Is Silicon Valley Still the World's Top Technology Hub?

Business.com / Technology / Last Modified: February 22, 2017

For years Silicon Valley technology investments and growth have led all other segments and regions. But where does the Valley stand now?

For years, North American technology investments and growth, specifically in Silicon Valley, have led all other segments and regions.

As of the start of 2016, the “Valley” is still the standard by which all startup and innovation communities are gauged, but the question arises, for how long?

Here’s a snapshot at how the world of technology innovation shapes up for the immediate future.

Down in the Valley

Since 2014, almost half of all the successful exits for startup companies worldwide originated in Silicon Valley.

The closest competing region was London, with roughly 10 percent of IPOs and acquisitions emanating from that UK tech ecosystem.

According to data compiled by benchmarking firm Compass Startup Genome, the total GDP of Silicon Valley tech companies totaled in excess of $535 billion dollars.

Likewise, of the world’s most valuable startup companies, most of the top ten are from the Valley including; Uber, Airbnb, Palantir, and several other notables.

Related Article: Insights Report Forecasts Massive Growth For Cloud Services In The U.S.

The chart below from Statista shows this lineup as of October. 2015.

Infographic: The World's Most Valuable Startups | Statista
You will find more statistics at Statista

However massive Silicon Valley technology incubation may be, there are signs of a big slowdown coming.

Competition from other regions plays a small part in tempering California dreams of big startup business, less than the culture of the valley and the flow of so-called “dumb money”.

This Guardian article by San Francisco correspondent, Nellie Bowles may register a shock for you.

As for what to expect from the valley going forward, moderation is key.

The Promise of Europe

If Silicon Valley is feeling the pains of economic slowdown, then Europe is terrified. Here in Germany and elsewhere in the region, tech stocks fluctuate over the same fears felt in every region, only it’s worse here because of the recent migrant crisis.

Persistent financial problems of EU nations do not make for the ideal investment atmosphere either, and this kills emerging innovation.

The European scene is dominated these days by news of failures, rather than success stories.

The Europe startup scene can best be viewed as a kind of Silicon Valley Jr.

Whatever affects startups in California, also factors into the ecosystem of innovation in Europe, only in much smaller portions.

Still, the outlook for European technology companies is not so dismal. Tech incubators help Europe’s entrepreneurs a great deal.

This is evidenced by such endeavors as Seedstars Summit, where small startups get the chance to get big tech dreams fulfilled.

East vs. West?

By now anyone doing business has to understand the future of growth is with the so-called BRICS nations.

Emerging economies not only present key burgeoning markets, but essential investment capital and entrepreneurial movement the whole world is dependent upon.

China’s expanding interests in being a part of technology innovation and business; other regional players like Russia and India, and the vast landscape of potential from Vietnam to Iran are significant.

China’s aforementioned excursions into Europe and North America bear scrutiny, but the underlying disruptive potential for Asia prevalence is even more monumental than most experts suggest.

One way of illustrating this is revealed in the 2015 Global Entrepreneurship Monitor (GEM) survey, which tells us early-stage entrepreneurial activity (TEA) in Asian & Oceanian countries is nothing less than amazing.

Related Article: 5 Technology Trends That Have The Power to Change Your Business

According to the report, a huge segment of the populations of countries in this region (averaging 13.1 percent) are engaged in some form of business startup activity.

What this means is, that the probabilities for success by sheer numbers of stakeholders in these regions is remarkable.

Looking at the rest of the so-called west via the benchmark of cloud usage, and we find Latin America having quadrupled is exabyte usage each year since 2014.

According to another study from Cisco Systems, global usage in the cloud also revealed cloud traffic in Western Europe projected to exceed an estimated 936 exabytes per year by the end of this year.

Technology as a percentage of GDP and growth within countries and regions is another good benchmark.

And in Canada, for instance, total GDP for technology and communications related industries surpassed all other single industry including, mining, manufacturing and energy. 

Statistic: Global mobile data traffic from 2015 to 2020 (in exabytes per month) | Statista
Find more statistics at Statista

Africa and the Middle East

Technology acceleration in these regions shows positive growth. However, when compared with other more dynamic sectors the vast potential of these areas lag very far behind.

From cloud storage usage to clean energy investment and beyond, Africa and the Middle East innovations are relatively insignificant overall.

According to a recent Bloomberg New Energy Finance study, China’s $110 billion plus in investment in clean energy dwarfs the $5 billion invested for all of Africa.

Even legacy technology sectors within this region seem to be lagging behind others. Looking at the traditional structure, such as railway tech, only saturated regions like Europe and Australia show less growth than Africa and the Middle East (four percent 2010 to 2015).

Looking at a close-up of Middle East tech shows us a very limited breadth and scale of innovation there.

While Africa’s obvious barriers to technology growth are often obvious, the vast capital that has been available to Middle Eastern companies has not translated into tech growth.

Furthermore, examining IT spending by segment shows only telecom services and devices as areas of growth, so there’s no current indication of forward momentum in these regions.

Summing Up and the Rest

In summary, while Silicon Valley is still the go-to Mecca for startup prowess, sighs the era of cheap money is over there make for a cooling forecast.

Meanwhile, the overall outlook for technology can be gleaned from looking at just about any sector of high tech, as the figures by region seem to be correlative based on such things as GDP growth etc.

That said the projected growth in segments like the Internet of Things (IoT) forecasts bear scrutiny.

According to Frost & Sullivan, the size of this worldwide market will almost double in the next three years, from $743 billion in 2015 to over $1.7 trillion dollars by 2019.

Related Article: Buying In the Cloud: How Cloud Technology is Revolutionizing the Retail Industry

Likewise, machine-to-machine connections (M2M) worldwide are projected to exceed 3.1 billion from just more than half a billion in 2015.

It seems safe to assume the leaders already mentioned are set to run ahead of regional competition for the foreseeable future, too.

The innovation incubator that Silicon Valley has become won’t be surpassed by Chinese or even Russia’s tech-city Skolkovo in the foreseeable future, but usurping the U.S. startup ecosystem is not really on anybody’s agenda.

The point of innovation and the tech sector is the business of forward motion, growth, and future potential.

It is in this dynamic we find the good news regardless of subdued economics. 

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