The Daily Prosper
Todos quieren ser Silicon Valley

The other Silicon Valleys: this is entrepreneuring beyond the United States

The San Francisco Bay area in the United States has become a reference for innovation and entrepreneurship worldwide. Now, every country is looking to create its own version.


More and more, countries are trying to imitate the innovation mecca of the world: Silicon Valley, in San Franscisco (US). But the Californian example is not the only one. "Now there are several clusters competing to lead the pack," explains the co-founder of the entrepreneurial community Spanish Startups, Ignacio Sánchez. Spain, for example, was ranked second in Europe in the Digital Spanish Startup Ecosystem Overview 2016 report published by the Mobile World Capital Barcelona foundation in the creation of new start-ups, with a total of 2,663 new companies founded and 502.1 million euros billed. Does Spain dream of being like Silicon Valley? If it does, it is not alone. According to Startup Genome´s Global Startup Ecosystem 2017 report, as many as 19 regions worldwide are hot on the heels of the infamous Californian stronghold, which, for now, remains firmly in the lead.  

Often, these attempts give birth to so-called hubs, spaces where gigantic tech companies – like Google, Apple and eBay – cohabitate with small, cutting-edge firms.  The success of this model is linked to the ability to attract talent and investments from venture capitalists from all over the world. "The concentration of both factors gives rise to innovations in need of financing," Sánchez highlights.

Within this explosive cluster, start-ups strive "to achieve an exit: to be bought by a large corporation whose size, administrative procedures and hierarchies prevent them from competing in terms of innovation with more agile structures." In his opinion, what makes these hubs unique is that potential early adopters and investors all inhabit the same space. "It is the perfect place to do business as long as your start-up is mature, otherwise all of the investment required to get there can be lost," according to the director of the open innovation program at Open Future, Ana Segurado.

London boasts the leading start-up ecosystem located outside the United States

But emerging companies first need to make it there. "It´s best not to obsess over getting [to these international hubs] quickly; first you need to gain traction in your own country," Segurado explains. This strategy was followed successfully by Myfixpert, a platform, launched initially in Seville (Spain), that connects expert technological device repair technicians and users who need them "in the same way Uber works." Segurado highlights: "This initiative contained the three essential keys that any entrepreneur must keep in mind: a truly innovative idea, an underlying team and a profitable business model." The Open Future program, managed by Telefónica, as well as other entrepreneurial programs like Yuzz, sponsored by Santander Bank, can also provide a boost for new companies and ideas looking to rub shoulders with beacons of innovation.  Perhaps after, with the right guidance and resources, these new companies will be ready to conquer the world´s most important hubs:

 

London: The Gateway to Europe

London (United Kingdom) boasts the leading start-up ecosystem located outside the United States, according to the latest ranking, published by Startup Genome, of the leading hubs worldwide.  In just two years, London has overtaken the promising city of Tel Aviv (Israel). The secret? "Science and innovation are at the heart of British policy," explains the Science and Innovation Attaché at the British Embassy in Spain, Sara Cebrián.

According to the study cited by Startup Genome, the British government has made firm commitment to public-private initiatives in order to "become global leaders" and position the United Kingdom as the gateway to the European market. Within the European Union, Berlin (Germany) and Paris (France) follow just behind the UK, with lower levels of institutional commitment, and Stockholm (Sweden), which, through a "significant effort to support entrepreneurship" during the past five years, has climbed to the 14th spot on the list.  

 

Beijing: From Imitation to Innovation

The retail platform Alibaba, commonly referred to as the Chinese Amazon, formed part of China´s digital wave. At that time, the strategy followed by the Asian giant was to copy existing products and services, and in this way emulated the Silicon Valley model with the Zhongguancun tech hub in the Beijing district of Haidian. Now, the Chinese tactic has shifted towards cutting-edge innovation, with the goverment investing 2% of the country´s GDP in R&D&I, matching the European average and well above the 1.2% spend in Spain, according to data from the World Bank.  In 2015, China led the world in patent applications (1,010,406), followed by the United States (526,296), according to the World Intellectual Property Indicators 2016 report, published by the World Intellectual Property Organization (WIPO).

 "Now, many large companies are looking to the Asian giant in search of disruptive ideas," Sánchez explains. For example, before WhatsApp had the idea to provide voice calls, its Chinese peer WeChat had already successfully tested them. Such efforts have elevated Beijing and Shanghai to the fifth and eighth spot, respectively, among the top 20 leading entrepreuneurial hubs worldwide. Other innovation hubs in Asia are Singapore (capital city of Singapore) and Bangalore (India).

 

Tel Aviv: What doesn´t kill you makes you stronger

Despite the fact that Silicon Wadi (Silicon Valley, in Hebrew) has lost steam in recent year, finding itself overtaken by cities like London and Beijing, according to Startup Genome´s 2017 ranking, Sánchez highlights that this hub is still referred to as "the Silicon Valley of Silicon Valley because it serves as a source of inspiration and ideas for the Californian stronghold." This tech conglomerate in the capital of Israel is host to over 1,000 start-ups, one for every 400 inhabitants; and over 4,000 nationwide. But, how has such a small country, lacking in natural resources and in a constant state of conflict attract research centers belonging to multinational giants like Google, Apple and IBM and create such a prolific entrepreneurial ecosystem?

For a start, Israel leads the world in R&D&I spending in relation to its GDP at 4.2% (compared to 2.7% in the US), according to data from the Organization for Economic Co-operation and Development (OECD). The spark that lit this impressive governmental commitment to innovation was the launch of Yozma in the 1990s, which the CEO and co-founder of StartupXplore, Javier Megias, described in his blog as “one of the few (some say the only) governmental investment in start-up initiatives to be categorically successful". Another one of the keys is the "markedly entrepreneurial spirit" of young Israelis, product of the difficult living conditions, according to another blog entry posted on this tech investment community.

 

Chile: A Bridge to Latin America

Chile is the most innovative economy in Latin America, according to the 2017 World Innovation Index published by the WIPO. This country´s current status is the result of the government´s determination to establishing a globally competitive entrepreneurial hub. One example is the public program Startup Chile, aimed at supporting, attracting and consolidating tech companies from surrounding countries.  Chile was also one of the first countries to offer fiscal benefits to foreign companies who set up shop on Chilean soil through an "entrepreneurial visa". The ultimate objective of these measures was to position the country in an emerging market with 600 million potential consumers in Latin America.

All of these international entrepreneurial hubs are very attractive, but one must not forget that “there are good ideas almost everywhere in the world and the abilities [required] to develop them”, Segurado concludes.

By Elvira del Pozo