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Global recession slashes Silicon Valley

09-02-2010 15:04 BJT

The global recession has slashed funds to venture capital firms which power one of the world's hotspots for innovation and job creation - California's Silicon Valley. With investment firms spending more than they are taking in, the model which gave rise to the likes of Google and Apple - is changing the way entrepreneurs invent and the way job - seekers approach the market. CCTV's Jessica Stone reports from Palo Alto, California.

Silicon Valley, California, birthplace of Google, home to Facebook, where investors share the streets, with the very inventors toiling to bring the next big idea to the marketplace.

Adeo Ressi, Founder of said "The ecosystem in Silicon Valley has created the seminal technology companies of the world."

Adeo Ressi is a veteran of eight start-up businesses and creator of the which allows entrepreneurs to trade information about venture capital firms. The global recession, he says, has dried up revenue, and venture firms are now only taking in one third of the funds they are investing.

Adeo Ressi said "At some point, they are going to run out of money,and that point is coming very quickly,and what's going to happen is that the number of investments are going to drop significantly."

It is in this environment that the man behind this video telephone system is looking for investors.

Lauren Elliott, Founder & CEO of Seeport said These are wi-fi connected devices,and they use a standard broadband available in the average American home.

Inventor Lauren Elliott is a serial entrepreneur,whose best-selling computer game "where in the world is Carmen San Diego" has sold thousands and employed hundreds. But even he has had trouble,finding investors for this new idea.

Lauren Elliott, Founder & CEO of Seeport said "They give you credit for who you are and your successes and love the idea,but they look at the amount of money they thought they had to invest in it, and the returns that they needed which are enormous."

The firms held back. Elliott changed his approach, going after wealthy individuals called Angel investors. As venture-capital firms have pulled back,angels and groups of angels are filling the void. But their investments are much smaller, leading to smaller companies and fewer jobs.

Venture-backed companies like Google have been huge employers in the state of California.In fact,the National Venture-Capital Association says in the year 2008,they created more than four million jobs,generating more than 1 billion dollars in revenue.

Nationwide, venture capital creates some 12 million jobs. But those numbers, says Ressi, may well be in the past.

Adeo Ressi said "There's going to be different types of employment, a much more freelance oriented economy. Because there are not going to be the hundreds and thousands of jobs created by the next Google or the next Yahoo."

But economist Steve Levy is more hopeful.

Steve Levy, Economist of CCSCE said "I think in the end it works out. You develop a product, and if you develop a product with 20 people or with 50 people. And it's a great product, somebody's going to take it to scale."

Levy runs the Center for the Continuing Study of the California Economy-in the Silicon Valley town of Palo Alto.

Steve Levy said "What matters is, if we develop something that customers want around the world. That could be small or large."

Elliot, meantime, says this new funding model will mean a market for his invention in less than a year.

How long do you think it will be before I can get one of these at the local Best Buy?

Lauren Elliott said "You'll be able to get them in about seven months, 6 or 7 months."

And so while the cycle of innovation that put Silicon Valley on the map has slowed. It HAS survived.

Editor:Xiong Qu |Source: CNTV.CN

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