Does Silicon Valley Still Matter?

(page 2 of 2)

It's great that these companies have opened their platforms to outside developers, who in turn can build downloadable games, entertainment applications, and business productivity tools designed to make smartphones and social networks more fun and useful. The resulting venture capital-fed ecosystems create a much needed avenue for developers to make money and get product out the door quickly—sometimes in a matter of days.

But if you can start a company, build a product, and get it to market in about a week, you're probably not building a high-risk, swing-for-the-fences business. Silicon Valley's infrastructure can remove obstacles, but it still won't give you something for next to nothing.

Focus on the Short Term

Some entrepreneurs are being lured more by the startup lifestyle than they are by the ideal of solving the world's big problems or meeting fundamental human needs. They're wooed by the ease of starting a Web business, combined with the allure of a Digg-influenced geek-chic subculture—even if they don't have a great idea or the fortitude to work around the clock to build a great business.

At the same time, venture capital is becoming more institutionalized. Some investors, Khosla and others argue, have become infected by Wall Street's emphasis on short-term results, losing sight of the need for hands-on guidance and patience that's essential to fostering a promising idea over the long haul.

There's also a great deal of soul-searching going on in Silicon Valley as venture capitalists and entrepreneurs alike peer past the end of an era in high-growth computing and networking. Homes and businesses are flush with machines that are more than adequate for most users' computing needs. The information superhighway is built, and plans are in place for networks capable of providing nearly ubiquitous high-speed wireless coverage. Sure, there's always a need for technology that makes our computers and networks deliver results more quickly and reliably, and for the Web-delivered applications that make them more useful.

Seeking Startups in China

Investors see great promise in such fields as cloud computing, three-dimensional graphics, and so-called business intelligence software that helps companies better use digital data. Many see cleantech as the future. And throughout Silicon Valley, breakthroughs and funding are coalescing in all these areas.

Yet, venture capitalists—many of them U.S.-based—are increasingly eager to find and fund technological innovations the world over. For instance, in China, where I traveled extensively in May, there's as much as $20 billion in VC funding in search of startups, experts say. The amount may be twice as high when you include angel investors and more informal financing sources. Unlike in the past, when investments overseas typically morphed into cross-border companies with a headquarters in the Valley, some Silicon Valley VCs for the first time are funding companies that don't aim to tap the U.S. market.

Put off by heightened restrictions on H-1B visas in the U.S., and attracted by the prospect of landing funding at home, many of the country's engineering graduates are quickly returning to their native countries after receiving their degrees abroad. Some never leave in the first place.

Move Over, America

Silicon Valley remains a hub of tech innovation, no question. But as Fareed Zakaria explains in his excellent new book of the same title, we're on the precipice of The Post-American World. Emerging economies like those in China, India, and Brazil are entering the modern age and luring billions of dollars from investors ready to back smart, high-growth ideas. The center of entrepreneurship is shifting eastward, and many VCs are looking abroad.

In the western world the Valley is still king, but for entrepreneurs in emerging markets who want to create the Next Big Thing in tech, the idea that you have to move to Silicon Valley may no longer hold true. Before long, Silicon Valley may move to you.

Lacy has been a business reporter for 10 years, most recently coverhas been a business reporter for 10 years and is currently writing a book on global entrepreneurship. Her first book, Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0, was published by Gotham Books in May 2008. She also blogs for TechCrunch.

Business Exchange

Track and share business topics across the Web.