New study shows that while Silicon Valley currently has a hot economy and high job growth, warning signs could be pointing to erosion of post-recession growth
San Jose, CA – March 2, 2017 – The Silicon Valley Competitiveness and Innovation Project (SVCIP), now in its third year, sheds light on how Silicon Valley can maintain its status as a powerhouse region of innovation and prosperity even in the face of serious challenges.
The data-driven 2017 report cautions that the region could be on a perilous journey to eroding post-recession growth if it does not address basic building blocks of a robust economy, starting with the education of its young people. Data shows that more than half of Silicon Valley 11th graders failed to meet state standards in math; this endangers these students’ ability to compete in a global economy and the region’s economic future. Also a growing concern is that venture capital investment dropped off significantly from 2015 to 2016, along with later-stage funding and valuations. The report points to another crucial area for concern: The worsening of the quality of life in Silicon Valley measured by the high cost of housing and rentals and longer commute times. These factors add to the looming possibility that other regions will attract more of our residents.
Notably, this year’s report broadened its comparative research to a few key global innovative regions, in addition to studying the following U.S. innovation centers: New York City, Seattle, Austin, Boston and Southern California. Researchers found that Silicon Valley’s housing and traffic situations have worsened compared to those in other innovative regions. Commute times have lengthened by more than 15 percent since 2010, compared to increases in other regions of only 5-11 percent. And coming off its 2015 peak, venture capital dropped in four out of the five quarters up to third quarter 2016. Annual venture investment dropped in Silicon Valley in 2016 for the first time since 2012.
“We must work with policymakers to improve STEM education for our region’s children, alleviate traffic congestion and make spiraling housing prices affordable again,” said Emmett Carson, Ph.D, CEO and President of Silicon Valley Community Foundation. “Those and other public policy efforts are imperative if we want Silicon Valley to stay at the top of the innovation field.”
These insights as well as others are spotlighted in the SVCIP-2017 report. Developed by the Silicon Valley Leadership Group and Silicon Valley Community Foundation in 2014, the project seeks to proactively identify a data-driven economic strategy to reinforce the region’s competitive advantages in innovation and ensure continued job growth. Study details, including a downloadable PDF of the study can be found at SVCIP.com.
“Silicon Valley remains the earth’s epicenter of innovation,” said Carl Guardino, CEO and President of the Silicon Valley Leadership Group. “While we celebrate our strengths, we must also work on our weaknesses. Those weaknesses include a lack of affordable homes, challenging commutes and an education system with uneven results in reading and math.”
Guided by an advisory council and a series of discussions with legislators, business and civic leaders, the SVCIP team developed an Indicator Dashboard and public policy agenda to evaluate and promote the health of Silicon Valley’s innovation ecosystem. The SVCIP represents a first step in identifying key public policy issues to address in the near term.
Note: The Silicon Valley region is defined as Santa Clara, San Mateo and San Francisco counties.
Sample of Key Findings from SVCIP-2017
Silicon Valley is the world’s leading innovation region based on a composite measure. At the same time, other regions like Berlin, London, Tel Aviv, Chicago, and Boston scored higher on the Compass Report’s Growth Index, meaning they are gaining ground on Silicon Valley by measures such as venture capital investment, talent pools and entrepreneurial networks.
Silicon Valley also has a much higher concentration of STEM talent than other innovation regions. The concentration of STEM talent measures the proportion of STEM workers in the overall workforce relative to the national average. Silicon Valley is almost three times more concentrated in STEM workers than is the nation as a whole, nearly twice as concentrated as the Boston region, and over one and one half times more concentrated than both Seattle and Austin.
For the first time, the report included a measure regarding women entrepreneurs in innovation regions. In 2015, women made up 42 percent of new entrepreneurs in Silicon Valley, placing the region second to Seattle, with 51 percent. But between 2013 and 2015, Silicon Valley had the biggest drop in the share of new female entrepreneurship, from 46 percent to 42 percent.
Between Q3 2015 and Q3 2016, total venture capital investment in Silicon Valley companies fell 46 percent. Moreover, venture capital funding levels dropped in four of the five quarters leading up to Q3 2016. The number of venture capital deals in Silicon Valley declined too, but by a much smaller 4.6 percent between Q3 2015 and Q3 2016.
Using the San Jose Metropolitan Statistical Area to represent Silicon Valley home and apartment prices, we see that median home values continued to increase quickly in the first half of 2016. In fact, median home values rose to $935,180, according to Zillow, exceeding home values in San Francisco ($799,150), and all innovation regions by a substantial margin.
- The average Silicon Valley worker spends an hour and 10 minutes commuting per day (both ways), second only to New York City workers, who spend an hour and 14 minutes commuting.
About the Silicon Valley Leadership Group
The Leadership Group, founded in 1978 by David Packard of Hewlett-Packard, represents more than 400 of Silicon Valley’s most respected employers on issues, programs and campaigns that affect the economic health and quality of life in Silicon Valley, including education, energy, environment, health, housing, tax policies, tech and innovation and transportation. Leadership Group members collectively provide nearly one of every three private sector jobs in Silicon Valley and contribute more than $3 trillion to the worldwide economy. For more information, visit svlg.org.
About Silicon Valley Community Foundation
Silicon Valley Community Foundation advances innovative philanthropic solutions to challenging problems. As the largest community foundation in the world, we engage donors and corporations from Silicon Valley, across the country and around the globe to make our region and world better for all. Our passion for helping people and organizations achieve their philanthropic dreams has created a global philanthropic enterprise committed to the belief that possibilities start here. Learn more at siliconvalleycf.org.
About Collaborative Economics
Collaborative Economics (COECON) is a strategic advisory and consulting firm that works with clients to create breakthrough solutions for regions and communities. COECON has extensive experience helping states and regions develop innovation strategies. Find out more at coecon.com.
Kimberly Ellis / Kellis@svlg.org /408-501-7853
Sue McAllister / SJMcAllister@siliconvalleycf.org/650-450-5513