What Makes Silicon Valley Successful? Not What You Think

A white paper released by the entrepreneurship organization Kauffman Foundation today says it is the presence of existing companies, not a network of local universities generating talent, that most directly spurs startup activity.

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By Catherine Clifford • Sep 9, 2013 Originally published Sep 9, 2013

Opinions expressed by Entrepreneur contributors are their own.

When you think of what spawned the success of tech hubs like Silicon Valley, often the first thought is talent – specifically, talent groomed and nurtured by a strong local higher education system.

One research paper, released today, however, says that the leading indicator of an emerging entrepreneurial hub is the population of existing companies in that region.

The paper, released today by the Kansas City-based small-business research organization The Ewing Marion Kauffman Foundation, says that a high density of technology startups is most directly sourced back to the number of existing companies in that region. Universities help, to be sure, but they are not the leading indicator.

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The analysis also revealed some interesting findings about age. Turns out that young visionaries such as Mark Zuckerberg and David Karp are the exception; the peak age for entrepreneurs is between 35 and 45, according to the paper, which was authored by Dane Stangler, director of research and policy at Kauffman.

"Entrepreneurs come from somewhere – this seems obvious," Stangler states. But the latest research "runs against the prevailing stereotype that entrepreneurs are, or should be, recent college grads or college dropouts. That "somewhere' usually is a previous job in a big company or at an institution, such as a university, which helps explain the age distribution of entrepreneurs," the paper says.

Hot emerging metro areas for entrepreneurial activity such as Kansas City, Mo., Seattle, Portland, Ore., and Boise, Idaho, are not overnight sensations. Rather, they have been developing their culture for years, the paper found. A new, local program or incubator designed to develop entrepreneurship is not going to turn away any entrepreneurs, but it won't flip a community suddenly, either. Local entrepreneurship hubs tend to be the byproduct of a developing community, not the other way around.

Related: The 5 Rules for Silicon Valley Success That Can Work Anywhere

"What Kansas City's growing tech density demonstrates is that the metropolitan area had a strongly growing technology sector prior to recent milestones, such as the advent of the high-speed Internet service potential of Google Fiber," says Stangler, in a statement. Ranked by startup density, the top 10 cities in 2010 were among the top 20 in 1990.

Here is a look at the top 20 metropolitan regions, ranked by the density of high-tech startups, in both 2010 and 1990.

Related: Spreading the Love of Silicon Valley (Infographic)

Top Startup Cities 2010

  1. San Jose, Sunnyvale, Santa Clara, Calif.
  2. San Francisco, San Mateo, Redwood City, Calif.
  3. Cambridge, Newton, Framingham, Mass.
  4. Denver, Aurora, Broomfield, Colo.
  5. Seattle, Bellevue, Everett, Wash.
  6. Washington D.C., Arlington-Alexandria, Va.
  7. Salt Lake City, Utah
  8. Raleigh, Cary, N.C.
  9. Bethesda, Frederick, Rockville, Md.
  10. Austin, Round Rock, San Marcos, Texas
  11. Portland, Vancouver, Beaverton, Or.-Wash.
  12. Wilmington, Del.
  13. Phoenix, Mesa, Glendale, Ariz.
  14. Dallas, Plano, Irving, Texas
  15. Santa Ana, Anaheim, Irvine, Calif.
  16. Fort Lauderdale, Pompano Beach, Deerfield, Fla.
  17. Atlanta, Sandy Springs, Marietta, Ga.
  18. Kansas City, Mo and Kan.
  19. New Orleans, Metairie, Kenner, La.
  20. San Diego, Carlsbad, San Marcos, Calif.

Top Startup Cities 1990

  1. San Jose, Sunnyvale, Santa Clara, Calif.
  2. Bethesda, Frederick, Rockville, Md.
  3. Austin, Round Rock, San Marcos, Texas
  4. San Francisco, San Mateo, Redwood City, Calif.
  5. Dallas, Plano, Irving, Texas
  6. Cambridge, Newton, Framingham, Mass.
  7. Houston, Sugar Land, Baytown, Texas
  8. Santa Ana, Anaheim, Irvine, Calif.
  9. Denver, Aurora, Broomfield, Colo.
  10. Washington D.C., Arlington-Alexandria, Va.
  11. Raleigh, Cary, N.C.
  12. Seattle, Bellevue, Everett, Wash.
  13. Orlando, Kissimmee, Sanford, Fla.
  14. Salt Lake City, Utah
  15. San Diego, Carlsbad, San Marcos, Calif.
  16. Warren, Troy, Farmington Hills, Mich.
  17. Oakland, Fremont, Hayward, Calif.
  18. Fort Lauderdale, Pompano Beach, Deerfield Beach, Fla.
  19. Minneapolis, St. Paul, Minn. and Bloomington, Wis.
  20. Atlanta, Sandy Springs, Marietta, Ga.
Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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