Nothing makes aspiring tech hubs crazier than losing their best and brightest (and their startups) to Silicon Valley. The Orlandos, Pittsburghs and Omahas complain that Silicon Valley exudes an irresistible lure for many young entrepreneurs convinced that they need to be in Palo Alto, Mountain View or San Jose to succeed. But, lately, other cities are doing a better job of hanging on to homegrown talent and even recruiting out-of-town workers. Could that cut off Silicon Valley’s talent pipeline?
By George Avalos
San Joe Mercury News
SAN JOSE — The Silicon Valley economy, fueled by fast-growing innovation industries like nowhere else in the country, has rebounded strongly from the Great Recession and is poised for more stellar growth. But the region has stumbled in its quest to create a skilled talent pool that can meet the hiring appetite of the high-tech sector, according to a report released recently.
Technology businesses now account for 33 percent of the economic output of Silicon Valley, defined as Santa Clara, San Mateo and San Francisco counties, the report from the Silicon Valley Leadership Group and Silicon Valley Community Foundation has found.
Innovation industries, which include Internet, information services, software, biotech, cleantech, medical telecommunications, aerospace, computer and electronics manufacturing, and medical devices, account for 26 percent of the workforce in Silicon Valley.
By comparison, no other region in the United States depends on tech to that extent; the innovation sector accounts for 18 percent of the jobs in Boston, just over 16 percent in Seattle and Austin, Texas, 15 percent in Southern California and 14 percent in New York City.
“The health of our innovation industries affects the entire Bay Area,” said Carl Guardino, president of the Silicon Valley Leadership Group, a private industry and public agency organization that hopes to develop policy initiatives based on the data. “A rising tide may not lift all economic boats. But a receding tide in Silicon Valley can sink all boats. One-third of our economic output is driven by tech.”
Sustaining that economic strength could be tough, however, in part because of the region’s struggles to educate Bay Area students in the so-called STEM subjects: science, technology, engineering and mathematics, the Silicon Valley Competitiveness and Innovation Project report warned.
“We want to be sure that everyone can participate in the benefits of this innovation economy,” said Emmett Carson, president of the Silicon Valley Community Foundation, a Mountain View-based group that guides philanthropy in the South Bay.
What’s more, other regions of the United States have begun to challenge Silicon Valley’s tech prowess.
“New York City is becoming a major competitor for Silicon Valley,” said Doug Henton, chief executive of Palo Alto-based Collaborative Economics, an economic research firm that prepared the study. Boston, Southern California, Seattle and Austin were also cited as key innovation hubs.
Research-and-development spending is one barometer of health in the technology field. To be sure, Silicon Valley in 2012 dwarfed all other U.S. regions in terms of total R&D spending of $67.9 billion. Yet R&D expenditures in the region that year flattened out, while rising 0.7 percent in New York, the leadership group’s study found.
Another big challenge for Silicon Valley: a limited supply of local talent that has to be supplemented by immigrants from other countries.
“The Silicon Valley innovation economy is increasingly depending on foreign-born entrepreneurs,” Carson said. “We must create a homegrown pipeline of talent.”
In 2013, the study determined, 3 percent of Silicon Valley’s new residents came from other parts of the United States, while 97 percent came from other countries.
“We are able to attract top talent from around the world, but 90 percent of CEOs that we survey say they are having trouble filling their open positions with people who have the skills that they need,” said Janine Kaiser, project manager with Collaborative Economics.
High home prices and traffic congestion discourage skilled workers from moving here. During 2014, the median home price in Silicon Valley was $470 a square foot, double the $230 a square foot in New York City and Boston and 146 percent higher than Seattle.
The creators of the study, which will be updated every year, say they intend to use it as a springboard for further action on the part of local, state and federal policymakers and legislators.
“There is clearly a sense of urgency about the problems we face” in terms of education and housing prices, said Greg Becker, president of San Jose-based Silicon Valley Bank. “This report helps to add to that sense of urgency.”
Despite the challenges that confront the region, leadership group officials are confident that Silicon Valley can solve them.
“One of the strengths of Silicon Valley is we are impatient,” Guardino said. “Time is not running out of an hourglass for Silicon Valley. We are not going to implode.”