next silicon valley - market research report
TRANSCRIPT
Sneha Lundia UCSC EXTENSION | POWER OF MARKET RESEARCH
Market Research Report WHICH GEOGRAPHICAL REGIONAL CAN BE POTENTIALLY TOUTED AS THE NEXT SILICON VALLEY?
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TABLE OF CONTENTS
Executive summary ................................................................................................................ 3
Introduction ........................................................................................................................... 4 Objective .............................................................................................................................................. 4 Background .......................................................................................................................................... 4
Methodolody ......................................................................................................................... 5
Findings .................................................................................................................................. 6 Demographics................................................................................................................................... 6 Responses ........................................................................................................................................ 7 Factors Influencing Technology Hub ................................................................................................. 7 Potential Geographical Regions ........................................................................................................ 9 Ranking of Potential Cities Based on Weighted Score Metrics ......................................................... 10 Other Findings ................................................................................................................................ 11
Conclusions and Recommendations ...................................................................................... 12
Appendices ........................................................................................................................... 13 Appendix A: Reference List ............................................................................................................. 13
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EXECUTIVE SUMMARY
• This report provides an insight into the factors which make a region technology powerhouse. It also devices metrics which governs the success of a startup ecosystem.
• An online web survey was conducted to understand which geographical region has the potential to be touted as the next Silicon Valley.
• The survey audience were adult urban population connected to the tech industry. • The results indicate that New York City, USA has a good potential and private investors and
venture capitalists could consider investing in these regions like New York and Seattle. • Availability of low cost and skilled working professionals, and with an above average growth rate
index Bangalore is also a wise investment option. • In order to better understand the situation from a global perspective, it would have been better if
this survey was done on a more global scale.
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INTRODUCTION
OBJECTIVE
The market research project, entitled which geographical region can be potentially touted as the next Silicon Valley? hopes to discover more information regarding the geographies which have the potential to become the next technology capital of the world. Silicon Valley is the home to many of the world's largest high-‐tech corporations and thousands of startup companies. It is an innovation powerhouse whose importance is hugely disproportionate to its small physical size.
BACKGROUND
The purpose of doing this research is my curiosity to know more about why the bay is called Silicon Valley and understand the features/characteristics a geographical region must have to be called the technology powerhouse.
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METHODOLODY
Based on the insights generated from the secondary research, I was able to narrow down on a few locations that have the potential to be labeled as the next Silicon Valley. However, understanding the characteristics of Silicon Valley and the critical question of what makes it a technological hub was not answered. More details regarding my secondary research can be found in Appendix A. The method best suited for attaining my research objective, due to the flexibility and immediacy of response, was a web survey.
I designed a web survey under the guidance of my instructor, Jen Berkley Jackson, and used Qualtrics to conduct the survey. For a population of approximately 60,000,000 (Urban Adult Population connected to tech Industry) to have a confidence of 90% with marginal error of plus or minus 10% the sample size should be minimum of 68.
SHORTCOMINGS
My actual sample size for the analysis is 45. For a population of 60,000,000 and sample size of 45, with 13% of marginal error I have a 90% confidence on my analysis. Although the sample size looks good enough it has a few limitations.
• Since my research is trying to answer a global question, the sample needs to be geographically distributed, but due to limited network my sample is skewed towards USA and India.
• The population considered is also an approximate value.
CHALLENGES
In order to begin analysis on the collected data from the survey, I needed to export the same from Qualtrics. However, since I was using a trial version of the software, I did not have access to the raw data. This was necessary to evaluate and cross tabulate results. After a lot of persuasion, I was able to convince the Quatrics Customer Support team to provide me with the raw data as a .csv file.
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FINDINGS
Many cities around the globe, armed with a sizable tech hub, are engaged in a fierce competition for global attention. Their byword and aspiration is: “the next Silicon Valley.” The industries that comprise these regions invest greatly in research and development, and they employ high proportions of people from the fields of science, technology, engineering, and math, collectively known as the S.T.E.M. fields.
Based on the research it is clear for any region to be the next Silicon Valley, it should have a good mix of the following characteristics:
• Expand government-‐ and corporate-‐funded R&D. • Nurture startups by getting them capital and other help • Improve the pipeline of S.T.E.M. workers through schools, universities, and corporate-‐funded
training programs • Collaborate to create local “ecosystems” that encourage companies to cluster together
Some other factors that should be considered are:
• Relatively low housing costs • Low unemployment rates • Median tech salaries higher than the median salary for the city’s total workforce • The presence of major tech companies • Venture Capital funding to spawn new businesses
Through my secondary research, I was able to narrow down on a few locations that have the potential to be labeled as the next Silicon Valley. However, understanding the characteristics of Silicon Valley and the critical question of what makes it a technological hub was not answered.
My primary research focused on understanding the major characteristics that needs to be considered for qualifying a region to be the next Silicon Valley. The survey consisted of multiple choice, rank based and other scoring questions to understand from the audience what characteristics are important for a region to be a technology powerhouse. Using the data collected through primary research, a weighted scoring methodology was created to score the prospective regions and finally be able to state which geographical region can be potentially touted as the next Silicon Valley.
DEMOGRAPHICS
The target audience for the survey was the world urban adult population connected to the tech Industry. The survey saw a healthy 69% participation from people employed in the tech-‐industry. The remaining 31% were also connected to the tech industry one way or the other. These included respondents from financial services, healthcare and consulting industry. This gave me confidence that the data is going to be representative of the target audience.
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RESPONSES
I received a total of 52 responses. 75% of the responses were completed, while 25% were partial responses. I decided to consider the data associated 50% of the partial responses for my analysis and discarded the rest. This decision was based on thoroughly analyzing the partial responses with respect to the kind of questions answered. Only those responses were considered which would add value to the survey and increase its efficacy.
FACTORS INFLUENCING TECHNOLOGY HUB
7%7%
11%
5%
4%
31%
4%
31%
Demographics
Computer and Electronics Manufacturing
Information Services and Data Processing
Information Technology
Other Information Industry
Scientific or Technical Services
Software
Telecommunications
Other
75%
12%
13%
Responses
Completed
Partial
Invalid
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Based on my secondary research I was able to narrow down on certain factors that govern the success of a technological hub. Although I had a list of these factors, there was no way to determine how each of the characteristics influenced the establishment of a technological hub. I used primary research to create metrics for each characteristic. Every respondent was asked to rate the characteristics between one to five, one being the least and five the most influential. These ratings were then used to rank the characteristics based on a weighted score mechanism.
As observed, 76% of the respondents feel that venture capital funding and an eco-‐system to nurture startups are the most influential factors that result in a successful technological hub. A major fact to note here is that presence of major technical companies plays a big role in maintaining a healthy environment to nurture startups.
Surprisingly, the importance of housing costs is the least influential factor considering that Silicon Valley itself is in a major real-‐estate bubble as of now. Also surprising is the fact that respondents feel that low employment rates do not impact the tech ecosystem too much. This is especially unexpected since respondents expect a high compensation. This would seem to imply that irrespective of the high housing costs and low employment rates, a high compensation is good enough to power technology.
CALCULATING THE WEIGHTED SCORE
To calculate the rank of each factor, I used a weighted score mechanism. Each value of the metric was assigned a weight based on the responses and then averaged. The least influential option was assigned weight one and the highest influential factor was given the weight 5. Using this mechanism, I was able to conclude that venture capital funding and nurturing startups for success are the most influential factors
5% 5% 5% 5%12% 12% 10% 14%7% 12% 12% 10% 17%7% 10%
29%26%
12% 7%19% 29%
36% 31% 26%
29%36%
40% 38%
33%
43% 29%26% 36%
26%14%36% 38%
31%14% 19% 24%
17%7% 10%
0%
20%
40%
60%
80%
100%
Factors Influencing Techo-‐Hub
5 (Most Influential)
4
3
2
1 (Least Influential)
9
with scores of 4 and 3.9 respectively. Although employment rates and housing costs have a low score with respect to others, looking at it individually, the score is high enough to conclude that they also influence the technology growth environment.
POTENTIAL GEOGRAPHICAL REGIONS
The primary research asked the respondents to choose a geographical region which has the potential to become the next Silicon Valley. The options given as part of this question were carefully selected after a thorough secondary research. The objective of this question was to gather a top of the mind response from the respondent based on his/her current knowledge and understanding of the technological landscape.
4.0 3.93.7
3.5 3.5 3.4 3.4
2.9 2.8
2.0
3.0
4.0
5.0
Weighted Score of Each Factor
17%
44%
5%
5%
3%7%
7% 12%
Potential Geographical Regions
Austin, U.S.
Bangalore, India
Boston, U.S.
London, United Kingdom
New York City, U.S.
Paris, France
Seattle, U.S.
Singapore
10
The survey results yielded a strong 44% in favor of Bangalore, India being the next Silicon Valley. This is unsurprising since we know that there is a bias with respect to the ratio of respondents from India. New York comes in a distant second place in this race, but again this can be attributed to the strong demographic bias that I’ve already mentioned. An interesting point to note that none of the respondents believed that Boston is likely to be the next Silicon Valley.
RANKING OF POTENTIAL CITIES BASED ON WEIGHTED SCORE METRICS
At the time of my secondary research I found an interesting article titled, “The 20 hottest startup hubs in the world” via Business Insider. The report — which last came out in 2012 — ranked cities in five categories: growth index, funding, talent, market reach, and startup experience. Through my primary research I gathered data from audience about how would they rank funding, market reach, talent, startup experience and job growth rate based on its contribution for the success of a technology driven ecosystem.
Interestingly I observed that a little less than half of the respondents feel that talent is the most important metrics that govern the success of a technology driven ecosystem. Based on the response, I ranked the metrics as follows:
1. Talent: Availability of skilled professionals 2. Funding: Availability of funds for establishing and running startups 3. Market Reach: Connectivity of the region with its target customers 4. Job Growth Rate 5. Startup Experience: Availability of an ecosystem to nurture the growth of startups
Each of the metrics were assigned weights, highest weight was assigned to rank one while lowest to rank five. Based on the weights an average score for each region was calculated.
24%
15%
48%
6%7%
Ranking of Metrics
Funding
Market Reach
Talent
Startup Experience
Job Growth Rate
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By combining the results of secondary research with primary research, it is observed that New York City, USA has the potential to be called the next Silicon Valley. With scoring high in funding, market reach and startup experience, this is an expected result.
OTHER FINDINGS
• The growth of an economic region is another factor which is of importance. • A region which has its infrastructure in place and the cost of holding it is low would have a high
chance of attracting tech companies towards it. • Australia has a good potential due to its location and culture. It is close to Asia, the manufacturing
hub and is good at doing business with US and Europe due to seamless communication with them.
• A few respondents were of the opinion that instead of having one big technology hub, there could be multiple small hubs distributed over the geography.
• Some were of the thought that there cannot be any other Silicon Valley.
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14 14 14
12
98 8
0
3
6
9
12
15
18
21
New York City, U.S.
Boston, U.S.
Seattle, U.S.
London, UK
Austin, U.S.
Bangalore, India
Singapore Paris, France
Ranking Based on Weighted Score
Funding
Talent
Growth Rank
Startup Experience
Market Reach
Weighted Score
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CONCLUSIONS AND RECOMMENDATIONS
The primary research suggests that Bangalore, India is the location that is the most likely to be touted as the next Silicon Valley. While this may be surprising, few people know that Bangalore is already referred to as the Silicon Valley of India. The primary research also yielded a ranking of metrics which make the Silicon Valley the technical hub that it is. A combination of these rankings along with my secondary research yields that New York, NY in the United States of America is the next Silicon Valley.
As a market research professional, my advice to private investors and venture capitalists would be to strongly consider investing in regions like New York and Seattle if they wish to invest in the United States. However, with the availability of low cost and skilled working professionals in Bangalore, it would be extremely unwise to not consider it as an option. For engineers and working professionals who want to place themselves in a region with future potential, Seattle, WA is a very good option considering its proximity and ties to the already well established Silicon Valley.
In a short period of time and with limited resources, I was able to reach out to respondents primarily based out of either the United States or India. This may or may not have led to some amount of bias in the responses gathered as part of this survey. In order to better understand the situation from a global perspective, it would be great if this survey can be done on a more global scale. This would help in figuring out which other regions have the technical expertise and the eco system for nurturing another Silicon Valley.
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APPENDICES
APPENDIX A: REFERENCE LIST
[1] Alex Kazaks, Eric Kutcher, and Michael Uhl. “How should you tap into Silicon Valley?” McKinsey. Internet: http://www.mckinsey.com/business-‐functions/business-‐technology/our-‐insights/how-‐should-‐you-‐tap-‐into-‐silicon-‐valley, September 2015.
[2] Vara, Vauhini. “How Utah Became The Next Silicon Valley.” The New Yorker. Internet: http://www.newyorker.com/business/currency/utah-‐became-‐next-‐silicon-‐valley, February 3, 2015.
[3] “Does Your City Have What It Takes To Become The Next Silicon Valley?” Free Enterprise. Internet: https://www.freeenterprise.com/the-‐next-‐silicon-‐valley/, June 6, 2016.
[4] Dahad, Nitin. “Is France on track to become the Silicon Valley of Europe?” The Next Silicon Valley. Internet: http://www.thenextsiliconvalley.com/2016/06/02/7522-‐is-‐france-‐on-‐track-‐to-‐become-‐the-‐silicon-‐valley-‐of-‐europe/, June 2, 2016.
[5] Lemonade, Make. “NZ and Vietnam to focus on joint technology trade growth” Scoop. Internet: http://www.scoop.co.nz/stories/BU1606/S00008/nz-‐and-‐vietnam-‐to-‐focus-‐on-‐joint-‐technology-‐trade-‐growth.htm, June 1, 2016.
[6] Athwal, Nav. “5 Cities Poised To Be The Next Silicon Valley Tech Hub”. Forbes. Internet: http://www.forbes.com/sites/navathwal/2015/02/12/5-‐markets-‐poised-‐to-‐be-‐the-‐next-‐silicon-‐valley-‐for-‐real-‐estate/2/#7e0085a4bb22, February 12, 2015.
[7] Andrews, Greg. “Austin Texas has what it takes to be the next silicon valley”. Accenture Consulting. Internet: https://www.accenture.com/us-‐en/insight-‐highlights-‐communications-‐austin-‐texas-‐next-‐silicon-‐valley. 2016.
[8] Forrest, Conner. “10 top startup hubs outside of Silicon Valley and the US”. TechRepublic. Internet: http://www.techrepublic.com/article/10-‐top-‐startup-‐hubs-‐outside-‐of-‐silicon-‐valley-‐and-‐the-‐us/. February 19, 2015
[9] Kirk, Chris and Oremus, Will. “A World Map of All the Next Silicon Valleys”. Slate. Internet:http://www.slate.com/articles/technology/the_next_silicon_valley/2013/12/all_the_next_silicon_valleys_a_world_map_of_aspiring_tech_hubs.html, December 19, 2013
[10] Alfaro, Lyanne. “The 20 hottest startup hubs in the world”. Business Insider. Internet: http://www.businessinsider.com/the-‐20-‐hottest-‐startup-‐hubs-‐in-‐the-‐world-‐2015-‐7, July 30, 2015.