News Column

Silicon Valley loses its appeal as IT firms move

February 25, 2014

Flavie Halais -1

The IT sector is no more concentrated in suburban areas, and now plays an integral part in the economy of cities around the world, according to new research.

In recent years, large urban centres like San Francisco, New York City and London have attracted an increasing number of start-ups and well-established players such as Yahoo and Google.

The idea of working in the Silicon Valley no longer appeals to tech engineers and entrepreneurs, who now prefer the dynamic lifestyle offered by cities.

Last year, Richard Florida and Martin Kenney released the results of their updated study on IT centres in the US and the rest of the world.

They looked at where venture capital and start-up activity was concentrated, and found that in the US, traditional centres such as Silicon Valley and the Bay Area were progressively being eclipsed by cities that previously didn't receive much venture capital, such as San Francisco, Boston, Seattle and Washington, DC.

Overall, venture capital investment had dispersed geographically in urban areas all over the country.

Researchers noted that smaller urban centres with high quality of life (measured by walkability, density and good transit) such as Santa Monica and Palo Alto, in California, or Cambridge, Massachusetts, were also attracting an increasing amount of tech-related venture capital.

So did smaller college towns like Austin, Texas and Ann Arbor, Michigan

Around the world, a number of large cities are equally housing more and more companies in the IT sector.

London, Toronto, Berlin, Mumbai, Barcelona and Singapore were among the cities that were listed as emerging venture capital centres.

"Start-up activity at the global level is spiky, clustered, and concentrated in and around the world's largest and most economically important cities and metro areas," wrote Richard Florida in an article last year.

The reasons behind the move are simple; real estate in urban centres is often more affordable for small start-ups, Mr Florida noted.

But what these companies seem to be mostly after is the vibrancy of urban life and the proximity with like-minded individuals to foster collaboration, competition and the exchange of ideas.

The IT sector has also become a core driver of economic growth for cities. In another article, Mr Florida underlined the aggressive push of New York City to open itself to the tech industry, a move that allowed the city to bounce back from the 2009 financial crunch.

But the move of the IT sector to cities hasn't been pleasing everyone.

In recent months, a number of neighbourhood protests have been held in cities of the Bay Area against Google and other companies. Protesters say that by moving to city centres, companies and their highly-paid workers are artificially raising real estate prices, leading to rent increases and evictions.

In some instances, companies occupy entire city blocks without contributing to local businesses, as they offer many on-site perks to employees, such as free food, Some shops have had to close down, and some of these streets are near-deserted.

Companies have been defending themselves by creating community programs in order to give backó they'll do whatever it takes to stay in the city.

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Source: Business Daily (Kenya)

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