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Is Silicon Valley making a comeback?

Steve Henn Jul 1, 2011

Is Silicon Valley making a comeback?

Steve Henn Jul 1, 2011

Kai Ryssdal: We’re going to turn now from one valley with multi-million-dollar homes — that’d be here, the Roaring Fork Valley — to another. Far less picturesque, probably just as wealthy.

But a couple of years ago, when we started talking to Steve Henn about covering Silicon Valley for us, the place was out-of-sorts. There were vacant office buildings, unemployment was higher than the national average. Those multi-million-dollar homes in really nice neighborhoods were sitting unsold for months and weeks at a time.

Today, two years on, Silicon Valley’s getting its grove back. Here’s Steve.

Steve Henn: A few days ago, I drove out of Silicon Valley and over hills to the Pacific. I was headed to an investment conference at the Ritz Carlton at Half Moon Bay. The hotel and its two golf courses are perched on the cliffs. When it’s sunny here, it’s gorgeous. And it was sunny, but when I arrive, the crowd is inside.

Hundreds of entrepreneurs and investors are swarming dozens of little conference rooms, stacking up one 15-minute meeting after the next. If tech investing in the ’90s was a mindless orgy, this is more like thoughtful speed dating. And everyone’s pitching.

Montage of pitches

VPs from Microsoft, HP and emerging giants like VMware are shopping for little companies to buy. Young venture capitalists are hustling, searching for ideas, courting entrepreneurs.

And investment bankers are back too — on the hunt for companies to take public. Justin Patterson is an e-commerce analyst at Morgan Keegan, which organized the conference.

Justin Patterson: The honey that lures them — besides the gorgeous San Francisco weather — would be just the excitement around the tech market.

There are three simultaneous investment booms going on right now: in social media, mobile and in the cloud. So, is Silicon Valley back?

Patterson: One word: yes.

VCs have to fight to get in on the best deals. Bidding wars are breaking out for talent.

Chris Thornberg is the founder of Beacon Economics.

Chris Thornberg: You are clearly seeing the sort of high-tech, high-skilled labor force really enjoying what’s happening.

There are no lines out the door at Silicon Valley Ferrari — yet. But cute three-bedroom homes in Palo Alto are going for $1.6 million, and drawing crowds of interested 30-something techies.

Still, the good times aren’t being widely shared.

Thornberg: There is still suffering, no doubt about it. The unemployment rate in San Jose is still quite high. And those lower-tech jobs — retail jobs, construction jobs — those really haven’t bounced back at this point in time.

Facebook may go public for $100 billion next year, but it employs just 2,500 people. And start-ups here are intensely focused on keeping their own headcounts down. For many, the goal is to not hire.

Gary Swart is CEO of oDesk, an online outsourcing network. It’s a matchmaker that puts companies in touch with online contractors who write code, design websites, even do legal work.

Gary Swart: Yeah, we have 58 employees. We augment our staff with 200 full-time equivalent contractors that come to work for us every day from around the world.

Swart says launching a Silicon Valley start-up has never been easier. Investors are waiting on the sidelines. You can outsource your code to India and get up and running, fast and cheap. You don’t even need own powerful computers anymore — you can store your data in servers on the cloud.

Swart says oDesk is doubling in size every year and has almost $20 million in the bank. It also has four contractors for every one employee.

Swart: And I wouldn’t build a business any other way.

And that’s what may ultimately makes this tech boom different. If, in fact, it turns out to be a boom. Even here in Silicon Valley, it may well leave a lot of people behind.

In Silicon Valley, I’m Steve Henn for Marketplace.

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