Living in six cities in three countries on two continents in my 17 years at the Wall Street Journal, I often heard locals claim they were going to render Silicon Valley obsolete. New Yorkers were developing a Silicon Alley. Chicagoans planned a Silicon Prairie. Scots promised a Silicon Glen. But Silicon Valley barely noticed.
Now, an announcement by one of the most prominent venture firms suggests we may finally have reached peak Silicon Valley and, more broadly, suggests we are headed toward a more decentralized model for innovation.
The announcement from Andreessen Horowitz is that it is moving its headquarters from the very heart of Silicon Valley venture capital, on Sand Hill Road in Menlo Park, to "the cloud."
The firm says the past 2 1/2 years of operating remotely because of COVID have shown that startups can innovate and operate very effectively without having everyone in the same place, which has reduced the need for aspiring entrepreneurs around the world to pack up and move to the Bay Area. If the firms don't need to be crammed into Silicon Valley, then the VCs don't, either.
Now, I was born at night, but not last night. There is some obvious PR behind the announcement. Andreessen Horowitz is one of the biggest backers of what it calls Web3 (known to others as the Metaverse), and it can't very well be evangelizing for a decentralized, largely disembodied universe for interactions if it makes everyone show up in a single office every day.
Still, the shift to a virtual model for the firm seems justified. The magic of Silicon Valley has always come from its having achieved critical mass -- of entrepreneurs, of money and of engineering talent. With Stanford right there and Cal just across the bay, the talent was always abundant. Then, Hewlett-Packard and Intel hit it big in the '50s and '60s and started a modern-day gold rush of entrepreneurs who thought they could do just as well. Money, of course, followed the successful entrepreneurs.
But with the shift to remote work, critical mass in a physical location just doesn't matter so much any more. Bloomberg reports that office vacancy rates in San Francisco were 18% in the second quarter and 15% in the larger Silicon Valley area, compared with 11% in Manhattan. Even Ben Horowitz, one of the eponymous cofounders of the firm that calls itself a16z, has moved to Las Vegas.
That shift suggests that insurers, too, can change how they approach collaboration, in general, and innovation, in particular. Rather than thinking in terms of localized talent and collaboration, insurers can pull in people from across the organization, without the need for them to relocate, or even get on a plane. It is becoming easier, too, to incorporate people from partners, swapping them in and out as needed. With Silicon Valley's state-of-the-art practitioners heading toward a distributed approach to innovation, the rest of us can watch, learn and copy.
To be clear: I'm not predicting the demise of Silicon Valley. Bloomberg says firms based in Silicon Valley received $52.3 billion in venture capital in the first half, or 36% of the nation's total, while Austin, Texas, seen as a rising star, got only 2.6%. (New York was second behind Silicon Valley, with 27%, while Los Angeles was in third, with 17%). And many will still value the serendipity factor--you never know who you'll see at Il Fornaio for breakfast, Buck's for lunch or the Rosemont bar for late-night drinking sessions.
Maybe I'm just hoping that we've reached peak Silicon Valley so I can stop watching the Zillow estimate on the house we bought in Atherton in 1996 and sold in 2002, which has climbed (soared?) steadily for years and currently stands at $7.9 million. If only....
Cheers,
Paul