Posted on February 13, 2010

Silicon Valley Challenged by State Budget Woes, Global Competition, Report Finds

Rapid economic growth in other countries and California's legislative gridlock are draining the lifeblood of funding and foreign talent from Silicon Valley, stalling the region's vibrant innovation economy and leaving its global competitive standing at risk, a new report from the Silicon Valley Community Foundation and Joint Venture: Silicon Valley Network finds.

The 2010 Silicon Valley Index (76 pages, PDF) found that the region's traditional way of funding innovation — through locally raised venture capital and public offerings — can no longer be taken for granted. And while the federal government has re-emerged as a major investor in innovation and basic research, the valley is not attracting its share of federal funding and hasn't for some time. One sign of the economic sluggishness in the region is office vacancy rates, which were up 33 percent in 2009.

The region's problems are compounded by rapidly growing economies in China and India, which threaten to slow the flow of talent to the region, and declining investment in higher education at both the state and national levels. Indeed, according to the report, the state's budget crisis has directly impacted the region's ability to prepare its workforce, provide crucial infrastructure, maintain quality of life, and keep pace in the "talent race" with other regions.

"This year's special analysis is a call to action for all of us," said Silicon Valley Community Foundation president and CEO Emmett D. Carson. "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."