The next Silicon Valley: why Forbes’ new tech cities are wrong

Dateline: Kuala Lumpur, Malaysia

Being back here in Asia is a breath of fresh air. As much as I love traveling and seeing the exciting opportunities in Central and South America, there really is no place with as much hustle and as much promise as this part of the world.

Which is why – while I can’t say I was surprised – I was disappointed to see Forbes magazine’s list of cities possibly poised to become “the next Silicon Valley”.

For years, I’ve been telling you that the future of business is NOT in the west. The idea behind this is often referred to as “the death of the west”.

There are any number of historical examples to support this, such as the rice vs. grain theory, as well as more modern and relevant quantitative examples like poor western test scores.

Heck, my friend Reid Kirchenbauer reminds me that the United States has slouched to 49th on the best countries to do business list, according to the bureaucrats at the World Bank. Not good.

In fact, I’ve long suggested that there will come a time when a big Silicon Valley player will announce they’ve had a tuchus-full of high taxes in the United States and especially in California.

What with all of the regulations in the People’s Republic of California, it’s amazing ANY work gets done there. And given that rents in many parts of San Francisco average $3,000 or more per month, it’s amazing even moderately well-paid staffers have any money left to grab beers at their favorite pretentious watering hole on Friday night.

Up until now, Silicon Valley companies have stayed put in California’s Bay Area for a few reasons:

• The talent is there. While New York’s “Silicon Alley” and Austin have been growing as tech hubs, tech companies want to go where the talent is. If you want to collaborate with or sell to Google, it’s better to be near Google.
• The money is there. What would a tech startup be without venture capital? Again, VC money is becoming more prominent in other US cities, but the biggest players with $10 million to hand out to a guy with a revenue-less app are still in California.
• They’re not innovative. Yep, I’m throwing down the gauntlet. It’s true; for as forward-thinking as the tech community loves to think they are, most companies are merely following the herd. Tech companies spring up in Silicon Valley for the same reason many of my high school classmates live in Avon Lake, Ohio; that’s all they’ve ever known.

All of those reasons can easily be changed. In fact, much of the world’s “new money” is outside of the western world entirely. The challenge is that a lot of the east’s new money was made in unsexy ways and those holding on to it aren’t as likely to invest in a hook-up app just because it’s cool.

Then again, even oil-rich Dubai practically lost their shirt investing in Las Vegas, so anything is possible.

In short, I strongly believe that there will be a new, very prominent Silicon Valley in the very near future. And while the western media may ignore its very existence as is their jingoistic nature, that does not mean it won’t exist.

I can’t believe it happened already. How tech companies got a bunch of young kids itching to get laid to move to a temperate climate that requires long pants nine months a year, and $80 to park your car twelve months a year, I don’t know.

So when Forbes’ Nav Athwal suggested the five new cities to outpace Silicon Valley are all in the United States, I yawned.

Just for fun, Nav’s five cities are:

• Austin, Texas
• Dallas, Texas
• Seattle, Washington
• Chicago, Illinois
• Miami, Florida

Most of these cities are relatively familiar in tech circles. Dell Computer was founded in Austin (alright, Round Rock) ages ago. And thanks to the likes of Microsoft, Amazon, and others, Seattle was a popular tech hub even before that.

What the article totally neglects to consider is that tech is moving beyond US shores for two reasons.

First of all, Barack Obama and the bankrupt US government are desperate to get more tax revenue. The tax plans that allow companies like Google and Facebook to book revenues overseas and park profits in Caribbean tax havens are coming to an end.

Eventually, the IRS and other tax authorities will figure out a way to tax based on what happens in a particular country. I’m not saying I like it, but I believe the days of selling in the US, UK, and EU without paying the piper are coming to a close, and it won’t be pretty.

It’s already happening, with Ireland shuttering its “Double Irish Dutch Sandwich” tax plan that was so attractive to tech firms; as seen here:

Second of all, the world economy is moving away from US shores, and that includes tech. While many products consumed overseas are made by American companies, this is decreasingly the case.

When I travel around, I see evidence of Chinese dominance, as well as local companies’ increasing role in tech. Two years ago, for example, I predicted in an interview that Chinese phone maker Huawei would be the next big thing in the mobile industry. Today, they are the third largest phone maker behind only Apple and Samsung.

One of the most exciting online companies in my opinion is Foodpanda, headquartered in Germany and grown in Singapore and Asia.

There are thousands of start-ups, some of which will catch steam, based in Asian cities like Ho Chi Minh City, Bangkok, and Singapore, as well as South American cities like Santiago.

Many of these start-ups don’t even care about the US market. In fact, when I interviewed entrepreneurs in Chile’s innovative Start-up Chile program, most of them were focused on the Spanish-speaking market exclusively.

Which is why I found the Forbes article’s choice of Miami as a start-up hot spot interesting. The author claims that Miami’s proximity to growing South American markets made it a top contender…

…because start-ups couldn’t just have an office in, you know, the ACTUAL growing South American markets.

Such is the provincial wisdom that led US companies to totally miss the boat on China. As opposed to American brands owning the internet, China has its own set up start-ups, led by mega-brands like Alibaba, that own the market. Internet experts suggest it would be impossible for US brands to catch up at this point.

So where is the next Silicon Valley?

While there is no area with as high a concentration of companies as California’s Bay Area, there are already plenty of areas around the world from the aforementioned Singapore to Hong Kong to Shanghai to Dublin to Prague to Santiago to – especially – Tel Aviv.

One commentator even suggested Manila could take a bite out of Silicon Valley. Another Forbes contributor – one more up our alley – suggested even Ukraine could rebound as a tech center. Heaven knows that part of the world has the skills.

It wouldn’t surprise me to see a move in that direction. Warmer weather (and friendlier, warmer dating partners) are already attracting many expat entrepreneurs to Asia and elsewhere. Again, many of these start-ups could care less about targeting the west. They merely target the people in the emerging countries they live in.

And while the United States and parts of Europe want to eliminate “tax loopholes” on greedy corporations that sell within their borders, at least 39 countries around the world are lowering taxes on businesses that will become tax exiles.

When you consider that Chile is just California flipped across the equator, you wonder why more companies aren’t looking to do business there. In an age of corporate inversions, I believe you’ll see more of that. It’s just a matter of the trigger that encourages a mass migration.