Houston Voices

Siliconned: Leaving Silicon Valley for universities

Tech startups are leaving Silicon Valley in droves — and some are finding benefits in heading back to school. Miguel Tovar/University of Houston

Silicon Valley has been a tech startup paradise for decades. It has been described as the modern day Florence in the Renaissance. Tech gods from Apple and Google to Facebook and Twitter were born here. We can credit Silicon Valley as the birthplace for such world-changing innovations like smartphones, microprocessor chips, Tesla automation, and WIFI-enabled teapots.

Okay, so maybe that last one isn't changing the world, but it was created in the Valley and it's changed my life, for whatever that's worth. If Silicon Valley were a country, it would have the 19th-biggest economy on the planet. There's no doubt it is an engineer's dream. A techie's haven. A capitalist's utopia. A beacon of the modern world.

Or at least, it used to be.

Now leaving the Bay Area

There is an exodus in Silicon Valley. It's been happening for about three years. For instance, according to a 2018 poll conducted by the Bay Area Council, 46 percent of survey takers admit they plan to leave the Bay Area in the next year. Couple that with the fact that Silicon Valley investors have allocated 66 percent of their funds into startups outside of Silicon Valley, compared with 50 percent just six years ago, and you have a recipe for a great exodus to other markets around the country.

Now, just for kicks, add to all of this that the Kauffman Foundation's research has pegged Miami-Fort Lauderdale as the number one city in America for startup activity. Where does Silicon Valley's Bay Area, formerly the world's preeminent hub for tech startups, rank? Fourteenth. How the mighty have fallen.

So, to what exactly can this mass egress be attributed?

Insufficient funds

The biggest reason is cost.

The cost of living in the Bay Area is one of the steepest on the planet. Startups in the Valley pay four times what they would in any other city in the country. In fact, just last year the California Association of Realtors reported that a typical family in San Francisco has to make over $300,000 a year in order to afford a median-priced house tagged at just over a million dollars. That includes a 20 percent down payment and an $8,000 monthly payment. Because most of the startups in Silicon Valley are in their infancies, the engineers, programmers, and non-technical employees don't get compensated enough to afford such a living. As a result, they are leaving the Bay Area in droves for places where the cost of living is manageable.

One location that tech startup entrepreneurs are flocking to is the university. Universities are also retaining tech wunderkinds on campus to blossom their startups, rather than seeing them leave for the microprocessor motherland known as Silicon Valley.

Now entering university life

One of the biggest reasons universities have become hotbeds for tech startups is that campuses provide a means for people with multidisciplinary backgrounds to intermingle within the same space. A chemical engineering student with a great idea might meet an MBA during a startup launch party. Together they can build and market the second iteration of "Secret Stuff" from Space Jam, or whatever that student has in mind.

The point is that universities position aspiring entrepreneurs to network with the right people for building their company from the ground up. Even the Innovation Leadership Forum attests that innovation is born when different ways of thinking clash. That is precisely what happens on campuses every day.

Furthermore, college students also have more room to take risks. Most aspiring entrepreneurs in college between 18 and 25 are not married, do not have kids, mortgages, or any other major financial responsibilities. This allows them to have the luxury of leeway when it comes to experimenting and trial and error.

The ecosystem of innovation

In essence, academic incubators are courting tech entrepreneurs because universities offer an ecosystem designed to support and grow startups from conception to commercialization. This ecosystem includes a space where researchers, faculty, and students of all disciplines interact and form working relationships. In many cases, it also includes university owned equipment and laboratories for use by startup researchers.

There is, of course, incentive for universities to concentrate so many resources to building incubators and luring startup entrepreneurs. There is an inherent sense of responsibility that universities have to create an academic climate that encourages students to explore new ideas. A sense of responsibility that encourages them to take more risks; to be fearless in their quest to use their intellect to enrich lives; to dream.

Moreover, university incubators also position schools as progressive institutions. Such positioning attracts elite researchers and enhances a university's reputation. Further, these incubators forge a bridge that links industry and academia in a way that Silicon Valley does not. That's because with academic incubators, startups are a stone's throw away from a place teeming with researchers, scientists, hungry students, and aspiring entrepreneurs: the university campus.

Consequently, it is no wonder that tech startups are leaving Silicon Valley for universities. It's also no surprise that students who have graduated are staying with their university's incubators to develop their companies. There, they have a place that cultivates innovation, encourages risk-taking, and is set up specifically to help them bring their tech to the world. In short, the university has become a hub set up to be conducive to thriving tech startups. And tech entrepreneurs have noticed.

------

This article originally appeared on the University of Houston's The Big Idea.

Rene Cantu is the writer and editor at UH Division of Research.

Trending News

Building Houston

 
 

Greentown Houston is headed for the Innovation District, which is being developed in Midtown. Photo via Getty Images

After announcing its plans to expand to Houston in June, Boston-based Greentown Labs has selected its site for its cleantech startup and tech incubator.

Houston Mayor Sylvester Turner and the Greater Houston Partnership announced that Greentown Houston will be opening in the Innovation District, being developed by Rice Management Co. and home to The Ion. The site is located at 4200 San Jacinto St., which was Houston's last remaining Fiesta grocery story before it closed in July.

The facility is expected to open this coming spring and will feature 40,000 square feet of prototyping lab, office, and community space that can house about 50 startups, totaling 200 to 300 employees.

"We are thrilled to announce the selection of Greentown Labs' inaugural location in partnership with RMC, the City of Houston, the Partnership, and leading global energy and climate impact-focused companies," says Emily Reichert, CEO of Greentown Labs, in a press release. "In order to meet the urgent challenge of climate change, we must engage the talent and assets of major ecosystems around the country. We look forward to catalyzing the Houston ecosystem's support for climatetech startups as we work together toward a sustainable future for all."

Emily Reichert is the CEO of Greentown Labs. Photo courtesy of Greentown Labs

Greentown Labs launched in 2011 as community of climatetech and cleantech innovators bringing together startups, corporates, investors, policymakers, and more to focus on scaling climate solutions. Greentown Labs' first location is 100,000 square feet and located just outside of Boston in Somerville, Massachusetts. Currently, it's home to more than 100 startups and has supported more than 280 startups since the incubator's founding. According to the release, these startups have created more than 6,500 jobs and raised over $850 million in funding

"We are so pleased that Greentown Houston will locate in the heart of the Innovation District, where they will seamlessly integrate into the region's robust energy innovation ecosystem of major corporate energy R&D centers, corporate venture arms, VC-backed energy startups, and other startup development organizations supporting energy technology," says Susan Davenport, chief economic development officer at the Greater Houston Partnership, in the release. "Houston truly is the hub of the global energy industry, and Greentown Houston will ensure we continue to attract the next generation of energy leaders who will create and scale innovations that will change the world."

Greentown Houston, which previously announced several founding partners in June, has just named new partners, including: RMC, Microsoft, Saint-Gobain, and Direct Energy. According to the release, Greentown Houston is also looking for Grand Opening Partners. Naturgy and and FCC Environmental Services (FCC) are the first to join on as a grand opening partners, and startups and prospective partners can reach out for more information via this form.

Reichert previously told InnovationMap that it was looking for an existing industrial-type building that could be retrofitted to meet the needs of industrial startups that need lab space. She also said that this approach is very similar to how they opened their first location.

Rice Management Company is developing the Innovation District in the center of Houston. Screenshot via ionhouston.com

The new location will be in the 16-acre Innovation District that's being developed by RMC, which will be anchored by The Ion, a 270,000-square-foot hub that is being renovated from the former Sears building.

"What we love about Greentown Labs as much as its commitment to helping Houston become a leader in energy transition and climate change action is its proven track record of job creation through the support of local visionaries and entrepreneurs," says Ryan LeVasseur, managing director of Direct Real Estate at RMC, in the release. "Greentown Houston, like The Ion, is a great catalyst for growing the Innovation District and expanding economic opportunities for all Houstonians. We're thrilled Greentown Labs selected Houston for its first expansion and are honored it will be such a big part of the Innovation District moving forward."

Acquiring the new Greentown location is a big win for the mayor, who released the city's Climate Action Plan earlier this year. The plan lays out a goal to make Houston carbon neutral by 2050.

"We are proud to welcome Greentown Labs to Houston, and we are excited about the new possibilities this expansion will bring to our City's growing innovation ecosystem," says Turner in the release. "Organizations and partners like Greentown Labs will play a vital role in helping our City meet the goals outlined in the Climate Action Plan and will put us on the right track for becoming a leader in the global energy transition. The City of Houston looks forward to witnessing the innovation, growth, and prosperity Greentown Labs will bring to the Energy Capital of the World."

Greentown Labs will host a celebratory networking event on September 24 at 4 p.m. Registration for the EnergyBar is open here.

Trending News