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Women of Silicon Valley Fund SILICON VALLEY A Primer Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 8 November 2006 Women of Silicon Valley Fund What is Silicon Valley? 1,500 square miles 35 Cities, 4 counties 2.4 million people, 40 percent foreign born 1.2 million workers 81 percent high school diploma; 40 percent college degree 25 percent of workforce in high-skill occupations Income average 60 percent higher than US 5 percent US GNP, 10 percent of US patents Productivity rate 50% higher than US average Women of Silicon Valley Fund MOST IMPORTANT CHARACTERISTIC: Region Continually Re-Invents Itself Women of Silicon Valley Fund MILESTONE SILICON VALLEY INNOVATIONS Vacuum tube (Varian) Transistor and Integrated Circuit (Fairchild) Microprocessor (Intel) Microcomputer (Apple) Graphical User Interface (Xerox PARC) Relational Databases (IBM Almaden) Internet Search (Google) However, the Valley’s edge does not stem from innovation alone ... Women of Silicon Valley Fund … but also from entrepreneurship Silicon Valley has a remarkable capacity to create and grow new companies New Companies (Entrepreneurship) + New Technologies (Innovation) Endogenous Growth New Wealth Creation Women of Silicon Valley Fund Valley spawns the leading companies in every technology generation 1950s 1960s/ 1970s 1980s 1990s Defense Electronics Hewlett-Packard, Varian Semiconductors National Semiconductor, Fairchild. Intel, AMD Personal Computers, Workstations Apple, Silicon Graphics, Sun Network Computing, packet switching Cisco Systems, Sun Internet Netscape, Yahoo, eBay, Google, 2000s? New technologies, new companies, new business models Women of Silicon Valley Fund LARGEST SILICON VALLEY FIRMS 1982 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Hewlett-Packard National Semiconductor Intel Memorex Varian Environtech* Ampex Raychem* Amdahl* Tymshare* 2002 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. *no longer existed in 2002 Hewlett-Packard Intel Cisco* Sun* Solectron Oracle Agilent* Applied Materials Apple Seagate Technology Also: Maxtor*, Palm*, Google*,Cadence*, Adobe*, Yahoo* *didn’t exist in 1982 Women of Silicon Valley Fund LARGEST DETROIT FIRMS 2002 1982 1. 2. 3. Ford General Motors Chrysler 1. 2. 3. Ford General Motors Daimler-Chrysler Women of Silicon Valley Fund Technology Regions Will Always be Driven by Waves of Innovation • New technologies drive dynamic waves • Entrepreneurs take advantage of new opportunities • Swarms of new firms cluster around new technologies creating short term bubbles • New products eventually become commodities and investment leads to breaking of bubbles. • New technologies emerge from the convergence of old technologies and the process of “creative destruction” begins again Women of Silicon Valley Fund “SILICON VALLEY LOSING IT’S EDGE.” Cover Story, Business Week. “DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.” Front page, Los Angeles Times “THIS IS THE END OF SILICON VALLEY AS WE KNOW IT.” Larry Ellison, CEO of Oracle. Women of Silicon Valley Fund “SILICON VALLEY LOSING IT’S EDGE.” Cover Story, Business Week, 1985. “DREAMS OF STRIKING IT RICH FADING IN SILICON VALLEY.” Los Angeles Times, 1991. “THIS IS THE END OF SILICON VALLEY AS WE KNOW IT.” Larry Ellison, 2003. Women of Silicon Valley Fund So what’s the secret? A HABITAT for Innovation 1. Results oriented meritocracy 2. Climate that rewards risk and tolerates failure 3. Strong markets (capital, labor) 4. Mobile, fluid workforce 5. Favorable government policies 6. Open business environment 7. Universities and national research institutions that collaborate with industry 8. Specialized infrastructure: venture funding, lawyers, accountancies, executive search 9. Quality of life 10. Cluster effect Women of Silicon Valley Fund So what’s happening right now in Silicon Valley? Women of Silicon Valley Fund RIGHT NOW? It’s not the go-go 90s anymore Thank goodness! Region added 350,000 jobs. Sustainable? Since 2001, we have lost 220,000 jobs. Net gain of 130,000 Now, with retrospect, we understand the meaning Internet search was another wave (Google, Yahoo) Internet is a viable tool for commerce (eBay, Amazon) Consolidation, boom-bust cycle is taking its predicted course Women of Silicon Valley Fund Rip Van Winkle Theory If Rip Van Winkle fell asleep in 1998 … … and woke up again in 2006 … Women of Silicon Valley Fund … He would actually be impressed! Women of Silicon Valley Fund Even through the downturn, most key indicators continued to rise Women of Silicon Valley Fund Value-Added per employee grows at twice the national rate Women of Silicon Valley Fund Region’s share of Venture Funding Continues to Grow Women of Silicon Valley Fund Average Pay Still Rising Women of Silicon Valley Fund Income Distribution Narrowing Women of Silicon Valley Fund High School Performance Women of Silicon Valley Fund Housing Density Increases Women of Silicon Valley Fund But disparities persist by race Women of Silicon Valley Fund Housing still out of reach for too many Women of Silicon Valley Fund But Rip Van Winkle would also be confused by something: Valley productivity is not translating into burgeoning job growth. Women of Silicon Valley Fund In the future prodigious job growth in Silicon Valley is unlikely. We can most likely expect steady, incremental growth. The major opportunities will be in a few key clusters, and the industries that support those clusters. Those jobs will be hard to get, and require significant training. Women of Silicon Valley Fund Why? What’s Happening? 1. Intense competition. Rise of competitor regions Companies doing more with less. They have to. Bay area workers doing it with productivity gains. Women of Silicon Valley Fund Why? What’s Happening? 2. Offshoring and outsourcing. Old story, except now higherend functions going off shore – Design – R&D Women of Silicon Valley Fund Why? What’s Happening? 3. Technologies we invented eliminated whole classes of jobs Administrative class Archivists, others Women of Silicon Valley Fund Why? What’s Happening? 4. Many of the emerging clusters (web 2.0) aren’t big job generators to begin with. Women of Silicon Valley Fund Why? What’s Happening? 5. Nature of capitalism itself is changing Vertical integration a thing of the past Companies down-sizing Focus on key competencies Groaning under weight of overhead Health care, benefits Reducing FTEs, using contractors Women of Silicon Valley Fund To survive and thrive, Silicon Valley has to be innovative, productive, and RESILIENT. Women of Silicon Valley Fund To survive and thrive, Silicon Valley workers must be innovative, productive, willing to re-invent themselves, and resilient Women of Silicon Valley Fund SILICON VALLEY WORKER OF THE FUTURE? Will work in numerous places over course of career Will have to re-train and re-tool Will have to distinguish self with a unique competency Will shoulder a heavier burden for coverage and benefits Will need high-end skills: language, writing, communication, technical expertise Women of Silicon Valley Fund Jobs Leaving Silicon Valley AREAS WHERE SILICON VALLEY IS NOT PRICECOMPETITIVE OCCUPATIONS LEAVING THE VALLEY Mass Production High tech manufacturing and assembly (except high-end) Back-office Operations Office support (e.g., data entry clerks, etc.) Business and financial support (e.g., processing staff) IT support specialists IT administrators Legal assistants Statistical analysts Product And Process Enhancement Entry-level computer and software engineers Quality assurance and test engineers Product and process engineers Women of Silicon Valley Fund Silicon Valley Job Strengths Bay Area Competitive Strengths Sample Occupations Aligned with Regional Capabilities New Business Creation and Entrepreneurship Venture capitalists, lawyers and other occupations in the entrepreneurial infrastructure Research In Advanced Technologies IT, biotech and nanotech R&D professionals and Cross-disciplinary Research Select computer and software engineers for research and advanced development (e.g., architects, systems level software engineers, software engineers with domain expertise) Select engineering including electrical, mechanical and electronics Concept And Market Development Strategic managers in sales and marketing Global Integrated Management Managers of global teams and assets (headquarters, product development, IT, HR, etc.) Product marketing managers Women of Silicon Valley Fund WAGE GROWTH IN KEY SECTORS, 2002-2005 Women of Silicon Valley Fund Women of Silicon Valley Fund So what’s next for Silicon Valley? Women of Silicon Valley Fund The Next Big Wave? 1. We’re not finished with information technology yet Telecommunications, handheld devices, entertainment Ubiquitous internet, WIFI, WIMAX Web 2.0 Women of Silicon Valley Fund The Next Big Wave? 2. Alternative Energy, Clean Technology, Green Buildings –VC activity starting a mini boom Women of Silicon Valley Fund The Next Big Wave? 3. CONVERGENCE Nanotechnology, Biotechnology, and Information Technology Women of Silicon Valley Fund Examples of Convergence Women of Silicon Valley Fund Our Organization Joint Venture: Silicon Valley Network Business Government Higher Education Labor Community-Based Organizations Women of Silicon Valley Fund The Joint Venture Program Tax and Fiscal Reform Technology Convergence Consortium Health Care Electronic Medical Records Wireless Infrastructure Initiative Transportation and Housing Unified Building Code Cell phone coverage Disaster Preparedness Women of Silicon Valley Fund For more information … www.siliconvalleyonline.org Women of Silicon Valley Fund And for more about Joint Venture … www.jointventure.org and the Index of Silicon Valley Women of Silicon Valley Fund Thanks for inviting me! Russell Hancock President & Chief Executive Officer Joint Venture: Silicon Valley Network 84 West Santa Clara Street, Suite 440 San Jose, California 95113 (408) 271-7213 www.jointventure.org Women of Silicon Valley Fund Women of Silicon Valley Fund