Silicon Valley is eponymous with the creation of wealth and employment through innovation in information technologies. Multiple public programs have been launched in an attempt to replicate this success. These efforts have been essentially unsuccessful, often at very high cost to taxpayers. The reasons of these failures matter, not only for public policy improvements, but also to avoid the destruction of fragile entrepreneurial environments. Thanks to Pevara’s high quality data, we will explore this topic by deconstructing Silicon Valley’s model and looking at some of its success factors, hoping in the process to draw some useful conclusions.

Deconstructing Silicon Valley

Public initiatives have failed to reproduce Silicon Valley because in many respects, it is an accident of history2. Attempting to replicate it with public top-down copycat strategies is therefore essentially doomed. Northern California has given birth to this major industrial cluster thanks to the combination of four major inputs:

  • The exploitation of fundamental and applied research produced by private and public laboratories.
  • The conversion of research into products and services notably by start-ups, some creating entire industries (such as e-commerce), others disrupting existing ones. These start-ups are the expression of the ingrained local entrepreneurial spirit, known for tinkering through “garage” innovation.
  • Venture capital (VC) provided some of the necessary resources to support these start-ups.
  • Public initiatives such as the Small Business Act3 and military budgets of the Cold War played a significant role as well.
Table 1 – IRR of US venture capital funds

Table 1 – IRR of US venture capital funds

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