Silicon Valley Losing Allure For Top Brains: Report

A looming foreign talent crunch has been pinpointed as a top factor that threatens to rob the Silicon Valley of its title as the world’s innovation center.

“There are clear warning signs suggesting Silicon Valley has entered a new phase of uncertainty and that our competitive standing is at risk,” says the 2010 Silicon Valley Index released on Thursday.

Although alarms are raised periodically about the Silicon Valley’s vitality, this is the gloomiest outlook ever painted by Silicon Valley Community Foundation and the Joint Venture: Silicon Valley Network which produce the yearly index and have been compiling and analyzing a variety of economic and social data relating to the Valley since 1995.

Apart from voicing doubts about the area’s continued ability to draw upon some of the world’s best brains, the report has highlighted other trends that are furrowing brows – the declining levels of venture capital, inattention from the federal government and California’s political dysfunction.

For a long time, the Silicon Valley has been used to attracting a premium crop of foreign students to its acclaimed universities, like at Stanford and Berkeley, and then expecting them to stay on as entrepreneurs, scientists and engineers.

But the report points to a 34 per cent drop in immigration over the last year, a jolt for the region where 60 per cent of the scientists and engineers are foreign-born.

The report juxtaposes the trend of fewer advanced degrees being awarded to overseas students – the exception being doctorates – with the aggressive efforts by other nations to develop technology centres of their own.

“With increasing global partnerships, Silicon Valley grows ever more dependent on foreign talent – particularly for filling science and engineering positions,” the report notes.

“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.”

Compounding the issue is the dwindling of resources to groom the local talent, with the state’s education budget cut down by 17 per cent while education costs have continued to rise.

“Even if we have the right immigration policies, we are not going to be able to survive on foreign ta-lent simply because people now have many other options, whether it is China, India, Singapore or Brazil,” says Dr Steven Levy, a California economist who helped draw up the report.

“We do have to put an emphasis on training our home-grown workforce and that is an issue which is a greater challenge but where we have greater leverage than counting on foreign talent,” he adds.

Silicon Valley has also suffered a setback in its traditional sources of capital to fund projects. Venture capital financing of start-ups sank 35 per cent from 2008 to 2009. The initial public offerings, through which private start-ups tap the stock market, have dropped to the lowest levels since the 1970s.

At the same time, federal funding for research and innovation projects in the area has tapered off, with the stimulus funds being channeled to the clean energy sector more than to the software or the semiconductor industry. A far cry from the days when the billions of dollars of federal investments in the defense and aerospace industry sparked off the Silicon Valley technology boom.

An added source of unhappiness is the California state government which has accumulated high levels of public debt and remains mired in a political gridlock rather than focus on winning the talent race by improving the state’s infrastructure and quality of life.

It is leading to a clamor for a rather drastic solution. Many Silicon Valley CEOs are backing a drive for a constitutional convention which will put up a revised system of governance for consideration by California voters in a ballot in November when elections for a new Governor and a new Senator will also be held.

Article written by Bhagyashree Garekar for The Straits Times