SXSW: Why your city should stop trying to become “the next Silicon Valley”


Carrying a number stencil for the entrance signage, Maggie O’Neill works on the site of 1776, a startup incubator luanched last year in Washington. (Jeffrey MacMillan/Jeffrey MacMillan)

—Spurred by research showing that technology start-ups are responsible for a healthy share of the nation’s new jobs and economic growth, local officials and business leaders across the country are increasingly looking for ways to turn their towns into the next Silicon Valley.

But should they be?

During an event at the South by Southwest convention on Monday, the architects behind several emerging technology hubs challenged the notion that cities should try to replicate California’s famed technology corridor. Instead, they said, leaders should play to their region’s existing strengths and unique interests.

“I’ve heard talk about Chicago becoming the next Silicon Valley, and it’s sort of silly,” Steve Collens, who spearheaded the development of 1871, a technology business incubator in downtown Chicago, said during the event Monday. “It invites comparisons in terms of the number of start-ups and the amount of venture funding, and there’s really no comparison. Silicon Valley is Silicon Valley for a reason.”

However, that doesn’t mean Chicago and other metropolitan areas can’t take steps to ensure entrepreneurs have the option to build their companies close to home rather than relocating to the West Coast. Collens said he considered city’s existing strengths and weaknesses as he created a co-working space that serves the needs of entrepreneurs in Chicago.

In large part, that meant building a business center that catered to the engineering students coming out of local schools (like the University of Illinois) and then connecting them with advisors and investors who are familiar with the computer engineering and digital technology sectors.

“Half of the students coming out of these programs are from Illinois, and the ones thinking about becoming entrepreneurs have always looked at moving to Silicon Valley, simply because they aren’t aware of much going on in Chicago,” Collens said. “We want them to be able to build a successful company wherever they want to be, as opposed to a decade ago, when they felt like they had to leave.”

Keeping entrepreneurs from leaving could accelerate economic growth in areas not traditionally known for attracting technology start-ups. Research by the Kauffman Foundation, an entrepreneurship advocacy and research organization, suggests that virtually all of the nation’s net new jobs are generated by young, fast-growing companies, particularly those built around technology.

In an effort to retain and promote the growth of those companies, local governments across the country are experimenting with new and evolving business incubator and accelerator programs, and some have taken it a step further, pouring taxpayer money into public venture funds.

In the nation’s capital, the mayor’s office has done both, last year investing $200,000 in 1776, a new technology start-up incubator downtown, and earlier this month announcing the creation of a venture capital program.

Donna Harris, one of the founders of 1776, says her team has taken a similar approach to 1871 in Chicago by honing in on sectors that have a strong presence in and around the District. Rather than competing for the type of consumer technology start-ups often lured to California, her team targets entrepreneurs who are building technology for highly regulated sectors like education, energy and health care, hoping to attract firms that would benefit from being close to federal policymakers.

Josh Baer, managing director of Capital Factory, a start-up incubator in Austin, says that every city should keep pursuing “that innovation, energy, density, access to funding, some of the things that Silicon Valley is known for, and those are elements worth trying to emulate.”

But trying to become a carbon copy of Silicon Valley? No thanks, he said.

“Do we want to become Silicon Valley? No, we want to build our own version, we want to be Austin,” Baer said.

To follow our ongoing coverage of start-ups, entrepreneurs and technology at South by Southwest 2014, click here.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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