Insight - What makes the San Francisco Bay Area ecosystem what it is?

By Frances van Ruth, Trade and Investment Commissioner, Austrade San Francisco

The United States is one of the world’s most competitive economies—the World Economic Forum (WEF) ranks it second, behind only Switzerland. According to the WEF, this competitiveness stems from a unique combination of:

  • exceptional innovation capacity driven by collaboration between firms and universities, availability of talent and company, and government spending on R&D
  • large market size as the world’s biggest economy
  • business sophistication including value chain breadth, extent of marketing and control of international distribution
  • well-developed financial markets.

These factors are found across the US, but they are present in the San Francisco Bay Area in spades and are what make this region the global hub of innovation and technology.

As Trade and Investment Commissioner, I’m lucky to meet with lots of Australian companies, founders and future founders when they come through San Francisco. There are four key ‘takeaways’ I share with them about the market.

Scale

Whichever way you look at it, the US market is big. At close to US$19 trillion, the US economy is more than 15 times larger than the Australian economy. Its population (323 million) is more than 13 times larger than Australia’s. California alone has the world’s sixth largest economy (Australia ranks 13th) and a larger population than Australia.

In 2017, around US$84 billion in venture capital was deployed in the US across nearly 8,100 deals, 44 per cent of that in the San Francisco Bay Area. More than 2,300 companies received venture investment for the first time. The collective value of California technology companies is in excess of US$2 trillion and these firms account for approximately six per cent of all corporate America’s profits.

When compared to Australia, this scale simply equates to more—more companies, more talented people, more capital, more competition, more potential customers and therefore more opportunity. This scale makes Australian companies that come here small fish in a big pond, or small fish in multiple big ponds, with their own distinct characteristics. It pays to think of the US not as one homogenous market, but rather to sub-divide it into regional markets and treat these markets differently. Be sure to contexualise your company and your offering in terms of the US market, not the Australian.

Pace

When many Australians think of California, a laidback surf culture is the first thing that comes to mind. San Francisco often elicits images of hippies and the counterculture and while both have played a role in shaping the San Francisco of today—an open, liberal, diverse city where jeans and t-shirts are more common in a business meeting than shirts and ties—Australians would be mistaken to equate that with a slow pace of business.

In the Bay Area, companies ‘pivot’ and ‘fail fast’—pick your favourite buzz term. Before you come, do your homework, know your competitors, know your unique selling point and come ready to work hard. Follow up promptly, push (politely) and always look to move the conversation to the next stage.

Proximity

Governments, businesses, universities and industry organisations from around the world come to Silicon Valley and the Bay Area looking to understand (and hoping to replicate) the secret sauce that makes this place what it is. The answer is it’s not really a secret and it didn’t happen overnight—academics have long extolled the compounding economic benefits of clusters.

Over more than 50 years, the combination of the factors listed below has resulted in the innovation hotspot we have today, home to over 60 unicorns (companies with a valuation in excess of US$1 billion) from Airbnb, to Pinterest, Stripe, Dropbox, Palantir, Lyft and thousands of other fast-growing startups.

  • World-leading research universities including the University of California Berkeley and Stanford
  • National research infrastructure such as the Lawrence Livermore National Laboratory, NASA Ames Research Center, and SRI out of Stanford
  • Large multinationals across diverse industries including Lockheed Martin, Cisco, Chevron, HP, Visa and many more
  • Capital – home to nine of the top 10 VC firms in the world.

There is a concentration of talent, capital and knowledge in the Bay Area that fuels fast business growth and means you’re never quite sure who you’re getting in a lift (or Lyft) with, or standing in line behind when buying coffee (if you’re Aussie, go to Bluestone Lane for your flat white) or attending a conference with. Proximity creates a virtuous circle that opens doors, leads to learning and drives innovation.

Impact

The final point I like to flag with visiting Australians relates not to the Bay Area itself, but to the impact it has globally. Whether it’s Apple, Facebook, Twitter, Verily, Salesforce, Tesla or Google, Bay Area technology companies have changed the way we communicate, do business and live our lives around the world.

People from all over the world are drawn to the Bay Area by the opportunity to work on ‘wicked problems’ and make a meaningful contribution to a better future (I’d be an ingénue if I didn’t also acknowledge some are drawn by the opportunity to make a lot of money). This all adds up to an ecosystem rich in talent, ideas, capital and enthusiasm.

If you’d like to be a part of this ecosystem, consider applying for a three-month placement in the San Francisco Landing Pad. You’ll receive introductions to mentor networks, access to a curated community that supports Australian entrepreneurs such as the Aussie Founders Network, and business advice and programming designed to help grow your business.

Visit the United States market profile to learn more about the San Francisco Bay Area, the US market more generally and how Austrade can help.