Silicon Valley? Silicon Allee? or Silicon Wadi?
There is no question that Silicon Valley is the place of its kind and the most successful tech hub in the world. The region 30 miles long and 15 miles wide has been the world leader in high-tech startups giving rise to cutting-edge companies from Apple and Intel to Google and Facebook. Although there is a rising scepticism that Silicon Valley is losing its sheen for many, Silicon Valley will remain a powerful tech base due to a strong global image and a great pool of resources which is hard to beat.
It is true, a location still matters for start-ups. If you are in tech, you should probably be in Silicon Valley. However, here are some other emerging tech hubs with like-minded people where you can soak up the innovation, and entrepreneurial success of the tech industry.
Silicon Allee
The German capital’s “Silicon Allee” is churning out innovative startups and attracting some of the technology’s biggest businesses. A combination of well working German economy, financial security, and the famous reputation as one of the world’s coolest and European’s cheapest capitals has put Berlin at the forefront of innovation.
Although Berlin still lags behind competitors like London when it comes to infrastructure – partly because Germany’s conservative investors made it difficult to raise capital – the rise of the German capital as a new tech hub has been on the radar for a few years now.
Silicon Allee’s startup community is fuelled by a range of nearby research institutions and universities from around the northern region, including the University of Leipzig and Dresden University of Technology. It was not once that I heard from a local tech entrepreneur that Berlin is a hub for tech startups where a new startup is created every 20 minutes. The internet of things also known as Industry 4.0 is a hot topic with the government dedicating almost 500 million euros into the technology sector. Recently, Berlin has experienced attractive early-stage fundings what is a good step in building a new exciting tech ecosystem. Berlin early-stage venture financings totalled just over $160M in the past four quarters, up 228% from the same period a year ago, and 853% compared to the same period two years ago.1 Over 50 investors made more than one investment into Berlin-based technology startups in the past four quarters. High-Tech Gruenderfonds, Earlybird Venture Capital, IBB Beteilgungsgesellschaft round out the top three investors with the attractive early-stage investment fund of $20M into Zimory.2 Hence, Berlin sets a high percentage growth of new start-ups while London starts to experience a slowdown after Brexit.
What Silicon Valley says about Silicon Allee?
Peter Thiel, US Internet billionaire: “Berlin has the most potential of all cities in Europe.”
Matt Cohler, Facebook co-founder, active US VC investor: “I’d bet on Berlin. I believe Berlin has the best shot in the Western world outside of Silicon Valley at becoming a place with a true tech startup ecosystem.“
Silicon Wadi
Silicon Wadi refers to the tech hub which is concentrated in the coastal plains of Israel. The Israeli’s government funding in defence, its support for universities, and concerns about natural resources brought a lot of companies and investors to Tel Aviv in recent years. According to the World Bank Report, almost 4% of GDP is invested in research. That is the highest in the world, ahead of Finland and Sweden. Hence, Silicon Wadi has attracted much interest from international tech leading companies and became a home to research and development departments of IBM, Intel, Google, Microsoft, Oracle among others. Silicon Wadi got even more attention when Google bought Waze, a GPS-like navigation system for $1.15 billion.3 This is one of the key factors in Israel’s success in obtaining a large amount of VC investments. Since the start of 2012, 4% of all VC deals outside the U.S. have taken place in Israel, according to the PitchBook Platform. There were 326 VC investments completed in Israel during 2015, some of the largest among them a $105 million round raised by software company IronSource.4 To add, Silicon Wadi is home of 2 biggest start-up funding platforms in the world: Jerusalem Venture Partners (JVP), which manages a portfolio of companies worth nearly a billion dollars and is among the top 10 venture capital firms and Our Crown the largest and one of the most successful crowdfunding platforms in the world. Hence, there is no surprise the estimation of active tech start-ups is between 3,100 to 4,200.
What Silicon Valley says about Silicon Wadi?
Eric Schmidt, formerly Google chief executive and now executive chairman of its parent company Alphabet: “For a relatively small country, Israel has a super role in technological innovation, I can’t think of a place where you could see this diversity and the collection of initiatives aside from Silicon Valley.”
Finally, the startup culture of entrepreneurship and tech enthusiasm is spreading around the world what fuels a revival of economic dynamism. It is undeniable that tech hubs are achieving transformational things across all sectors and having an informal engagement. Thus, creating successful innovation ecosystems across the globe gains momentum.
1 http://iconcorpfin.co.uk/berlin-tech-booming/
2 https://www.cbinsights.com/blog/berlin-funding-growth/
3 http://www.businessinsider.com/how-google-bought-waze-the-inside-story-2015-8
4 http://pitchbook.com/news/articles/inside-silicon-wadi-why-vc-in-israel-is-a-booming-business
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6 comments on “Silicon Valley? Silicon Allee? or Silicon Wadi?”
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She also worked as a project associate in European Strategy Council, working primarily on the Innovation and Cybersecurity Forum.
Michaela holds a master degree in International Relations & International Law from the University of Roehampton in London, Certificate in Technology progress from EUIC and Diploma of International Affairs and Politics from the University of Coast Opal.
Michaela also lead a research project on the ICT technology with Crucible Research Center.
Hi Michaela,
You chose a great topic ! What the silicon valley started in the 70’s when companies like Intel, HP and Apple came up, is a culture of self-belief. It made you believe that technology is the next big thing. US being the world’s largest economy, invested generously in research and is now reaping the rewards of that. Surely, this culture has catching up in other parts of the world. You mentioned two very important and prominent examples of Germany Israel. I have a friend who attended a startup bootcamp in Israel for 3 months and was very impressed by the work culture there (He ended up founding a company of his own, https://www.speakeza.com). Even in India, the start-up culture is very much on the rise and we already have 10 unicorn firms in the country ! The administration is trying to remove bureaucracy and red tape so that it is easier to start a new business. India currently ranks poorly in the list of Ease of Doing Business and will have to take many steps to ensure a smoother environment. I also want to see a rise in women entrepreneurs across the world.
Ever since I had to look into how much housing costs in the San Francisco / Silicon Valley area I have been wondering how sustainable the current status quo is. It seems unlikely that the booming tech industry could be largely contained in one area. Already we see serious issues with highway congestion and housing prices. Highly paid employees at top tech companies are complaining that they are unable to afford a house and start a family in the area.
https://www.theguardian.com/technology/2017/feb/27/silicon-aa-cost-of-living-crisis-has-americas-highest-paid-feeling-poor
Already it seems that the market and industry is starting to realize the saturation in the area as housing prices have (according to some) finally stopped rising
http://www.siliconbeat.com/2017/01/03/fact-bay-area-rental-costs-hit-plateau/
and other areas in the U.S. are starting to see offices open with the promise of lower rents and large office spaces available
https://www.forbes.com/sites/petertaylor/2016/11/07/why-the-midwest-is-about-to-become-americas-next-silicon-valley/#5472c1ed14c7
I didn’t know about these large hubs outside of the U.S., and wonder if they are / will go through similar rise and fall cycles as the hubs in the U.S.
Michaela, Thank you for this informative post. I agree with both your points that there are more than one fertile grounds for start ups that entrepreneurs could chose and that the Silicon Valley will never lose it’s magic.
AnnaLee Saxenian, (https://www.linkedin.com/in/annaleesaxenian/) Professor and Dean at UC Berkeley, studied this and wrote a book comparing two regions. The book is called Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (http://www.hup.harvard.edu/catalog.php?isbn=9780674753402&content=reviews)
Current situation reminds me of those periods colonization. Almost all the Internet giants and leading players in artificial intelligence gather in a small area. A very small portion of population with similar backgrounds and beliefs control a huge portion of data generated. This is probably not the healthiest way for future development. Meanwhile, this may exacerbate the gap between developed and developing countries, the rich and the poor.
Quite a fascinating topic that you chose! There is an accelerator / VC / school of entrepreneurship named The Family (https://www.thefamily.co/) that aims to develop the European startup ecosystem, and they’re doing quite well! Launched in Paris, they expanded to Berlin, London, and Barcelona – and they plan to spread all around Europe. (+ their branding is quite amazing!)
According to you, what are the key ingredients for an ecosystem to be created and developed?
I am so excited after reading your article. Silicon Valley was once my dream work place, and it is still is, but no longer the only choice of mine. Not only these two places you mentioned above, Silicon Allee and Silicon Wadi, but also some other places around the world, like Shenzhen and Seoul. Other countries besides the United States are also devoting money and other resources into the tech industry. We can imagine what they can create and achieve when all these places around the whole cooperate together. I hope that day will come soon.