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Why Is Silicon Valley A Startup Heaven?

Investopedia logoInvestopedia 12-06-2015 Shobhit Seth
© Provided by Investopedia

Silicon Valley has emerged as the destination of choice for establishing technology businesses. Apple, Google, HP, Intel, Adobe, Ebay and many more major tech giants have established their headquarters in Silicon Valley, and they operate from the region with continued business success. The location also continues to attract new startups. Even international tech-startups hope to get a footprint in Silicon Valley. (See related: What exactly is a startup?)

What makes Silicon Valley a destination of choice for tech startups and more established businesses? Here are some primary reasons:

Destination Location

Similar markets and industries tend to become concentrated in a particular area. For example, competing bookstores are often in close proximity in a city [AUTHOR: I don’t think this is necessarily true, at least not in the US. Different way to make this point?], dedicated marketplaces exist for groceries, and malls have different brand clothing shops lined up sequentially. Why do competitors line up next to each other in close proximity? Because people prefer variety and choices, and this applies to consumers, workers, entrepreneurs, and businesspeople. It is easy to build infrastructure facilitating similar businesses.

Silicon Valley is a destination on its own. Starting a tech business in such an ambience with an established business infrastructure, talented resource pool, and a flourishing marketplace provides a clear headstart compared to other locations. Hosting your business on a cloud service offered by a company next door gives you more confidence to operate the business than partnering with a firm hundreds of miles away. [AUTHOR: I don’t think this is actually true? A lot of major companies have remote hosting sites including Google, Yahoo and others] (See related: Best U.S. Cities To Become An Entrepreneur)

Success Breeds Success: Benefits of Networking and Specialization

The entrepreneurial environment of Silicon Valley is characterized by innovation, collaboration, and risk-taking. It provides the essential motivational framework required for tech startups.

Many startups are founded by employees and partners of established tech giants. It is easy to find and connect with experienced and supportive mentors belonging to the same field, to seek expert guidance in moving forward with one’s entrepreneurial venture. Starting a tech company around Wall Street may help in getting financial assistance. But specific guidance necessary for tech startups, knowledge of technological innovation, and expertise is abundant in Silicon Valley. (See related: 10 Characteristics of Successful Entrepreneurs) 

Local Opportunities and Insights

Should you continue using ASP.net or move to AJAX? What are the benefits of using HTML5? Timely availability of information and answers to such questions can make or break your tech offering (and your business). Silicon Valley offers easy access to free flow of vital information, and is a one-stop destination for hosting regular seminars, product fairs and workshops about technical developments, path-breaking advancements, and next-generation technologies. Regularly attending such sessions for vital information becomes much easier when one has to walk to a nearby convention center, as opposed to traveling from a far-off destination spending money and time in flight. [AUTHOR: Not sure about this? Many ways now to do remote training and education used throughout the tech industry nationally and internationally]

Legal Support

Local laws play an important role in supporting businesses. Tech startups may not actually produce a tangible physical product. They rather bank on successfully developing a business based on ideas, applications or services, which constitute intellectual property. Silicon Valley has efficient laws, policies, and regulations to safeguard business interests, trade secrets, and ownership of ideas. These act as a necessary shield for tech businesses, especially the ones that are starting small.

Joint Industry Strength

Combined industries in close proximity can jointly lobby for certain benefits. Lobbying the government to increase the cap on foreign employee visas, requesting a dedicated transport facility from a nearby suburb, sharing common service providers for employee benefits (such as for food or transport), or joining hands for a charitable cause are a few of the benefits of co-location, which offer advantages to technology businesses in Silicon Valley. With close proximity, it becomes easy to find synergies for common cause.

Easy Financing Opportunities

Silicon Valley is a high-cost location – it requires a major amount of capital to establish a company. But it has also established itself as an epicenter of substantial capital funding for qualified business ideas. If your tech startup is really exciting, it’s easier to attract local talent pools, partners, legal counselors, and venture capitalists who are willing to bet on your tech company. Familiarity of angel investors [AUTHOR/EUNY: Should this term be explained further or otherwise linked?] with the overall industry makes it easier for businesses to pitch their unique ideas and get the buy-in from financiers. (See related: Should I Get Loans Or Equity For My Startup?)

The Bottom Line

Positioning yourself among experts, and among the most talented and successful, brings in its advantages, and a few disadvantages too. Hiring necessary talent can be expensive and difficult. Existing talent may be lost to paymasters. Other resources and facilities may come at high costs. Expectations and peer pressure are high.

Above all, business location alone cannot guarantee success. Before selecting a location for a tech startup, one should build a robust product, service, or application offering to ensure a profitable business venture.

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