Cities and regions all over the world aspire to be like Silicon Valley. That’s why dozens of governments have paid millions of dollars to consultants peddling a snake oil called the “top-down cluster.” Their prescriptions have supposedly been based on management theories espoused by Harvard management guru Michael Porter.
Many of these efforts have failed because they lacked the right ingredients. It isn’t the science parks, venture-capital pools or proximity to research universities, which these consultants have been prescribing, that create an innovation cluster. An open-minded and diverse population that readily shares information, encourages experimentation, accepts failure and dispenses with formality and hierarchy is what makes Silicon Valley the successful hub that it is. Perfect weather, proximity to mountains and the ocean as well as the myriad state-park hiking trails also help.
New York City is second to Silicon Valley in its diversity. While 52% of Silicon Valley’s startups from 1995 to 2005 were founded by immigrants, the figure was 44% for New York City startups. Its entrepreneurs are similar to their kin in Silicon Valley — they help each other and tolerate failure.Look at the regions that have had the most success in attracting startups. You will notice that they share some of Silicon Valley’s advantages. As I wrote for a Businessweek cover story, Boulder, Colo. has become one of the top destinations for Internet startups. Its people are as open-minded as the inhabitants of Silicon Valley; its mountains are even more breathtaking. In Boulder, you feel like you’re living in a Swiss village while hanging out in Boulder’s cafes and interacting with its friendly natives.
In South America, Chile’s capital Santiago now has a bustling startup community thanks to the Startup Chile initiative, which pays foreign entrepreneurs $40,000 to stay there for six months. You find that the foreigners who are bootstrapping their startups in Chile change the value system of the locals by teaching them how to network, learn from one another and embrace failure. It doesn’t hurt that Santiago possesses the weather and natural beauty of California.
Innovation is all about people. Innovation thrives when the population is diverse, accepting and willing to cooperate. Having a community that understands the odds of failure lowers the risk for people taking the leap into entrepreneurship. Any region that wants to thrive economically has to get these ingredients right.