Perspectives on Silicon Valley

How its high-tech ecosystem has evolved and

where it’s going?

RCAPS Seminar

Asia Pacific University

June 23, 2010

Masa Ishii

AZCA, Inc. - Managing Director

Noventi - Managing Director

Visiting Professor – Graduate School of engineering, Shizuoka University

Palo Alto Research Center (PARC) – Senior Executive Advisor

©2010 AZCA, Inc.

The Bay Area before Silicon Valley

1

©2010 AZCA, Inc.

Early Days of Silicon Valley

2

©2010 AZCA, Inc.

Mecca of High-tech Industries

• 15,000 high-tech companies (2007)

• Value added per capita: $224,200 （US

average $85,800） • Patents - 7459 patents in 2000 up to

8809 patents in 2003 (40% of California

State, 10% of the entire US)

Abundant financial source to back venture

activity

• 40% of VC money flows into Silicon

Valley

• Over 300 VC firms

Strong informal network

• High mobility of people

• Seminars and conferences and

universities and research institutions

• Grassroots networking events

• “Silicon Valley Club” of entrepreneurs

and VCs

San Jose became 10th largest city in the US

(passing Detroit)

Silicon Valley Today

People with diverse cultural background

• 36% of the population is foreign born

• 55% of engineering professional is

foreign born

• 48% of people speak languages other

than English at home

High Education Level

• Universities and research institutions

such as Stanford University, UC

Berkeley, PARC, SRI International

• More than40％ of people have bachelor

or higher degrees (US average 27%)

Abundant High-tech Talent (2006)

• Software: 101K

• Innovation Services: 77K

• Semiconductor: 57K

• Hardware: 54K

• Components: 24K

• Biomedical: 21K

3

©2010 AZCA, Inc.

US Graduate School Rankings

大学院

所在地

州

Score

Biological

Sciences Chemistry

Computer

Science Physics Total Score

Stanford University Stanford CA 4.9 4.9 5.0 5.0 19.8

Massachusetts Institute of Technology Cambridge MA 4.8 4.9 5.0 5.0 19.7

University of California--Berkeley Berkeley CA 4.8 4.9 5.0 4.9 19.6

California Institute of Technology Pasadena CA 4.7 4.9 4.2 4.9 18.7

Harvard University Boston MA 4.7 4.8 3.9 4.9 18.3

Cornell University Ithaca NY 4.4 4.4 4.5 4.7 18.0

Princeton University Princeton NJ 4.4 4.0 4.5 4.9 17.8

Columbia University New York NY 4.3 4.3 3.9 4.3 16.8

University of Michigan--Ann Arbor Ann Arbor MI 4.3 4.0 4.0 4.2 16.5

University of California--San Diego La Jolla CA 4.2 3.9 3.9 4.1 16.1

University of Illinois--Urbana-Champaign Urbana IL 4.5 4.6 4.6 13.7

University of Chicago Chicago IL 4.2 4.2 4.6 13.0

University of Wisconsin--Madison Madison WI 4.5 4.2 4.1 12.8

Yale University New Haven CT 4.5 4.1 4.1 12.7

University of Texas--Austin Austin TX 4.2 4.3 4.1 12.6

University of California--Los Angeles Los Angeles CA 4.2 4.0 4.1 12.3

Scripps Research Institute La Jolla CA 4.5 4.6 9.1

University of Washington Seattle WA 4.2 4.5 8.7

Johns Hopkins University Baltimore MD 4.6 4.0 8.6

University of Pennsylvania Philadelphia PA 4.3 4.2 8.5

University of Maryland--College Park College Park MD 4.0 4.2 8.2

Carnegie Mellon University Pittsburgh PA 4.9 4.9

University of California--San Francisco San Francisco CA 4.5 4.5

University of California--Santa Barbara Santa Barbara CA 4.5 4.5

Washington University in St. Louis St. Louis MO 4.5 4.5

Rockefeller University New York NY 4.5 4.5

Northwestern University Evanston IL 4.4 4.4

Duke University Durham NC 4.4 4.4

Georgia Institute of Technology Atlanta GA 4.3 4.3

University of North Carolina--Chapel Hill Chapel Hill NC 4.0 4.0

Pennsylvania State University--University Park University Park PA 4.0 4.0

Purdue University--West Lafayette West Lafayette IN 3.8 3.8

Brown University Providence RI 3.7 3.7

Source： US News & World Report 4

©2010 AZCA, Inc.

VC Investments by Geography

Source: National Venture Capital Association

100% ($Billion) = 2.7 2.7 7.9 104.0 23.1 28.4

VC Investment by State VC Backed Startups

（top 10 states, 2008）

State VC backed

startups

California 1292

Massachusetts 346

New York 195

Pennsylvania 152

Texas 125

Washington 126

Maryland 87

New Jersey 76

Colorado 78

Virginia 65

Others

WA

NY

TX

MA

CA

5

©2010 AZCA, Inc.

High-tech Ecosystem of Silicon Valley

Idea New

Products

Entrepreneur

VC

Universities

Research

Institutions

Lawyer

Accountant

Consultant

Investment Banker

Research Firm

Executive Search

Etc.

Network of Innovation

Regional Cluster

6

©2010 AZCA, Inc.

Network of Innovation

• Intellectual

liberty

• Openness

• Excellent

universities and

research

institutions

• Abundant talent

• Continuous

innovation

• Abundant

entrepreneurs

• Access to VC

money

• Activities of

ventures

• Open

innovation

• High

productivity,

economic

achievement

7

©2010 AZCA, Inc.

A Few Quotes about Silicon Valley

“It’s a filter system: First, ambitious people come. Second, and environment

for growth exists that encourages and accelerates ambition, which doesn’t exist

in other parts of the world.”

-Ronnie Vasishta, eASIC

“Imagine innovation in America without Andy Grove, without Jerry Yang,

without Sergey Brin – Hungarian, Chinese, and Russian. These immigrants have

contributed enormously to innovation and our well-being.”

-John Doerr, Kleiner Perkins Caufield & Byers

“We’re very blessed in the United States to be a people focused on the future.”

-Said Hilal, founder, Applied Medical Resources

“If I stayed in Hong Kong I would have ended up fixing radios. It was America’s

culture that encouraged me to be ambitious.”

-Patric Lo, founder Netgear

8

©2010 AZCA, Inc.

23

2

2

3

3

4

5

5

5

6

7

7

7

16

17

32

0 5 10 15 20 25 30 35

Other

Hungary

Belgium

Switzerland

Korea

Italy

Iran

China

Australia

Germany

UK

France

Canada

Taiwan

Israel

India

#Companies

*- IPO

Source: 10K , Hoover’s

Country of Origin of Successful* VC Backed

Entrepreneurs

Any one from Japan?

9

©2010 AZCA, Inc.

California, 62% Massachusetts,

14%

New Jersey, 6%

Washington , 3%

Texas, 3%

Other, 12%

Source： Thomson Financial database

Where 1st Generation Immigrant

Entrepreneurs Founded Companies?

10

©2010 AZCA, Inc.

Successful Companies by 1st Generation

Immigrant Entrepreneurs

0

50

100

150

200

250

300

350

400

Before 1980 1980－1989 1990－2005

Started by US born enterepreneur

Started by 1st Generation Immigrant

IPOs of VC Backed Companies

Source: Thomson Financial database

123

246

356

7%

20% 25%

11

©2010 AZCA, Inc.

Company Founder Country of

Origin

#Employees（WW、2005）

Type of Business

Intel Corporation Andy Grove Hungary 99,900 Semiconductor

Solectron Corporation Winston Chen Taiwan 53,000 Contract design, manufacturing

Sanmina-SCI Corporation Jure Sola

Milan Mandarin

Bosnia

Croatia

48,621 Contract design, manufacturing

Sun Microsystems, Inc. Andreas Bechtolsheim

Vinod Khosla

Germany

India

31,000 Work station, computer

eBay Inc. Pierre Omidyar France 12,600 Electronic auction

Yahoo Inc. Jerry Yang Taiwan 9,800 Web portal

Lifetime Fitness, Inc. Bahram Akradi Iran 9,500 Fitness center

Tetra Tech, Inc. Henri Hodara France 7,200 Engineering service

UTStarcom, Inc. Ying Wu China 6,300 Telephone equipment

Google Inc. Sergey Brin Russia 5,680 Web search, portal

Kanbay International, Inc. Raymond J. Spencer

Dileep Nath

John Patterson

Australia

India

Canada

5,242 Computer system design service

Cadence Design Systems, Inc. Alberto Sangiocvanni-Vincentelli Italy 5,000 ECAD software

Juniper Networks, Inc. Pradeep Sindhu India 4,145 Communications equipment

Watson Pharmaceuticals, Inc. Allen Chao Taiwan 3,844 Pharmaceutical

Parametric Technology Corporation Samuel Geisberg Russia 3,751 Software

Pediatrix Medical Group, Inc. Roger Medel Cuba 3,013 Healthcare facilities

NVIDIA Corporation Jen-Hsun Huang Taiwan 2,737 Semiconductor

Salton, Inc. Lewis Salton Poland 2,466 Consumer Electronics

Lam Research Corporation David Lam China 2,200 Semiconductor equipment

WebEx Communications, Inc. Subrah S. Iyar India 2,091 Software

VC Backed Public companies Started by First Generation Immigrants

Successful Companies Generating Employment

World Wide

12

©2010 AZCA, Inc.

AZCA

William Hewlett &

David Packard

Elon Musk

Andy Grove

Pierre Omidyar (French-born Iranian-American )

Jerry Yang Larry Page

Sergey Brin

Larry Ellison

Steven Jobs

Major Players in Silicon Valley

Bill Gates

William Shockley

13

©2010 AZCA, Inc.

“Brain Circulation”

Footprint of Students from Asia Is Japan in this Circulation?

14

©2010 AZCA, Inc.

Evolving Economic Model

Past：

New technologies and state of the

art products emerge in developed

countries equipped with high R&D

capability and affluent customers.

After the product is standardized

and the manufacturing process has

matured, activities shift to

countries where low cost

manufacturing is possible.

Today：

Highly capable engineers travel

frequently between SV and their

home country.

Immigrant entrepreneurs have

abundant experience in SV as

well as strong ties in the country

of origin.

Limited chance for new technology

to be developed in the developing

countries.

Sometimes government in the

developing country leads R&D

programs.

R&D opportunities for developing

countries thanks to the

advancement of distributed

development and manufacturing

approach.

Wider opportunities for

developing countries to come up

with their own technologies.

15

©2010 AZCA, Inc.

Global Propagation of High-tech

Infrastructure

Major Publications by AnnaLee Saxanian

1994： Regional Advantage: Culture and Competition

in Silicon Valley and Route 128 (Harvard University

Press, 1994)

1999: Silicon Valley‘s New Immigrant Entrepreneurs

(Public Policy Institute of California, 1999) www.ppic.org/content/pubs/report/R_699ASR.pdf

2002: Local and Global Networks of Immigrant

Professionals in Silicon Valley (Policy Institute of

California, 2002) www.ppic.org/content/pubs/report/R_502ASR.pdf

2006: The New Argonauts: Regional Advantage in a

Global Economy (Harvard University Press, 2006)

AnnaLee Saxenian is Dean

and Professor in the School of

Information and Professor in

the Department of City and

Regional Planning at the

University of California,

Berkeley.

16

©2010 AZCA, Inc.

A Few Questions (in Nihongo)

Q1: “Silicon Valley is built on ICs.” というけれど、そのココロは？

ヒント： 我が家の近くの中華料理屋の名前は“ABC”、そのココロは“American Born Chinese”。

A1: “Silicon Valley is built on Indian and Chinese engineers.”

Q2: Ronald Reagan大統領曰く、“You can go live in Japan, but you

cannot become Japanese. You can go to France, but you don’t

become a Frenchman…”と言ったけど、そのあと続けて何と言ったか？

ヒント： これは残念ながら911の後はそう簡単ではないかも。

A2: “…But anyone from any corner of the world can come to America

and be an American.”

17

©2010 AZCA, Inc.

Waves of High technology

1960 1970 1980 1990 2000 2005

Telecommunications, Internet

Semiconductor

PC, Computer Systems, Peripherals

Software

Life Science

Nanotechnology

Greentech

World’s De-

facto

Standards

18

©2010 AZCA, Inc.

California, 46%

Massachusetts, 19%

Texas, 10%

Washington, 8%

New Mexico, 6% Others, 11%

VC Investment in Greentech Greentech Investment by State

(2008)

100% = $4.1 Billion

VC Investment in Greentech

Source: Thomson Financial/NVCA

1.4% 2.2% 2.3%

2.9%

4.5%

5.9%

9.1%

14.5%

12.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2001 2002 2003 2004 2005 2006 2007 2008 2009

$Billion % of total VC

Investment

19

©2010 AZCA, Inc. 20

Requirement for Greentech Cluster Growth

Source: NRDC (National Resources Defense Council)

Survey Results on 25 Investors

Requirement #Answers

Entrepreneurial Culture, Abundant Entrepreneurs 13

Aggressive Government Policies 12

Excellent Universities, Research Institutions 11

Access to Financial Sources (e.g., VC) 8

Market Potential 8

Deal Flow 4

Customer Awareness 3

20

©2010 AZCA, Inc. 21

Greentech Policies of California State

Public Energy Research (PIER) Program

The Green Wave Initiative

California’s Renewable Portfolio Standard (RPS)

Renewable Energy Incentive Programs

Renewable Resource Trust Fund

Solar PV Initiatives

California Solar Initiative (CSI)

Energy Efficiency Rebates

Diesel Emission Reduction Plan

21

©2010 AZCA, Inc.

“Green New Deal” by President Obama

Key Points

Create 5 million new jobs by investing $150 Billion in

Greentech during the next 10 years

Reduce the use of crude oil by equivalent amount of

import from Middle east and Venezuela within the next

10 years

Introduce 1 million plug-in hybrid cars made in USA by

2015

Usage od renewable energy – 10% by 2012, 25% by 2025

Reduce green house gas emission by 80% by 2050 as

compared in 1990

22

©2010 AZCA, Inc.

Greentech and Key Technologies

Biotechnology

nanotechnology

Computer Science

Material Science

Telecommunication

Microelectronics

●

●

●

Key Technology Power generation (Solar, Fuel Cell, Solar

Thermal, Wind, etc.)

Energy Storage (Secondary Battery, Super

Capacitor, etc.)

Infrastructure (Smart Grid, distributed Power,

Wireless, etc.)

Energy efficiency (Solid state light, HVAC,

Lighting control, green Building, etc.)

Transportation (HEV, PHEV, EV、Related infra,

etc.)

Fuel (Bio fuel, Hydrogen, Catalyst, etc.)

Desalination

Air, water, soil, waste (Monitor, detection,

process, improvement, etc.)

Greentech application

23

©2010 AZCA, Inc.

Silicon Valley’s Leading Position in

Greentech

Silicon valley’s Infrastructure

Obama’s Green New Deal

Green Policies of California State

Silicon

Valley leads

Greentech

Entrepreneur

VC

Universities

Research

Institutions

Lawyer

Accountant

Consultant

Investment

Banker

Research Firm

Executive

Search

etc.

Network of Innovation

Regional Cluster

Accumulation of relevant technologies

• Micro Electronics

• Information Technology

• Telecommunication

• Material Science

• Computer Science

• Biotechnology

• Nanotechnology

24

©2010 AZCA, Inc. ©2010 AZCA, Inc.

Commercialization in Greentech

25

©2010 AZCA, Inc.

Silicon Valley’s Fundamental Characteristics

Keyword 1: Openness

Openness to people with different

background

Openness to new ideas (technology, business

model) “Out of the Box Thinking”

Keyword 2: Tolerance for Failure

Low risk high return

May attempts, many failures behind some

success

26

©2010 AZCA, Inc.

Discussion

27