Silicon Valley Special Sauce - Key Ingredients For a Tech Hub

It started out with a bang. The great tech boom swept into San Francisco and Silicon Valley with a massive wave of investment and talented engineers. If a company could throw together a sock puppet and an HTML website they were sure to get millions. Unfortunately, the art of due diligence was tossed out the window like a soggy fast food carton as investment firms began to resemble forty-niners flocking to the gold rush more than prudent businessmen. Inevitably the bubble popped and the tech industry deflated. Fortunately, the foundation that was laid during the early days of the PC and throughout the tech boom left Silicon Valley uniquely capable of fostering innovation and supporting technology companies. Given the high growth associated with technology, other regions have begun to produce and foster high tech sectors. From New York media startups to Chicago's recent tech revival, what are the critical elements to supporting a vibrant technology industry? Here is an examination of some key characteristics that make Silicon Valley such a powerhouse.

Legal Foundation

One of the primary reasons that the Valley is such a tech magnet has to do with its legal environment. During the early sputtering days of innovation before the web 2.0 bubble, certain engineers in the valley decided to take chances. The area was known for research into early computing technology and certain employees developed innovative ideas that the larger companies were not completely willing to back. Shockley Semi Conductor laboratory offer a solid example. Initially founded to research the possibility of replacing germanium with silicon as the best material to build semiconductors, the company eventually gave up research due to assumed difficulties with manufacturing. As the company scaled back their efforts, several key engineers decided to take a risk and form their own company, Fairchild Semiconductor. That day Silicon Valley became Silicon Valley. The brazen risk taking approach has permeated the business culture of the area ever since. Given the increasing level of spin-offs and new ventures, legal firms in the area gained a wealth of expertise in forming, fostering and protecting new ventures. This legal expertise represents a key component to fostering the formation of new technology companies in the area to this day.

Venture Investment

The end of 1980 marked the beginning of the venture investment boom in Silicon Valley. As the local semiconductor industry took off, many players in the Sand Hill road area of Menlo Park began to look for opportunities to invest their new wealth. A couple of upstart entrepreneurs including Steve Jobs and Steve Wozniak had a little idea about selling kits for personal household computers. Despite the inherent risk of trying to sell computers for individual use, some investors took a chance on the nascent company called Apple. In 1980, Apple issued an initial public offering of 1.8 billion dollars. In the aftermath of this unprecedented success story both individuals and investment firms began to flock to the investment opportunities in the area. Over the years, these investment firms worked to develop a unique understanding of the needs and risks associated with financially fostering technology companies. A dynamic venture capital environment is a critical element for any would be technology hub. Without investment, tech sectors are almost guaranteed to fall behind other regions with more active investment firms.

Human Capital

As the chapter of the Great War closed, a ground swell of troops returned home with dreams of peace, families and success. Education was a primary focus. The GI bill provided an educational stimulus the likes of which had never existed before. Certain universities placed greater emphasis on their specialties to help provide a more useful education to the great numbers of applicants. Stanford, a school with a long history of computer science and engineering, began to buckle down and look for ways to enhance their stature in these fields. The Stanford Industrial park was an early attempt to bolster the technology prowess of the school. In a move to make use of available university owed land, Stanford decided to lease the land to local companies. One of the requirements set forth in the leasing decision was that each company must be in the technology industry. Companies from Hewlett-Packard to General Electric moved into the newly available space and began offering subsidies for their employees to attend graduate school at Stanford while they were working. This combination of educational and employment opportunities began to draw engineers to the region from all over the world. The web 2.0 bubble of the 1990's accelerated the pilgrimage of technology expertise to San Francisco and the greater Bay Area. Any ambitious engineer with an idea and a will could try their hand. Even after the boom, the sheer number of computer engineers in the greater Silicon Valley area is unrivaled. This wealth of available engineers represents the full spectrum of talent from 3rd rate hacks to world leading geniuses. For technology hubs, being able to effectively access your talent pool is almost as important as the availability of the talent itself. Given the supply of engineers, Silicon Valley and San Francisco technical recruiting firms have sprung up to help match startups with the technical expertise required to realize their big ideas. Needless to say, human capital is probably the most critical factor for any region to become a center for technology companies.


The most intangible attribute, and probably the most universally acknowledged one, is the clout of Silicon Valley. Companies with roots in the area are actively competing with organizations on the cutting edge of technology. A corporate address in the Valley is almost like a stamp of approval. Between the venture firms priding themselves on due diligence and the top notch engineers, Silicon Valley has curb appeal. Clout is possibly the most difficult characteristic to achieve. For any aspiring technology hub, establishing legal protections, developing a venture friendly environment and courting engineering talent are the first major steps. With perseverance and a continued commitment to supporting the local technology industry a region can only hope to develop a level of clout capable of inspiring tech entrepreneurs for years to come. After all, inspiration is what puts the twinkle in the eyes of the next Steve Jobs or Bill Gates to grace us with their grand ideas. Regardless of where the next big ideas spring up the characteristics the define Silicon Valley are sure to resonate in the next great technology Mecca.

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