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How to create the next Silicon Valley

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How do you create the next Silicon Valley?

Don't focus on finding the venture capitalists on Sand Hill Road -- instead, look to build college campuses like Stanford University or the University of California, Berkeley. So says a new study from the Kaufman Foundation which looked at new businesses in 356 metro areas. 

"Their results -- the fact that you have lots of educated people in the places where there are a lot of start ups -- is absolutely right," says Steve Kaplan, a professor of entrepreneurship and finance at the University of Chicago’s Booth School of Business. Kaplan notes the research doesn't prove graduates will fuel more start-ups, only that the two tend to show up in the same cities.

"You also need accelerators, co-working space, active angel investors, organized early stage venture capitalists," says Brad Harrison, a managing partner with Scout Ventures, who adds that new graduates alone can't create a tech hub. "Especially if you take unseasoned first, time entrepreneurs. If they've never worked before, it's a learning curve in just having them understand what it takes to build the company."

Kaplan says that requires other local ingredients: a government that supports business via regulations and taxes, and successful previous start-ups, like Google, Microsoft, and Groupon, to lead by example and create an entrepreneurial mindset and culture, and also, to provide one last critical component -- money. 

About the author

Sally Herships is a regular contributor to Marketplace.

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