A Social Order Shaped by Technology and Traffic

A Social Order Shaped by Technology and Traffic

Thor Swift for The New York Times

Giriraj Vengurlekar, an engineer who lives in Sunnyvale, says the cricket pitch can be something of an informal job market.

Published: December 20, 2007

ALVISO, Calif. — Palo Alto Networks is a high-tech start-up with
ample financing and ambitious plans. But despite its name, the company
has no offices in Palo Alto, Silicon Valley’s unofficial capital.

Bay Area’s Niche Neighborhoods


Thor Swift for The New York Times

Nir Zuk of Palo Alto Networks, with Dave Stevens,
right, and Jana Kameda, said, “You would never locate a networking
company in Palo Alto.” So his start-up is in Alviso, Calif., to the

Instead, it is based about a dozen miles farther south, on the
outskirts of San Jose, in Alviso. The company is developing technology
to protect computer networks from hackers and misuse, so it chose to be
where engineers with networking expertise are clustered: around big
companies in the field like Cisco and Juniper Networks.

Nir Zuk, its founder and chief technology officer, notes that Palo
Alto is synonymous with high-tech innovation, and he was living there
when he came up with the name.

“But in Silicon Valley, you locate a company where the engineers
are,” he said. “You would never locate a networking company in Palo

Silicon Valley, the wellspring of the digital technologies fueling
globalization, is itself a collection of remarkably local clusters
based on industry niches, skills, school ties, traffic patterns, ethnic
groups and even weekend sports teams.

“Here, we have microclimates for wines and microclimates for companies,” said John F. Shoch, a longtime venture capitalist.

Silicon Valley, home of Stanford and other universities, has long
been the model of success for a modern regional economy, and policy
makers worldwide have tried to emulate it by nurturing high-tech
companies around universities. There have been a few winners, like the
semiconductor manufacturing hub in and around Hsinchu Science Park in

Yet a look at the microclusters within Silicon Valley demonstrates
the business relationships, the social connections and the seamless
communication that animate the region’s economy. It also suggests the
human nuance behind the Valley’s success and shows why that success is
not easy to copy, export or outsource.

“These microclusters turn out to be a very efficient way to
innovate, to see what works and what fails, and do it extremely
rapidly,” said AnnaLee Saxenian, an expert in regional economies and a
professor at the University of California, Berkeley.

New companies, and emerging industry clusters, seek to build on and
tap the skills of older clusters. While there are plenty of exceptions,
it is generally true that hardware clusters — semiconductors, disk
drives and network equipment, for example — are in the South Valley,
around San Jose and Santa Clara. The actual manufacturing of hardware,
of course, moved to cheaper places years ago. What remains in the
Valley is product design and engineering.

Moving farther north in the Valley typically means moving farther
away from the guts of the machine and climbing up the tiers of
computing — from chips to layers of business and consumer software and
then into San Francisco, home to people with online advertising and
digital design skills.

For start-ups, the location decision can be critical, particularly
because of the area’s notorious traffic jams. Lately the calculations
about traffic, talent and real estate have become trickier because the
Valley’s economy is surging again, driving up rents and salaries and
clogging roads.

The boom is fueled by the accelerating march of Internet technology
into advertising, media and entertainment, and even into company data
centers and the traditional software industry. Companies like Google and Facebook are the best known, but a spate of start-ups are in their wake, pursuing both business and consumer markets.

Yaniv Bensadon, the founder of FixYa, made a major location decision
a few months ago. He started his company — a Web site for technical
support and repair suggestions for consumer products, based on users’
experiences — two years ago in Israel. But he moved to the Valley in
August to be in the thick of things.

“For a consumer Internet company, this is where everything happens,”
he said. “It’s true that things can be done anywhere on the Internet,
but at the end of the day it’s still a people business.”

Many recent start-ups are hybrid companies. They combine computing with other fields, so they must tap a variety of skills.

Adchemy is a start-up that is still developing its technology and
has not yet announced a product; in Valleyspeak, it is in stealth mode.

Adchemy’s goal is to improve the efficiency of online advertising by
using predictive algorithms and other scientific techniques. It already
has a team of 50 people, mainly computer scientists and software
engineers. They typically live in the Valley, mostly from Palo Alto
south. But the company also needs people with advertising and marketing
expertise, who are often young and single and prefer to live in San

So Adchemy is in Redwood City — just north of Palo Alto, but a
30-minute drive from San Francisco. The choice is important, since the
company plans to double or triple its payroll over the next year.
“Recruiting is crucial for us,” said Murthy Nukala, chief executive of
Adchemy. “There is a real war for talent in this field.”

Big industry-leading companies tend to become the center of gravity in each cluster: in semiconductors in Santa Clara, it is Intel; in networking in San Jose, Cisco; in database software in Redwood Shores, the giant is Oracle; and of course, in Internet services in Mountain View, it is Google.

there are the clusters that are based more on personal connections or
affiliations than on geography. Stanford, just outside Palo Alto, is
perhaps the strongest cluster-generator in the Valley.

Stanford students and staff have been behind countless companies in the Valley, from established ones like Hewlett-Packard, Cisco and Sun Microsystems to more recent success stories like Google and VMware.
And for decades, Stanford has been a source of ideas and talent for the
Valley’s venture capitalists, bunched around the Palo Alto thoroughfare
Sand Hill Road, the Wall Street of venture capital (and another Valley

Navin Chaddha, a managing director of the venture
capital company Mayfield Fund, personifies the Stanford network of
students, entrepreneurs and venture capitalists. As a Ph.D. student, he
developed video-streaming technology that enabled Stanford to put its
closed-circuit television programs on the Web.

Alumni investors noticed the potential, and Mr. Chaddha and a professor, Anoop Gupta, formed a company, VXtreme, which Microsoft
bought in 1997. Its technology became part of Windows. “If you are
using Windows Media Player, you are using our creation,” Mr. Chaddha

Mr. Chaddha also represents another social cluster in the
Valley, the ethnic Indian community. When he and Mr. Gupta needed
advice, he said, “we went back to our roots,” tapping leaders of the
Indus Entrepreneurs, a powerful ethnic Indian networking group. Today,
Mr. Chaddha is a senior member of the organization.

New companies
with deep ethnic links — mainly Indian and Chinese — are sprouting up
in the Valley. Often, ethnic background is but one layer of social
relationship. SnapTell, a start-up that seeks to marry
image-recognition technology, cellphones and marketing, was founded
last year by G. D. Ramkumar and Gautam Bhargava, Indian computer
scientists and Valley veterans. The company has 10 employees, six of
whom have Ph.D.’s and three of whom are from Stanford.

The shared backgrounds, interests and schools make for frictionless communication that fosters rapid innovation.

weekend sports, it seems, become the basis for informal business
clusters in the Valley. Start-up ideas or job opportunities often
surface on the sidelines of a weekend soccer game or, increasingly,
cricket match. Giriraj Vengurlekar, an engineer who lives in Sunnyvale,
plays in one of the Valley’s cricket leagues, which now has 40 teams.
His team, the Centurions, includes employees of Sun Microsystems, eBay, Cisco, Yahoo and other technology companies.

year, Mr. Vengurlekar joined Serus, a start-up that makes software for
managing offshore manufacturing operations. The cricket pitch, he
finds, is a good place to scout recruits or learn of job openings.
“People don’t play cricket to get jobs, but it definitely happens,” he
said. “Cricket definitely spills over into business.”

There is
a certain visual identity to the clusters, and a hint of cultural
tension among them. The clearest schism, perhaps, separates Valley
dwellers from San Francisco residents.

The hard core in the
Valley jokes that San Francisco, with its Internet advertising and
design cluster, has a “high P.I.B. coefficient,” for People in Black.
The city’s companies also have more women than those in the Valley. San
Franciscans regard Valley engineers as denizens of a style-free
suburban zone for whom being well-dressed means wearing jeans and a
T-shirt with a company logo.

In recent years, more companies
have successfully tapped the pool of people, including engineers, who
shun the Valley: Craigslist, Linden Lab, Slide and Twitter.
Salesforce.com, a thriving company that sells software as a service
over the Internet to business customers, was a pioneer when it chose
San Francisco as its base at its start in 1999.

San Francisco,
said Marc Benioff, the founder of Salesforce and a former Oracle
executive, has been “an incredible recruiting tool and a differentiator
when we are competing for talent with our suburban rivals.”

Valley residents see themselves as true entrepreneurs, entirely focused
and dedicated. Marc Andreessen, 36, the co-founder of three companies
in the Valley (Netscape, Opsware and Ning), concedes that San Francisco is generating more start-ups these days.

in general, the nerds with minimal social lives like me are well down
in the Valley, and the cool kids with the trendy glasses and Prada
shoes who like to go to parties are in San Francisco,” Mr. Andreessen
said in an e-mail message. “You can guess who has the leg up in
building companies.”


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