Building successful technology clusters

Even if you’ve never heard the term “technology cluster” before, you are most likely already familiar with the most influential cluster in the United States: Silicon Valley. If you’re familiar with the Oregon startup scene, the influence of Silicon Valley is fairly obvious: Portland’s “Silicon Forest” and Eugene’s “Silicon Shire” are clear attempts to mimic the success of that region of the country.

But what made that region so successful? Can it be replicated somewhere else?

Silicon Valley is a famous demonstration of the cluster effect: a few companies specializing in computer hardware and software were founded in close proximity to each other. As they grew, they began attracting additional companies and talent to the region. Soon, investment capital followed, which quickly attracted new companies and then more talent to the area.

What we forget, though, is that Silicon Valley didn’t exist at one point. Independent entrepreneurs founded the area, and, through their work, it grew it the economic force it is today.

What are technology clusters?

Technology clusters, also referred to as industry or innovation clusters, are an important part of organizing and understanding the economic activity in a region.

A regional technology cluster represents a geographic concentration of interconnected companies and institutions in a particular field. Common components include a variety of small or startup companies, a few mid-sized firms, one or two large companies, and often research universities and other governmental organizations.

Although we often thing of them in terms of “high tech” software or computing, the term “technology cluster” can refer to any group of companies working on the leading edge of their field and competing using the most sophisticated tools available.  Tech clusters can form in industries ranging from food production and brewing to game development and biotechnology.

Key components of a successful technology cluster

Let’s take a look at five important components needed to develop a successful cluster.

1) Entrepreneurial density

A successful cluster needs to reach a critical mass of interconnected companies, entrepreneurs, and expertise in a particular field before it can begin attracting outside talent and investment. Reaching this critical mass takes time: entrepreneurs must understand the advantages of choosing your region over national clusters (Silicon Valley and New York City) and over other regional clusters (Portland or Seattle).

2) A local university

Almost every successful technology cluster has access to a local university that can provide research, workforce training, and resources to support the needs of the growing clusters. In Eugene, we are fortunate to have both the University of Oregon and the Lane Community College system as resources to support technical and entrepreneurial education in our community.

3) Resident early-stage seed funding

Growing companies need access to seed funding to survive. Without it, startups will either move away or die shortly after they launch. Most importantly, this funding must come from angel networks and investors within the community before outside firms will start to consider investing in local companies.

4) Local entrepreneurial community events

The entrepreneurial community must be active and involved in supporting the growth of new startups in the region. Part of this activity should include events geared towards entrepreneurial education to help build resident entrepreneurial expertise.

Local events like Startup Weekend Eugene, SmartUps, and the ID8 Incubator Program help train entrepreneurs. Other important community events, including networking sessions, informal meetups, and events like the recent HP Hackathon and the Eugene Indie Game Conference help entrepreneurs connect with each other and develop new collaborations.

5) Community Support and Vision

Arguably both the simplest and most difficult to achieve, the entire community must begin to recognize its strengths and areas where it can compete on a global market. Just like evaluating your company’s business model, the region must start to identify and refine its value proposition to the rest of the country.

Building for the future

As we look ahead to the new year, it is time for us to begin considering areas of opportunity in Eugene. What resources do we have? What makes the city a unique place to build and launch a company? How can we build organized clusters that will attract new entrepreneurs and investments to the region?

Share your ideas and comments below, or join us on twitter: @eugenerain.