Tech hubs

How do cities become tech hubs?

Some of the world’s most well-known capitals are stepping up their game in the tech space and developing into booming tech hubs. The spotlight is also falling on smaller cities like Manchester and Leeds for their rate of progress in the tech arena. In this article we unpack what the startups in these flourishing cities are getting up to, and which cities are making their mark on the world through innovation. We also look at Silicon Valley and ask some important questions around how cities become tech hubs.

 

What is a tech hub?

Quite simply, a tech hub is a community that fosters innovation for technology startup companies. When most of us think “tech hub,” we think “Silicon Valley,” because it has risen to prominence in recent years as the home of Apple, Google and Facebook. But a tech hub can also be a specific part of a city, like London’s Silicon Roundabout, a building or a collective like Silicon Cape Initiative in Cape Town, South Africa. Tech hubs often provide opportunities for startups to meet potential investors and funders while providing a platform for business networking. According to Joe Svetlik, this is done by “encouraging experimentation, not demonising failure, and helping firms network with other like-minded individuals and enterprises.”

 

Which are the biggest tech hubs in the world?

According to the Global Startup Ecosystem Report (and an analysis by CityLab), these are some of the biggest players in the tech hub space globally:

 

Silicon Valley, California

The study identified Silicon Valley as a Heavyweight Hub due to its high concentration of big names in tech. As a Heavyweight Hub, it has fewer new companies entering the market than more emerging hubs, as well as a stable growth rate. In Silicon Valley there is also a higher density of engineering hiring and on average, investment 670 deals were sealed by the startups in the region between 2012 and 2017. In terms of deal values, $38 billion was raised (on average) by startups in the region between 2012 and 2017. These staggering figures make Silicon Valley a proverbial Shangri-La for budding startup founders and digital entrepreneurs.

 

Beijing, China

Beijing, China is considered a High Growth Hub for a number of reasons. Firstly, in relation to Heavyweight Hubs like Silicon Valley, Beijing has a higher frequency of early startups entering the market. As such, it has higher dollar investment, deal count rates and corporate-backed deal-making. According to the study, the average investment deal count between 2012 and 2017 was 171. The average dollar amount raised between those same years equated to $14 billion.

 

Stockholm, Sweden

Europe has its fair share of developing tech hubs which are outside of London. Amongst them is Stockholm, which according to the Global Startup Ecosystem Report (and an analysis by Citylab), is an “up and comer.” Tech hubs in this category generally have lower deal counts than other hubs, and lower dollar investment. There are also a high percentage of first-time funding rounds and high foreign investment rates. On average, the investment deal count between 2012 and 2017 in Stockholm amounted to 75, with an average deal amount of $2.5 billion within the same time period.

What are startups in these tech hubs getting up to? The study suggests that there is an overall trend towards “investment in AI, Big Data and Analytics, Blockchain and Advanced Robotics and Manufacturing.

 

How cities become tech hubs

100 years. That’s how long it took for Silicon Valley to become synonymous with technology. This may be a surprising fact given that it seemed to have sprung up overnight. To illustrate some of the highlights in the history of Silicon Valley, Corey Protin, Matthew Stuart and Matt Weinberger put together this timeline:

  • Late 1800s: San Francisco became one of the earliest hubs of telegraph and radio. In 1909, San José was the birthplace of one of America’s first radio stations. Less than two decades later, Moffett Field became the early home of the aerospace industry. In 1939, due to the work of the Ames Research Centre, the same area played host to the world’s largest wind tunnel.
  • 1939 arrived, William Hewlett and Dave Packard founded Hewlett-Packard in Palo Alto. During these formative years, computers were the size of a room!
  • In the 1940s, William Shockley invented what would become the computer processor, at Bell Labs. Later, he would found his own company and be the first to make processors out of silicon rather than germanium.
  • In 1957, eight of Shockley’s employees became disgruntled, left his company and partnered with Sherman Fairchild to create Fairchild Semiconductor. A few years later, Fairchild helped  to make components for the Apollo program. In the 1960s, those eight employees founded their own independent companies, some of which led to the establishment of brands like Intel, AMD, Nvidia and Kleiner Perkins.
  • In 1971, journalist Don Hoefler entitled a 3-part report on the semiconductor industry “SILICON VALLEY USA.” The name stuck.
  • During the 1970s, Atari, Apple and Oracle were founded in the area.
  • In the 1990s, eBay, Yahoo, Paypal and Google were founded in the area.
  • In the decade that followed, Facebook, Twitter, Uber and Tesla joined the suite of flourishing startups.

Tech hubs develop slowly but surely, and are accelerated by concentrated efforts to encourage tech incubators, investors and innovation hubs to move their efforts into a particular geographical region.

There are major considerations to be made during the developmental stages of a tech hub. For example, with Amazon considering establishing its second headquarters in Seattle, there are a number of important factors to be considered. What will the effect on traffic be? Which construction company will handle the development of the building? How will the GDP of the city be affected? Will it mean more jobs for Seattle dwellers? As technology continues to demonstrate its pervasiveness, the world and how we perceive our urban environments will need to evolve in order to accommodate society’s inevitable progression.

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