6 Secrets to Silicon Valley’s Success in Startups and Technology

How Silicon Valley has become a hotbed for innovation.

6 Secrets to Silicon Valley’s Success in Startups and Technology

When you think about tech startups and entrepreneurship, what comes to mind? For the vast majority of people, the answer is Silicon Valley and the surrounding bay area that's become known worldwide as a hotbed for innovation and high-value companies.

But have you ever taken the time to consider why exactly this region of California in particular, has become so successful as a place to start and grow a business?

There are a number of reasons and some are not quite as intuitive as you may think. Let's take a look at a few of the most impactful ones.

The Secrets to Silicon Valley’s Success

Silicon Valley is a fertile ground for startups. There are so much opportunity and cash flowing through the area that entrepreneurs with the right skills, talents, and connections figure it’s only a matter of time before they strike it rich with the right business idea. In essence, Silicon Valley is the modern day equivalent of the 19th century California Gold Rush – only this one doesn’t appear to be drying up anytime soon.

Thanks to these six factors, Silicon Valley is an incredibly stable place to launch a tech startup or any type of business for that matter.

1. The Trifecta

Silicon Valley is unique because it’s a junction point for academia, the private sector, and the U.S. government. These three all-important sectors converge together to create an environment that’s unlike any other in the world.

With Stanford University and Berkeley at the epicenter of the valley, there's a constant flow of new entrepreneurs and talented tech minds being minted each year.

“What results is a steady stream of well-trained engineers, business people, marketers, researchers; a vibrant venture capital community; a highly available stock market appetite for stock flotations; and people with experience in business, including how and why business failures happen,” says Vint Cerf, chief internet evangelist at Google.

When you consider all of these factors – and then combine them with the fact that launching a business is fairly effortless under California law, including the fact that non-compete agreements are void in the state – it’s easy to see why businesses get started and thrive in Silicon Valley.

2. High Density of Wealthy Investors and Funding Institutions

The amount of both personal and institutional wealth in Silicon Valley makes it the perfect location for business growth. There are thousands of wealthy investors in the area who organize as angel investors and venture capitalists, looking to put their money to work instead of paying hefty taxes on earnings to the U.S. government each year. As a result, they’re willing to pour funds into a variety of different businesses, with the hope that a handful will return high dividends in the years to come.

While there are countless startup failures in Silicon Valley, the sheer volume of new businesses means there will always be success stories. It’s these success stories that investors will chase – even if it means striking out nine times out of ten, which is commonly accepted as the rule of thumb in startup investing.

From a startup’s perspective, this access to investors means there’s an increased chance that they’ll be able to find financial support.

Even if a startup gets turned down by dozens of potential investors, there are hundreds more waiting to listen. This means entrepreneurs can pitch their ideas without feeling like every meeting is a “do or die” situation. What's more, is that the majority of startup investors and venture capital firms provide an immense amount of support, mentorship, guidance, and connections above any beyond just a financial investment to their portfolio companies. So, aligning yourself with the right investor becomes a key decision as you seek funding options.

3. Access to Amenities

The third reason behind Silicon Valley’s success in startups is the amazing access to attractive business amenities in the area. Silicon Valley and nearby San Francisco (where lots of young techies make their homes) have tons of amenities that make the Bay Area an attractive destination for investors, conventions, and more.

These amenities include world-class hotels at surprisingly fair prices, large conference centers, some of the world's most highly-rated restaurants, popular sports teams and unique entertainment options.

For entrepreneurs, these amenities mean it’s easy to bring investors, clients, and potential new business into the city to wine and dine. The complex ecosystem also means it’s the perfect test market for many types of new products and services at the forefront of technology. If a target market exists, you can most likely find it in Silicon Valley, especially since the majority of locals classify themselves as early adopters when it comes to trying out exciting new trends like self-driving cars, artificial intelligence and space travel.

4. Inspiration from Past Success Stories

Much of Silicon Valley’s present success is rooted in the incredible successes from decades past. As both an entrepreneur or investor, there’s something about being surrounded by success stories that make it easier to imagine future victories for yourself. It’s as if the accomplishments of past entrepreneurs makes the thought of achieving something great further down the road, that much more palpable.

Spend enough time in Silicon Valley and you’ll hear incredible war stories, case studies, and unique experiences. There’s a brotherhood of sorts in the region that encourages the next generation to achieve something new. Somehow, this makes it easier to innovate, dream, and succeed. On top of that, the sheer number of experienced, successful entrepreneurs and investors in the area who generously offer up their time to advise budding startups, is staggering. Dozens of successful entrepreneurs in Silicon Valley, including Hiten Shah and Tim Ferriss have made names for themselves because of their willingness to offer free advisement and connections to new startups in their spaces.

5. Level-headed Approach to Failure

Just as past success stories encourage Silicon Valley entrepreneurs, so do past failures. And despite what the media tends to sensationalize in the headlines, there are many examples of failure in this otherwise lush entrepreneurial area.

When three highly esteemed business experts met with some 50 Silicon Valley entrepreneurs to study what makes this area so incredibly successful, they discovered that the day-to-day determination to succeed – despite near-constant failure – is absolutely pervasive amongst entrepreneurs in the valley.

“We found people at all levels to be especially levelheaded about failure and comfortable with the inherent messiness of experimentation,” they told the Harvard Business Review. “The magic for them is not something’s initial lightbulb moment but the commitment to assessing, refining, and reintroducing the systems that will make the thing work.” This emphasis on execution over simply valuing the business idea itself is what places entrepreneurs in the valley so far ahead of those in many other areas. They understand that ideas alone, are worth very little and that real success in business requires strategic execution and refinement.

Elizabeth Charnock of Bloomberg agrees that Silicon Valley’s unique approach to failure makes it a very successful region. “The Silicon Valley mantra is ‘fail fast’ and that of the rest of the world is ‘don't fail,’” she says. For better or worse, this means more successful ideas ultimately come out of the valley, and the entrepreneurs who become successful with this approach will, in turn, teach the younger generation of aspiring entrepreneurs the exact same system of thoughtful failure and iteration.

6. Emphasis on Platform Over Product

Traditionally, the business world has operated under the premise that the more products or widgets you sell, the more money you make. And while this is technically true, more product output doesn’t always equal better long-term profitability. This is especially true in Silicon Valley where a growing number of technology startups don't even build physical products for their customers.

Part of the reason Silicon Valley is so successful as a region is that there’s a cultural mindset that prioritizes platform development over product innovation. Whereas a product is very limited in what it can do, a platform’s value is determined by the users that populate it and can easily be morphed into something else down the road. In a world populated with companies like Facebook and Uber that are constantly building out their platforms to better suit the demands of their users, it’s clear that this platform focus is the way forward.

The Future of Silicon Valley

It’s impossible to tell exactly what the future holds in any industry or region, but you can bet that Silicon Valley will continue to play a vital role in the entrepreneurial growth of the U.S. moving forward.

Other cities and geographic areas may very well pop up and establish themselves as growing forces in the world of entrepreneurship and startups, but it’s impossible to replicate the success of Silicon Valley in it's entirety. The valley represents a unique combination of history, resources, and people that enable it to perpetuate startup success. As a result, it will forever be recognized as the premier destination for the world’s greatest and brightest entrepreneurs.