http://dealbook.nytimes.com/2011/03/22/the-search-for-ingredients-to-replicate-silicon-valley/
With the rocketing valuations of social media companies, there is again hope that our economy can compete globally. The hope belies a sobering reality. Governments cannot create or even know what will be the next great entrepreneurial success. The Web’s latest hits show the pitfalls of such efforts.
Facebook, Groupon andTwitter are successes backed by venture capital at an early stage.
These companies had a timely idea, but entrepreneurial efforts and vision may have carried them to fortune. It was not just the founders, but advisers, employees and other companies that helped stir this creative spirit. Investors and advisers like lawyers exist side by side with gaggles of venture capital-financed companies and their most important resource: talented, innovative employees.
These networks have been a crucial driving force for venture capital. There are few successful venture capital communities in the United States. Silicon Valley is the one everyone knows, but Austin, Tex., and Boston are also prominent. Other emerging venture capital communities are in Boulder, Colo.; Chicago; and New York.
But all of these are organically created communities.
What causes their creation is debated. Some theorists will say that military spending in the Silicon Valley area combined with two large research institutions and corporate spinoff technology from companies like Xerox’s legendary Palo Alto Research Center created a critical mass that spurred formation of the venture capital funds and lured the people who innovate.
Daniel Senor and Saul Singer recently wrote “Start-up Nation,” a book about Israel, the only country that has created a venture capital network to rival Silicon Valley. They attribute Israel’s success to its military and the requirement that all citizens serve a period of service. The maturity and entrepreneurial nature of the military combined with an influx of Russian émigrés created Israel’s venture capital network.