2010 News Releases

Silicon Valley faces tough climb back from recession

2011 Silicon Valley Index cover San Jose and Mountain View, Calif. | February 11, 2010 – The economic recession has stalled Silicon Valley’s vibrant innovation economy and left its global competitive standing at risk as never before, according to the 2010 Silicon Valley Index released today by Joint Venture: Silicon Valley Network and Silicon Valley Community Foundation.

The comprehensive yearly study on the economic strength and overall health of Silicon Valley reveals that rapid economic growth in other countries, coupled with California’s legislative gridlock, is draining the lifeblood of funding and foreign talent from Silicon Valley, leaving recovery in a “new phase of uncertainty.”

“Silicon Valley’s innovation engine has driven the region’s prosperity for 60 years, but at the moment we’re stalled,” said Russell Hancock, CEO of Joint Venture. “What’s hard to say is whether we’re stuck in neutral, which has happened before, or whether it’s time now for a complete overhaul.”

“This year’s Special Analysis is a call to action for all of us,” said Emmett D. Carson, Ph.D., CEO and president of Silicon Valley Community Foundation. “On the heels of the worst economic year since the Great Depression, our region has entered a new era of uncertainty in which our ability to attract top talent, fund innovation and preserve a decent quality of life is no longer guaranteed.”

The 76-page 2010 Index reports the latest data and trends in economic development, workforce, housing, education, public health, land use, environment, governance, arts and culture and other sectors throughout Santa Clara and San Mateo Counties and portions of Alameda and Santa Cruz Counties. An accompanying Special Analysis section of the report each year takes a closer look at a particularly significant topic.

The Index is published in conjunction with the annual “State of the Valley” conference, a town hall-style gathering of regional leaders, elected officials and citizens in a daylong discussion of Silicon Valley’s economic opportunities, challenges and future. Joint Venture presents the conference with the Community Foundation as lead sponsor. The 2010 conference takes place tomorrow, February 12, at the McEnery San Jose Convention Center.

Highlights of the 2010 Index and Special Analysis include:

  • Foreign Talent – With increasing global partnerships, Silicon Valley grows ever more dependent on foreign talent – particularly for filling science and engineering positions. However, the actions of our nation in the wake of 9/11 and the rise of other global regions have made Silicon Valley less accessible and less attractive than it once was. Inflows from China and India continue to rise, as does investment and collaboration between the Valley and those two nations, but China and India are both experiencing rapid economic growth. As they do, opportunities in those countries will slow the flow of talent here.
  • Investment Capital – Silicon Valley’s traditional ways of funding innovation – through locally-raised venture capital and public offerings – can no longer be taken as a given. Major structural shifts are underway in the funding community, and the federal government has re-emerged as the major investor in innovation and basic research. However, Silicon Valley is not attracting significant shares of federal funding, and has not for some time.
  • Venture Capital – Investment is shifting away from software and semiconductors and into biotechnology, energy, medical devices, and media. The level of investment continues to decline, and venture capitalists generally have not realized significant returns for the past decade.
  • California Government – Silicon Valley is “slammed” by forces beyond its control, most notably the “malaise” in our state government. California’s budget crisis and the political dysfunction in Sacramento has direct and debilitating effects on the region’s ability to prepare the workforce, provide crucial infrastructure, maintain quality of life, and keep pace in the talent race with other regions.
  • Higher Education – U.S. and California investment in higher education is declining at a time when talent becomes still more important to Silicon Valley.
  • Jobs – Between November 2008 and November 2009, employment in Santa Clara and San Mateo Counties dropped 6.1 percent, compared to 3.8 percent nationally. Silicon Valley lost 90,000 jobs between the second quarter of 2008 and 2009, bringing total employment down to 2005 levels. The “green” economy accounted for 12,000 jobs in the region.
  • Housing – Residential foreclosure activity dropped by 39 percent in 2009 yet in some cities more than a third of sales are foreclosures. Housing affordability for first-time homebuyers is improving. New affordable housing units in the region doubled from 2008 to 2009. Average rents declined six percent from 2008, the first drop in rents since 2005.
  • Commercial Real Estate – Office vacancy rates are at an all-time high since 1998 and were up 33 percent in 2009 over 2008.
  • Transit – Silicon Valley continues to expand transit-oriented development. Newly approved housing averaged more than 20 units per acre for the fifth consecutive year. More than 60 percent of new residential construction is within walking distance of the region’s transit infrastructure.
  • Fuel Consumption – Silicon Valley residents consumed roughly 50 gallons of fuel less per person than the rest of California in 2008, a reversal from 2000. Since 2002, vehicle miles traveled has decreased 14 percent while gas prices have increased 91 percent.

“Clearly, this is no time for complacency,” notes the study. “While our region has enjoyed many advantages in the past, success in the future demands that we think beyond our prevailing assumptions, organize differently, draw upon still more ingenuity from our people, and forge new collaborations in order to compete globally. Our vulnerabilities don’t mean Silicon Valley’s best days are behind it. But they do suggest we’re a region at risk.”

Published annually since 1995, the Silicon Valley Index findings are reported in five major sections: People (talent flows, diversity); Economy (innovation, employment, income); Society (preparing for economic success, early education, arts and culture, health, safety); Place (environment, land use, housing, commercial space); and Governance (civic engagement, revenue).

Joint Venture added the Community Foundation as its partner and lead sponsor on the Index in 2008. The 2010 Silicon Valley Index and Special Analysis may be downloaded from the Joint Venture website at www.jointventure.org and the Community Foundation website at www.siliconvalleycf.org.

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About Joint Venture: Silicon Valley Network

Established in 1993, Joint Venture provides analysis and action on issues affecting the Silicon Valley economy and quality of life. The organization brings together established and emerging leaders—from business, government, academia, labor and the broader community—to spotlight issues, launch projects and work toward innovative solutions. For more information, visit www.jointventure.org.

About Silicon Valley Community Foundation

Silicon Valley Community Foundation is a catalyst and leader for innovative solutions to our region’s most challenging problems. Serving all of San Mateo and Santa Clara counties, the community foundation has more than $2 billion in assets under management and 1,500 philanthropic funds. The community foundation provides grants through donor advised and corporate funds in addition to its own endowment funds. The community foundation serves as a regional center for philanthropy, providing donors simple and effective ways to give locally and around the world. Find out more at www.siliconvalleycf.org.

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