Yes, Sarah, Silicon Valley still matters.  BusinessWeek’s Sarah Lacy wrote a few things last week that I completely disagree with in her post Does Silicon Valley Still Matter?.  While the thesis of her article seems to be a question, upon reading it you know right away what she thinks the answer is… no.  She bills the Valley as a has-been of tech innovation, and leads readers to believe that since “the information superhighway is [already] built” and the computing and networking sectors are slowing down, there isn’t much more innovation that can come out of the Valley.

The common theme of her article is that the Valley has become more of a place for those who want to play it safe—investors and entrepreneurs alike—than for the truly innovative and risky start-ups.  While I disagree with her billing of Facebook and Twitter as ‘truly innovative’ (let’s be honest, while social networking is an interesting concept you really can’t have a “business” without a viable business model), I agree that many new companies have been started and funded here over the last few years that focus on small markets (like iPhone apps) and there has been less investment in breakthrough technologies that provide innovative leaps forward.  Why is this?  Well, I think that alongside those with innovative ideas and business models the Valley has attracted those who want to make a ‘quick buck’.  Software and web have always had very low overhead and high margins (for those companies with viable business models), and I think its natural for investors and entrepreneurs to minimize risk.  Other investors are looking for opportunities and innovation overseas in BRIC markets, but the fact remains that a huge majority of venture funding is centered in the Valley.  In many cases, those innovations around which strong, lasting companies can be built will be ported over to the Valley where it is very easy from a regulatory standpoint (state and federal) to build and profit from a business.  There are opportunities to use exisiting technology to beneifts foreign markets, but true innovation will flow through Silicon Valley for a good while longer… the Valley is far from giving up its crown as the world’s epicenter of innovation.

It is very easy to say that the Silicon Valley edge in innovation will continue to wane as technology shifts away from computing and networking.  Those that believe that though, are missing out on the big picture; they forget that Valley-born innovation made computing and networking what it is today.  Let me put it another way, the success of computing was born out of the Valley’s innovative culture, computing did not make the innovative mindset.  This mindset is not limited to one industry and it never will be.  Those who have lived even a couple of years in the Valley know that innovation runs through the veins of almost every company and industry here.  I have personally been involved or apprised of some very innovative startups in cleantech, biotech, and devices in emerging industries.  During the next decade there will be a true merger between biology and electronics, and Silicon Valley will undoubtedly emerge as the innovation leader of this new biotronics industry.