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Quick Take: Have We Witnessed Peak Silicon Valley?

Photo of Zach Fuller
by Zach Fuller

In light of Facebook’s controversial handling of the Cambridge Analytica scandal, it seems a pertinent time to ask if the world is falling out of love with Silicon Valley, the West Coast powerhouse that birthed many of the world’s eminent technology companies.

History often pinpoints the beginning of Silicon Valley to William Shocklee establishing a Semiconductors laboratory in 1956, with a set of employees infamously regarded as ‘the traitorous eight’, subsequently leaving the project to set up Fairchild semiconductors. This would create the nucleus of the region that from which Apple, Oracle and Google among others would emerge.

However, the past few years have shown signs that change is afoot in how capital and labour are flowing into the region. In 2014, the Bay Area (San Francisco, San Jose) which houses Silicon Valley, accounted for 46.4% of all venture deals — a figure that had swollen since the mid nineties, when just 22.6% of venture capital deals were with companies in the region. However, in the past few years this has begun to shrink; 38.9% of all US venture funding in 2016 went to Silicon Valley. Additionally, according to the national venture capital association, total VC funding, the mother’s milk for the tech industry, has shed around 20% of its value, declining each of the past two years from over $10 billion in 2015 to $8 billion in 2017. Small angel deals – those under $500k, which allow young companies to get their first product to market, have dropped from 48% of total US deals in 2010 to 32% in 2017.

Silicon Valley remains venerated, but with human capital clustering in other areas with lower barriers to entry (San Francisco rent has priced many would-be entrepreneurs out of the region), and the increasing negative publicity, this suggests the next wave of tech powerhouses may not be as intimately associated with this famed location.

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