The key to growth and success of the next Silicon Valley is the growth of its innovation clusters and science parks. These are popping up around the world with great ease and enthusiasm – and not just on a whim, but with many of the strong principles of innovation and entrepreneurship embedded firmly in their growth strategies.
With a harsh economic environment during 2011, one question that must be on many minds is this: what are governments doing to come out of recession, or to drive economic growth? It seems that while debt-ridden Western economies are cutting and not always re-investing in growth (or even able to), the global trend, according to a poll of International Association of Science Parks (IASP) members, is about 50:50 in terms of governments maintaining or increasing their support for science parks, and that the majority of parks have grown in 2011.
Science and technology parks are a key ingredient of innovation clusters, and of growth in the 21st century knowledge economy, so the IASP poll is a good barometer of confidence in the prospects of the innovation economy. It had asked two questions: 1) if the level of support provided by governments/public administration to parks had changed in the current economic environment, and 2) the extent to which members’ parks had grown in 2011 in terms of tenant companies located in them.
To the question about government support, a total of 49% said that it hadn’t changed or was the same as before, or had increased government support. A total of 18% were not yet sure of the effects of the economic climate on public support, while 33% said it had decreased.
On the question of growth, the results showed the majority of the parks (64%) grew by up to 19%; meanwhile, a total of 24% of parks saw growth of more than 20%, and 5% of parks grew exponentially by increasing the number of tenant companies by more than 50%; in addition, 5% experienced high growth between 30-50%. Only 14% of respondents said their park experienced no growth in 2011.
Growth is coming from all regions around the world – in recent weeks, the IASP has added or upgraded members from Slovenia, Italy, Vietnam, and the USA too.
In a recent interview carried out by The Next Silicon Valley’s editor, Richard Wallace, you can also see why China is becoming the next big thing in the electronics industry, and particularly in fabless semiconductors. South East Asia is also becoming a goldmine for angel and venture capital investment, especially in the emerging markets, quietly creating a maturing and entrepreneurial culture itself.
Australia is also a rising star in the global scene (Top tech successes and failures of 2011); according to this story, investment in Australian tech startups boomed in 2011, with several receiving funding from large US venture capital firms. It’s reported that US venture capital firm The Founders Fund (headed by PayPal co-founder Peter Thiel and Facebook’s first president, Sean Parker) is sending three of its top executives to Australia this month to meet with local tech startups.
The increasing global connectivity combined with knowledge ecosystems, funding sources and good infrastructure is a the key to the growth of the science parks in 2011, and this is likely to be a continuing trend as new business models emerge in this global marketplace . As Thomas Friedman says (“So Much Fun. So Irrelevant.”), the best ecosystems will be cities and towns “that combine a university, an educated populace, a dynamic business community and the fastest broadband connections on earth; these will be the job factories of the future. The countries that thrive will be those that build more of these towns that make possible ‘high-performance knowledge exchange and generation’.”
In the article, Friedman notes that throughout history economic clusters have always required access to abundant strategic inputs for success – where it might have been access to abundant flowing water and raw materials in the 1800s, and access to abundant electricity and transportation in the 1900s, our economy today and the rest of this century will rely on access to abundant bandwidth and abundant human intellectual capital.
With this kind of infrastructure being important for growth, we can see why government support for science parks has broadly continued positively on a global basis – and those regions that will emerge as the best next Silicon Valley or cluster are those that will have strong government backing plus the other essential ingredients needed – talent and funding.
India seems to be going through a new era in high-tech – whether it is in software, with new product entrepreneurs emerging in huge numbers, or electronics and telecoms which are both in the process of having new national policies formulated.
There is certainly a wave of enthusiasm among technology businesses, and among policy-makers who want to create the environment for Indian companies to both serve the growing domestic market in India as well as take on traditional multinationals in global markets.
Indian tech companies are now talking about ‘inventing the future’. There’s talk of creating at least one $1-billion tech IPO per year in coming years. Companies like Flipkart (India’s version of Amazon.com), InMobi (a US-funded mobile ad network with a growing presence in the UK), Zoho, and SnapDeal (India’s equivalent to Groupon) feature among this list.
According to India’s software industry association NASSCOM, the software products industry in India has shown growth of 22 per cent for the past five years – evidence that the Indian software product industry is entering a new era, beyond simply outsourcing or offshoring. There are now around 2,400 organisations contributing $2 billion to the overall software industry revenues, enabling India to emerge as a global software products hub (as opposed to just being a BPO or business process outsourcing hub).
Innovation-driven start up activity has seen more than 1,110 organisations incorporated in the last five years in India focused on the mobility, small-to-medium sized business, e-commerce and education sectors. There are currently six major product segments, 30 significant geographical centres for product firms and 46 product categories. In the last year itself, the market has witnessed the launch of new ventures, healthy market capitalisation and an increased focus on the domestic market, all of which are ushering in the next wave of growth for Indian software products.
A level playing field for Indian global start-ups
The fact that the entry costs for a software product start-up are now similarly low whether you are in India, the UK or the USA, means that there is a level playing field for Indian tech start-ups. That’s because they are able to exploit emerging, disruptive and innovative technologies such as cloud computing, mobility, sustainability, social networking and virtualisation. The cloud especially has made it easier for product start-ups to market and deliver their products effectively and address a global audience from day one, especially using SaaS (software as a service) as the model.
In India, product firms have grown the fastest in tier II and tier III cities – leading to product start-ups now setting up in places like Mysore, Visakhapatnam, Thiruvananthapuram, Coimbatore, Kochi, Ahmedabad and Chandigarh. The combination of improved connectivity and Internet access, a large untapped consumer base and availability of manufacturing clusters is making many of these cities a great foothold for new tech start-ups to grow organically, first locally and then nationally and internationally.
Indian tech and software product start-ups are fired up and looking at all kinds of areas – at a conference in Bangalore last month, Silicon Valley veteran Vinod Khosla (co-founder of Sun Microsystems) told an audience of over 1,400 – comprising new and fast growing young Indian tech entrepreneurs – that opportunities for them existed in many emerging areas and listed 12 at least to note for possible new product ventures in consumer retail: these include data reduction, big data analytics, emotion-based businesses, education, TV 2.0, ‘Social next’ (ie: next generation Facebook), identifying consumer interests, NFC (near field communications), democratisation of publishing, utilities, healthcare and marketplaces. The future, he said, would be based on:
– Broader access (eg. via Internet, mobile)
– A post-PC era
– New social behaviour (eg. Facebook and Twitter)
– Consumerisation of technology
– Economic efficiency
It’s clear that there is a buzz in India’s tech scene. Having spent time with a product start-up in the Silicon Valley in the dot com boom of the late 90s, it’s evident that the energy and go-getting atmosphere that was there in the US and Europe at that time is being relived with even more vigour in India. It’s not just Bangalore that’s emerging as the next Silicon Valley – but many cities in India.
Indian tech start-ups, and particularly software product start-ups, are thinking global from day one – and are dreaming of creating billion dollar companies. The combination of inspirational role models returning from Silicon Valley, the high visibility of already successful new generation Indian tech start-ups, an improved environment for tech start-ups both in terms of the start-up ecosystems and clusters as well as the development of improved Internet/wireless connectivity (3/4G, LTE and broadband) are all contributing to creating a new era in the Indian technology sector. The confidence of this sector and the nexus of networks mean that they are also able to gain a lead in markets beyond the US and Europe – into Brazil, Africa and China. This will provide both opportunities and competition for companies in the UK, US and other traditional developed markets.
In summary, the next generation of Indian high-tech companies is entering mainstream global markets. They are not based on the traditional Indian model of providing low cost software and engineering services. They have taken this a step further and developed software and technology products that stand up and compete against the current global technology product leaders.
There is drive and enthusiasm among India’s young tech entrepreneurs to compete both locally and globally. They know about developing quality products that provide value for money. It’s something that the world’s tech industry needs to be aware of and either figure out how to take advantage of this through partnership, or watch as the Indian companies gain market dominance.
For a perspective on places around the world competing to be the next Silicon Valley, visit: http://www.thenextssiliconvalley.com
Nitin Dahad is CEO and Publisher of The Next Silicon Valley. A long-time consultant and adviser in the electronics, semiconductors and wireless industry for over 25 years, he’s worked in various roles throughout his career with large corporations as well as start-ups globally – particularly the UK, US and India. He is the brain behind a number of successful technology and B2B publications.