer the question, venture capitalist Joe Schoendorf leads a visitor to the roof of 428 University Avenue in Palo Alto, Calif., wedges his shoe in the door so it won't lock and walks to the railing. It is a clear, crisp day in the epicenter of the world's most imitated economic phenomenon.
""This is ground zero,'' he says, sweeping his hand past Hewlett-Packard, Oracle, Sun, Netscape, Apple, Stanford University and, he guesses, at least 5,000 start-up companies where visions of megabuck IPOs dance in founders' heads. Also passing under his gesture are thousands of supporting actors--high-tech PR flacks, intellectual-property lawyers, late-night sushi chefs, freelance circuit-board designers and entire squadrons of CEOs-in-waiting, lined up like paratroopers poised to leap into the wild blue stock-option yonder. ""Everything I need to start a company is here,'' he says. His implication is clear: here, and nowhere else.
Oh yeah? How, then, to explain the explosion of Silicon Valley wanna-bes, both domestic and overseas, that have already begun transforming cities, regions and, in some cases, entire countries? Their boosters may embarrass themselves with copycat nicknames (Silicon Alley, Silicon Fen, Glen, Woods, Forest, ad nauseam). But the results can be as revolutionary as, well, the technology itself.
Take Austin, Texas, a very nice town once famous for slackers, snipers and Willie Nelson. Now it's known as the home of both dorm-room billionaire Michael Dell and the guys who made your computer into an astral war zone with Wing Commander. Almost 2,000 high-tech companies employ 20 percent of the region's work force. ""It takes an entrepreneur to think there's life outside Silicon Valley,'' says Austin Ventures' Joseph Aragona, the Hoss of Texas's high-tech venture-cap cowboys. ""And when they do, they come here.''
They also come to Salt Lake City, Utah, where the Wasatch Front (at the foothills of the Wasatch Mountains) has more high-tech companies than fast-food restaurants. And to Seattle, where Microsoft is only one of an impressive roster of billion-dollar software giants (Amazon, RealNetworks) that have geekified the entire Northwest. Not to mention Boston, fully recovered from the extinction of its minicomputer empire and now a hip hotbed of exotic start-ups, as well as the second biggest recipient of venture-capital funding (behind you-know-where). They even come to the Virginia suburbs of Washington, D.C., where the company town's key industry isn't government, but the Internet: Dun & Bradstreet reports that the area has one of the highest percentages of info-tech-based employment of any comparable market, including San Jose.
In many countries outside the United States, building at least one tech city is, economically speaking, a matter of national security. Failure to do so is a snub to the future itself--and the future is a guy you don't want to tick off. While a few heavy-handed attempts to create foreign versions of Silicon Valley by fiat have so far fallen short, some nations have plenty to boast about. England's hopes lie in Cambridge. Ireland has seen Dublin go wired. Finland's Helsinki is hot, at least as far as cutting-edge tech goes. Thousands of programmers churn out code in India's Bangalore. And some say that the Silicon Valley's most serious global competitor is the mini-sprawl around Tel Aviv. ""High-tech start-ups are the new Zionism,'' says Yossi Sela, head of a $150 million venture-capital fund in the suburb of Herzliya.
The self-proclaimed Medicis of the new Florence south of San Francisco might object to the characterization, but these localities are all bona fide tech cities--places poised to exploit the digital revolution by spawning new companies, creating wealth and ditching the prewired business practices of the 20th century in favor of the rocking-and-rolling, go-for-gold ethos that has taken root in northern California. According to a recent American Electronics Association (AEA) study, in fact, the upstart tech cities are already scooping up the bulk of the country's new computer jobs: since 1990, Texas has added six times more high-tech workers than California, which was also dwarfed by the likes of Washington and Utah. Silicon Valley may still be the Big Daddy, but it's far from the only game in town.
HOW DO YOU GO ABOUT building a tech city? It's not easy. ""Silicon Valley is a set of networks and social relationships--simply plopping a science park down isn't going to work, '' says AnnaLee Saxenian, a University of California, Berkeley, associate professor in city and regional planning. The main technique of aspirants is to reverse-engineer Silicon Valley. Sometimes the attempts to clone the California phenomenon are almost comically literal (a developmental plan on the future of Cambridge, England, actually superimposed a geographical outline of the Valley over a map of East Anglia). Still, you don't need an engineering degree to isolate the elements of a high-tech hotbed:
1. A major research institution. In 1934 Stanford professor Frederick Terman persuaded recent grads Bill Hewlett and Dave Packard to start a firm in the area, kick-starting the Valley. To this day, according to the university's James Gibbons, half of Silicon Valley's revenues come from Stanford-seeded companies. But Terman himself was imitating the practices of the Massachusetts Institute of Technology, which over the years has spawned 4,000 companies employing more than a million people, according to a 1997 BankBoston study. MIT spinoffs include Cambridge success stories like Lotus (now owned by IBM) and Firefly (purchased by Microsoft). If this MIT archipelago were a nation, it would be the world's 24th largest economy, between South Africa's and Thailand's.
An ocean away, Cambridge University, after 800 years of perching above the commercial fray, is now actively leading an effort to Valley-ize its surroundings. Graduates, and even faculty members, are encouraged to go into business, and two of its colleges have opened science parks to incubate start-ups.
But even the most ambitious university can't build a tech city alone. That's why a lot of town-and-gown communities wind up hosting only a few high-tech hopefuls, led by entrepreneurs whose choice of location is determined by postgrad inertia more than anything else. Trying to defy those odds is Champaign-Urbana. The University of Illinois, and particularly its supercomputing center, lures brilliant young minds. The town just oozes with technology: even local criminals get arraigned electronically via a T1 hookup from jail to courthouse. Nonetheless, the locally based makers of the revolutionary Mosaic software--which single-handedly catapulted the World Wide Web to the center of the high-tech universe--had to go to Silicon Valley to take their dream to the marketplace. (They helped found a little company called Netscape.)
2. At least one megasuccess story. Instead of casting a shadow that eclipses smaller enterprises, a brand name not only draws world-class talent to a tech city but generates a stream of apostates who leave to start their own companies. This certainly has been the case in Seattle, where Microsoft has become the (reluctant) spawner of a slew of spinoffs known locally as Baby Bills. ""Half the people working in software here don't work for Microsoft,'' says Susannah Malarkey of Tech Alliance, a regional business group headed by none other than Bill Gates II, the dad of that guy starring in video depositions. So numerous are these new companies that even Wilson, Sonsini, the Microsoft-hating Silicon Valley law firm, has just opened a Seattle office to serve them.
Internationally, businesses seem to set their sights higher when their region is host to a company that kicks global butt. In Helsinki, for instance, the worldwide fame of Nokia ""did a lot for [our] self-esteem,'' says Linus Torvalds, a 28-year-old Finnish programmer who himself has become a national treasure by creating the Linux operating system while at the University of Helsinki.
3. High-tech talent. Whether they come from existing companies, a university or, in the case of Tel Aviv, the Army's Central Unit for Data Processing, smart new hires are like oxygen to high-tech firms. Only places with a rich talent pool can claim to be a tech city. Case in point: after years of bragging about how even a remote location like the so-called Silicon Prairie in North Sioux City, S.D., could incubate a world-class computer manufacturer, mighty Gateway threw up its hands and relocated its administrative headquarters to San Diego. ""We simply exhausted the Sioux City work force,'' explains vice president John Heubusch. On the other hand, once talent reaches critical mass in a city, young fortune seekers flock there, secure in the knowledge that they can choose from a range of existing companies and hot start-ups.
4. Venture capital. Austin, Boston and other towns may not have a Sand Hill Road, where superstar Silicon Valley venture capitalists sift through business plans seeking the next eBay, but they're starting to catch up. Still, it's hard to get inexperienced lenders to understand the high-risk, high-reward Valley ethic. Salt Lake City, for instance, has yet to shake many dollars from the pockets of the wealthy Mormons who dominate the state's financial scene. ""People in Utah tend to invest in what they know and trust, such as real estate, oil and mining,'' says Lynn Gordon Butterfield, COO of a nonprofit group set up to develop Utah's venture-capital system.
Overseas, the task is even tougher. Big money in London, Paris and Tokyo just isn't used to funding nerds in sneakers. But consider the rewards: if you sell a country's traditionally closed banking system on the upside of edgy high-tech companies, you're halfway home to rehabilitating the mind-set of an entire national economy. This is a lesson Israel has learned well: big venture-capital funds have helped seed a start-up culture that has begun to wean the country from its traditional unionized, state-run, kibbutz-based values.
5. Infrastructure. Star high-tech execs and programmers require a huge supporting cast that few places can provide. Bangalore may be the jewel of India's high-tech crown, but, says Saxenian after a recent visit, ""there are still cows in the street and the phone lines break down every couple of hours.'' But plenty of other places have suitable underpinnings for cyberindustry. Boston has at least two law firms specializing in high tech; Austin is loaded with Web designers, and Champaign-Urbana is rich in high-speed fiber for Internet connections. Even a low-key tech city like Nashua, N.H., claims a support system: ""We have lawyers, banking people, a printing industry and business services that are starting to focus on high tech,'' says Bob Thomason, head of a local executive-recruitment firm.
6. The proper 'tude. Silicon Valley's most valuable asset is its mind-set, a powerful merging of two behavioral strains: the macho, riverboat-gambler swagger of the original chipmakers who thought nothing of betting the company on a risky new idea, and the gently subversive high-tech idealism of early computer hackers. The resulting intellectual alloy counts you as a sellout if you don't try to make yourself a billionaire.
This attitude is where a lot of Valley wanna-bes, particularly those outside the United States, fall short. But it's hard to overcome centuries of tradition that honor the very qualities that Silicon Valley loathes: aversion to risk, lifelong fealty to an employer, willingness to work within a strict hierarchy. Efforts to grow hothouse tech cities like Sophia-Antipolis in the south of France may lure name companies with tax breaks and get some start-ups going with government development funds--but a tech city can't truly gel without the big-swinging-chip attitude that balloons garage operations into billion-dollar IPOs.
One attitude that's a sure-fire killer is a government bent on controlling the free market of ideas. Singapore, for instance, has had considerable success in building a high-bandwidth infrastructure and raising high-tech employment--as well as questions about its Big Brother reputation. (This is a government that fines people for not flushing public toilets.) Officials insist the rap is undeserved. Internet censorship, says George Yeo, minister of Information and the Arts, is minimal--""for symbolic purposes.'' But for better or worse, it is a symbol--of an obedient, cautious populace. ""It's hard to find examples of imaginative local companies,'' says Bruce Gale, a Singapore-based business consultant.
WHILE TECH CITIES try to emulate the elements of Silicon Valley's success, the ways in which they're not Silicon Valley can also be a virtue. Some potential employees like the idea that compared with the Valley, these other tech cities are not as crowded, and certainly not as expensive to live in. (""The cost of living in the Valley is pornographic,'' says American Electronics Association chief William Archy.) Tech cities also boast that they're not as work-obsessed as the Valley. ""People in Silicon Valley only meet people at work,'' says David Clarke, an exec at Iona, a hot Dublin software house. ""We have lives outside of work, and we intend to keep them.'' Meanwhile, tech-city employers love that their workers generally don't copy the incessant job-jumping of the Valley, where you're in gold-watch territory if you stay at a company for a year.
The paradox, of course, is that the more successful a tech city becomes, the more it develops the Valley's flaws. People in Cambridge, England, and Salt Lake City now grumble about traffic jams and longer commutes. Despite some recent bumps caused by stock-market jitters, real-estate prices have been soaring in Seattle and Cambridge, Mass. And company-jumping is increasingly common in northern Virginia and Dublin, Ireland.
But that's not the only way that tech cities have begun to resemble the Valley. Forget geography: the entire global high-tech culture tends to converge into what venture-capitalist John Doerr calls ""the Silicon Valley state of mind.'' Do people everywhere tend to behave similarly when they stare at computer screens, think digitally and endlessly ponder the value of their stock options? Or is it that, because of the Internet, technoids in places as distant as Tel Aviv and Boise, Idaho, are actually as close to each other as to their compatriots across town? In any case, you could drop a denizen from any tech city into another and he or she would fit in perfectly, down to the chinos, Power Bars and well-thumbed ""Guide to Programming C++.''
You could argue that as tech cities boom, Silicon Valley can no longer claim to be the sun around which the high-tech world revolves. It may have to settle for the status of brightest star in an expanding constellation of high-tech business and culture. Valley dwellers, of course, harrumph that even the most successful tech cities won't really put a dent in their dominance. But while nobody does it better than the Valley, its ideas, and its dreams, are eminently exportable.
That's the lesson of Taiwan's Hsinchu Science-Based Industrial Park, an 18-year-old government-seeded enclave carved out of farmland and abandoned factory zones 80 miles from Taipei. Among its many chief executives are heavy-hitting CEOs like Wu Tao-yuan, a Stanford grad who gave up his cushy stucco house in the Los Altos Hills to return to his homeland. He joined Umax Data Systems, a company that now claims 30 percent of the lucrative worldwide scanner market. Hsinchu also has the world's largest semiconductor foundry and the giant PC maker Acer. Its engineers, most of whom cut their programming teeth in U.S. universities, are almost indistinguishable from the nerds who park their Volvos in Santa Clara parking lots: they eat at McDonald's, crank out code while their earphones throb with rock music and pack the local MIT alumni club.
OBVIOUSLY, HSINCHU IS not California. ""Diversity'' is a word that doesn't translate: of 70,000 high-tech workers, fewer than 100 are non-Chinese. Many of the engineers bunk in spartan dormitories, commuting to their families on Wednesday nights and weekends. And Asian traditions don't exactly encourage the ""failure is cool'' Valley ethic. ""There are a number of small companies that after eight or nine years are still not doing well,'' says Wu, ""but they think: if I go under, what will my parents, my relatives and my friends think of me?'' Finally, the standard-test-obsessed educational system discourages free thinkers.
Still, despite the regional recession, revenues from the 250 companies in the park alone are expected to account for a tenth of GNP. Perhaps more important, the business practices common in Hsinchu--like granting stock options to all employees and discouraging nepotism--are being adopted all over the country.
In other words, Hsinchu, just like all the other tech cities in the United States and abroad, may never be Silicon Valley--but it doesn't need to be. By adopting some of the Valley's best traits, it has helped to decalcify Taiwanese businesses practices without snuffing out tradition entirely. Every afternoon under the stainless-steel arches in the gleaming front lobby of the Umax headquarters building, rows and rows of employees sit cross-legged on mats. They're practicing qigong breathing methods. Tomorrow they will return to their keyboards, not only energized but flowing with inner peace--ready to root out software bugs, embellish business plans and maybe even cook up an idea for some new start-up of their own.
That's what tech cities are all about. They realize the Silicon Valley dream--somewhere else.