Silicon Valley Is Up, Even When America Is Down

By Shlomo Maital 

 

  Silicon Valley is ‘up’, even when America as a whole is down.  That is the point of an article by two Associated Press technology writers. *  Even though Facebook and Zynga, its sidekick, have destroyed $60 b. in wealth, a sum larger than many countries’ GDP,  the Valley continues to hum.  “Companies catering to mobile devices, business software and data management products are thriving, while longtime Silicon Valley stalwarts such as Apple Inc. and Google Inc. remain among the most revered brands in the world,” the authors note.

  It is still possible to raise venture capital in the Valley.  “Silicon Valley startups raised $3.2 billion from venture capitalists during the April-June quarter, far more than in any other part of the U.S as tracked by the National Venture Capital Association. Venture capital flowing into Silicon Valley increased by 4 percent from the same time last year, while it dropped 12 percent nationwide.”

   Moreover, rents in San Francisco, the Valley’s hub city, are still strong, as are rents in San Jose.  “San Francisco apartments rented for an average of $2,734 in June, up 13 percent from a year ago and well above the average of $2,128 when technology stocks were at their peak before the dot-com bubble burst in 2001, according to the research firm RealFacts. Renting in San Jose — the region’s largest city — is less expensive than San Francisco, but even there the average lease cost $1,811 a month in June, a 10 percent increase from last year.”

  If you are a software engineer, you can earn top dollar in the Valley, because there is a shortage.  “Software engineers working in the San Francisco area are now paid an average of about $115,000, up from $106,000 in 2008, according to Glassdoor.com, which analyzed compensation figures collected from users. The average salary for software engineers in the Bay Area is about 17 percent higher than the national average for the same occupation, according to Glassdoor.   Google now pays its engineers an average of $142,000, up from just under $104,000 in 2008, Glassdoor calculated. During that time, Google’s workforce has swelled by 70 percent to about 34,000 employees, including thousands of engineers working at or near its headquarters in Mountain View, Calif. “

   Even Facebook and Zynga are hiring, say the authors.

   What is the secret of Silicon Valley’s success.  It is, I think, the fact that anyone who has been there for more than a year or two understands the principle of rapid change and cyclicality.  In high-tech, downs and ups happen rapidly.  If you are not prepared for them, if you are not resilient enough to ride the ups and endure the downs, the Valley sends you packing.    Some of the best examples of recent successes, note the two AP authors, “include Silicon Valley-based software companies Palo Alto Networks Inc., ServiceNow Inc. and Splunk Inc.  All have seen their value grow by more than half since their IPOs this year, even as IPOs of better-known companies such as Facebook proved to be a disappointment.  The difference? Rather than focusing on consumers whose tastes can be finicky and rise and fall with trends, these three court corporations and government agencies as customers. Palo Alto makes firewall technology that protects computer networks, ServiceNow’s software automates technology operations and Splunk’s analyzes massive amounts of data. “You can make a lot of money selling stuff that nobody understands,” jokes Ben Horowitz, who went through the first Internet boom as an executive at Web browser pioneer Netscape Communications during the late 1990s. He’s now a partner at the venture capital firm Andreessen Horowitz.  On average, the 60 technology companies that have gone public since the start of 2011 had seen their stock price increase by 11 percent through August, according to Dealogic. That was slightly better than the 9 percent gain posted by the Standard & Poor’s 500.

  Silicon Valley’s success is both good news and bad, for America.  Good, because it shows America still has a growth engine, somewhere!   Bad, because Silicon Valley is unique and in my view, cannot be replicated anywhere else.  Other nations have tried and failed.  It is a unique blend of money, risk, can-do culture, high-level engineers, Stanford research and start-up history.  We can admire it, but not recreate it elsewhere, even in America.  

* Silicon Valley isn’t sharing Facebook’s misery, By BARBARA ORTUTAY and MICHAEL LIEDTKE, AP Technology Writers, Sept. 10    

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