Knowledge Partners

 Economic Laws Practice       Avalon Consulting

 Technloogy Holdings   

June 12, 2004

How offshoring is changing Silicon Valley

It is quite well known that today, most Silicon Valleys VCs demand that their portfolio companies have an "India-China" strategy. But what impact will this increasing drive towards offshoring have on the San Francisco Bay Area and Sand Hill Road?

"Silicon Valley will be impacted in a serious way over the rest of this decade and beyond," says Sanjay Anandaram, managing director at leading Indo-US cross-border VC fund JumpStartUp, in a recent article for the AlwaysOn-Network blogzine. Apart from predicting how life is set to change for Silicon Valley VCs and start-ups, the article also points out new opportunities thrown up by globalization.

According to Anandaram, Silicon Valley VCs will need to pack their travel bags more often. "No longer can the VC only make investments in companies that are a short driving distance away. As startups become micro-multinationals with offices, employees, customers, and partners around the globe (in many cases, the bulk of the employees and customers are outside the United States and the Valley), it is hard if not impossible for the VC to remain local," he says.

The management team of start-up firms will have to gear up to function as micro-MNCs. "(They will) have to focus on creating a management culture that's process oriented, global in worldview, and experienced in managing different people, offices, and customers," Anandaram says. "This learning curve will be painful for many people used to the traditional self-obsessed Silicon Valley culture," he adds.

While some of its denizens might find globalization painful, Silicon Valley itself is in no danger. Anandaram is confident the SF Bay Area will continue to retain its position as the "epicenter of global innovation". "But it will increasingly be connected to China and India via an intricate mesh of capital, talent, and markets".