Figures released for February 2015 by the state Employment Development Department revealed jobs in Santa Clara County alone growing at an annual rate of 5.4 percent, or 53,100 jobs compared to the previous February. That’s the highest number since January 2001, when the county added jobs at the same clip. And in the combined area of San Mateo and San Francisco counties, the total number of new jobs from February 2014 to February 2015 grew by 45,800, or 4.6 percent. Compared to the same period, the statewide annual growth rate in jobs was 3.1 percent, or 476,400 new jobs, according to the EDD. TO MARKET, TO MARKET With the city and county of San Francisco alone gaining 18,499 new jobs in calendar 2014, a total of 76,450 new positions were created in the Bay Area’s “Market Street to Market Street corridor.” That term refers to two downtown thoroughfares by the name Market Street coursing through the centers of San Jose and San Francisco, which has become the economic heart of the nine-county Bay Area, according to Stephen Levy, director and senior economist of the Center for Continuing Study of the California Economy, a Palo Altobased private research organization. “I’m not sure if the mayors are competitive with each other, but San Francisco and Silicon Valley have really developed complementary economies,” Levy said, referring to Mayor Sam Liccardo of San Jose and Mayor Ed Lee of San Francisco. “The combination has made the Bay Area the clear economic leader in California. Silicon Valley and San Francisco are adding jobs at twice the rate of the nation as a whole. It’s the biggest gain since 2000, but this time, it’s based on the success of companies that have real customers and real products.” Take the example of SmartStory Technologies, a San Mateo-based company that automates the delivery of short, customer-focused informational videos for banks, pharmacies, hospitals and consumer electronics retailers and other organizations. Though less than 3 years old, SmartStory has already raised more than $5 million from private investors and last summer launched its enterprise platform at kiosks operated by Stayhealthy Inc.—a Monrovia-based health information company—located in thousands of pharmacies, grocery stores and companies 50 South Bay Accent nationwide. Chris DiGiorgio, executive chairman of SmartStory, said his company’s early success has enabled it to expand well beyond Silicon Valley, into New York and Idaho. The Silicon Valley veteran has been a longtime observer of the region’s economic ups and downs, having until very recently served as executive research fellow at the Accenture Institute for High Performance. He said the mother’s milk of high-tech innovation—venture capital investments— also matched 2000 levels last year. According to the index, it reached a regional total of $14.5 billion during just the first three quarters of 2014, with $7.4 billion in Silicon Valley. The $7.1 billion in San Francisco represented a gaudy 68 percent increase over 2013. VENTURING FORWARD According to DiGiorgio, a large portion of the $3.3 billion in VC investments in San Francisco’s burgeoning clean-tech sector went to Uber Technologies Inc., the ride-sharing app giant that attracted $1.2 billion in 2014. Between Silicon Valley and San Francisco, the region increased its share of statewide VC funding to 73.7 percent, up 1.5 percent over 2013. About 55 percent of that funding went into software, the fifth straight year it has increased and up from 21 percent in 2009. DiGiorgio said developing software can be inexpensive over a shorter period of time compared to hardware. “The situation has changed over the past five to 10 years,” he noted. “VCs now are looking for (companies and products) with a shorter return cycle. And so much of the software innovations today have to do with apps. You had to buy a server before, but now you can go to the cloud.” Along with employing other cost-cutting measures, DiGiorgio said the expense of developing a software product in 2014 was about 10 percent of what it was a decade ago. The character of the venture capitalist, now a legend in Silicon Valley, started changing in earnest the past couple of years, explained DiGiorgio. He said VCs have not only begun expanding the volume of their investments, but also the roles they play. “A VC today in Silicon Valley is not your father’s VC,” he said. “They have started becoming much more involved in helping shape a company’s chances for success. They have become more portfolio manager than science pioneer.” And some of the businesses they may have helped get off the ground are maturing. Twenty-three of the nation’s 275 initial public offerings and mergers and acquisitions last year involved Silicon Valley companies, an uptick of three over 2013. DiGiorgio was quick to note that while IPOs are on the rise, the level of activity in this arena is still below that seen before the economic crash of 2008. But that slowdown has certainly not been shared by salaries or the cost of living. While average annual earnings topped $116,000 in Silicon Valley and neared $105,000 in San Francisco by the midpoint of last year, local housing prices and rents continued to soar. The median home sale price of $757,585 represented a 7.5 percent leap over 2013 prices in Silicon Valley, while the average rental rate of $2,333 a month during 2014 was an 11 percent increase over the previous year. SILICON PHENOMENON Russell Hancock, president and CEO of Joint Venture Silicon Valley, which has compiled the index since 1995, said although Silicon Valley does have a geographic definition for the purposes of the annual report, it has grown to encompass the economy of the entire region—including San Francisco and increasingly the East Bay. “Silicon Valley is not so much of a place in a geographical sense as it is a phenomenon centering on technological innovation and entrepreneurship,” Hancock said. He explained the term Silicon Valley was coined as a “brand name” in the 1970s to describe the budding cluster of technology companies in the Santa Clara Valley. Four decades later, one of the world’s most famous “brands”—on a par with the “Hollywood” moniker for the movie industry of Southern California or “Wall Street” for New York’s huge financial sector— now has spread to encompass much of the Bay Area, according to Hancock. “The entire area is firing on all cylinders,” he said. “When I first saw the numbers in this year’s index, my reaction was, ‘Wow, these numbers are extraordinary.’ The only time we saw anything like this before was in 2000, but that was based less on reality and more the overheating of the economy. And it all came crashing down.” The situation in 2014 was “staggering,” according to Hancock. But in a good way.
South Bay Accent - Jun/Jul 2015
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