♻️ The Life Cycle of a Tech Ecosystem
How technology ecosystems bloom, evolve and wither away
In 1908, the Model T was invented in Detroit and quickly became the most famous automobile of its time. Durable, inexpensive, and a pioneer of the assembly line in the US, the Model T marked a significant technological advancement. Over the next 50 years, Detroit's population nearly 10X’d as the auto industry experienced a boom. However, after 1950, maintaining the high cost of union wages proved challenging, and the industry faced fierce overseas competition. Japanese automakers produced cheaper, more fuel-efficient cars at a faster pace, making it difficult for Detroit to compete. Racial tensions and violence further complicated the city's situation, making the rise and fall of Detroit a poignant example of how a technology ecosystem evolves in the United States.
Detroit is just one illustration of a full cycle of innovation, growth, and decline—a narrative playing out in many cities across the country. Each city finds itself at a different stage of development, a unique point on the curve. As depicted in the chart below, the life cycle of a tech ecosystem involves phases such as birth, growth, maturity, decline, and possibly re-emergence. This post will delve into the essential ingredients needed to navigate from the birth of an ecosystem to its maturity phase.
Birth of an ecosystem: Silicon Valley
The birth of a technology ecosystem typically begins with a catalyst. This catalyst could be a novel innovation, a generational company, a university inspiring entrepreneurs, the arrival of money, etc... Silicon Valley serves as an exemplary case, with multiple catalysts. In 1939, HP Computer and, later, Fairchild Semiconductor in 1957 were among the earliest innovative technology companies in the Bay Area. Stanford University played a pivotal role, fostering high-quality graduates who joined these companies. By the latter half of the 20th century, Silicon Valley had emerged as a tech hub.
Growth
The growth phase follows initial successes and demands various supporting forces, notably financial backing. Venture capital plays a crucial role in attracting talent and fueling the fire of innovation. Early Silicon Valley was supported by figures like Arthur Rock, an early investor in Intel and Apple. Soon, firms like Sequoia, Kleiner Perkins, and others joined, further igniting the innovation fire.
As successful startups mature and create wealth, the landscape becomes more competitive and costly. This competition, along with other factors, can drive people to explore different geographies and industries, as observed in the current trends in the Bay Area.
Maturity and decline
More and more startups mature, create wealth for founders, employees and investors but also lead to far greater competition. The massive amounts of wealth generated by the preceding decades make a geography prohibitively expensive, overly competitive for all involved and less desirable to inhabit. Competition amongst investors, startups and employees begins to drive people to new places and industries as we are currently seeing in the Bay Area. To say it plainly, the Bay Area is an ecosystem in decline. I firmly believe that it will remain relevant due to the sheer volume of talent and capital that remains. However, it will be one of several key hubs, rather than the only hub of technological development as it was years ago.
Ecosystems in development
Accelerated by the pandemic, we have seen a number of other cities pop up as emerging tech hubs. The more popular of these has been Austin with Tesla moving there and companies like Canva seeing incredible success. Boston has also seen a number of winners like Klaviyo, Rapid7 and Toast.
On a smaller scale, we have Bozeman, Montana. In 2015, Next Frontier Capital was founded to invest in the Rocky Mountains. In the last 9 years, the economy of the state of Montana has changed dramatically. Snowflake moved its executive HQ to Bozeman, the population has increased dramatically, the price of real estate has skyrocketed and the number of startups being founded in Montana has also shot up. The catalyst in this case was money and a network becoming available, really for the first time, to the already existing pool of talent and startups. The pandemic helped too, as it gave people the luxury of deciding where they wanted to live before determining where they could get a job. Bozeman was high on that list.
Portland, Maine
Lastly, a city that is becoming near and dear to me, Portland, Maine is an interesting and ever evolving story that I hope to be a part of. Portland has WEX and IDEXX, two very large public companies. A few years ago, David Roux donated $100 Million to open the Roux Institute with Northeastern and help start the next generation of Maine-based companies. The Roux alongside state sponsored programs like the Maine Seed Tax Credit, Maine Venture Fund and more has attracted local founders to seek out the local resources. The development of Portland has been slow but steady.
However, there is a problem. The local “giants” don’t pay NYC or SF wages. From what I can gather, they actually pay about 60-70% as well as major market tech companies. This means they cannot attract talent from out of state to come to Maine. Those who want to live here are more likely to seek employment from remote or hybrid employers while remaining in Maine because of the simple fact that they can make more money. This also means that the pool of talent isn’t growing as quickly as is required to support a fast growing ecosystem of innovative startups. Until this changes dramatically, many Maine-based founders will be encouraged to build their companies, at least in part, in other cities or remote-first. In essence, people follow money (we saw this with Detroit too…) and the money is only starting to show up here.
The opportunity
Being a part of different sides of the evolutionary spectrum has been eye opening. In the Bay Area, I was a tiny piece of a mature community. I learned a ton and had incredible history to study. Now being in Maine, I have the opportunity to contribute to the development of an emerging ecosystem. From plugging my Bay Area network in here to starting a Maine operators community to helping people find the amazing state sponsored resources available here, there are huge opportunities and I am only scratching the surface right now. I couldn’t be more excited as I cannot think of many more fulfilling pursuits.