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Silicon Valley 'seeing revival'

17 September 09 09:27 GMT
By Maggie Shiels
Technology reporter, BBC News, Silicon Valley

Silicon Valley is stirring back to life, following a bruising economic downturn, according to industry insiders and start-up entrepreneurs.

The view seems to underscore Federal Reserve chairman Ben Bernanke's belief that the US recession has ended.

He told a Washington think-tank that "from a technical perspective the recession is very likely over".

Wall Street shares that optimism - with the Dow Jones having been on a steady rise for the last six months.

"In the Valley we are seeing real signs of life," said Satish Dharmaraj, a partner with Redpoint Ventures, a firm specialising in internet start-ups.

"We are seeing an enormous amount of really good companies coming up and good people leaving their jobs and joining start-ups, which is always a sign of confidence," Mr Dharmaraj told BBC News.

Recent acquisitions in the hi-tech field include the purchase of Mint.com by Intuit for $170m (£102m), Adobe buying Omniture for $1.8bn (£1.08bn), the sale of Skype to a private equity syndicate for $2bn (£1.2bn) and the purchase of SpringSource by VMware for $420m (£254m).

"Looks like the economy, and with it the urge to splurge, is back - especially in Silicon Valley," said Om Malik of tech blog Gigaom.com.

"What's even more encouraging is that none of these deals are the small micro - transactions that Silicon Valley got used to over the past few years," he added.

"Opportunity"

While empty offices still dot the Silicon Valley landscape and the unemployment levels are only slightly down from a record high of 11.9%, there is plenty of optimism to go round.

Not least from David Kralik who just launched his company on Tuesday at the TechCrunch 50 conference in San Francisco, which showcased 50 start-ups in front of an audience of investors, analysts, entrepreneurs, and journalists.

CitySourced is a "real-time mobile civic engagement tool" - aimed at empowering citizens to use their smartphones to identify things such as potholes, graffiti, rubbish, snow removal and so on.

"The recession has been a great opportunity, and if you think about it Microsoft, Google and Cisco all started in a down economy, so starting a business now seemed like just as good a time as any," said Mr Kralik.

"A lot of companies starting today are all appealing to how we can save money. Our business offers a huge opportunity for cities to save money by preventing, predicting and identifying urban blight.

"Graffiti clean up is a $12bn (£7.25bn) a year industry and if we can disrupt just 10% of the market we will be a game changer," said Mr Kralik.

San Jose has just signed up for the service, and the company said it is in talks with ten other cities.

"New reality"

Before the champagne corks can be popped over news that the economy is in recovery mode, Mr Bernanke pointed out that "it is still going to feel like a very weak economy for some time as many people still find their job security and their employment status is not what they wish it was".

"We are entering a stage of new reality," said Redpoint Ventures partner Mr Dharmaraj.

"I would hope the way people do business has changed.

"The recession was a big slap in the face and all of us are learning, maybe we have entered a new kind of normalcy," he said.

And that new normal means doing things in a more frugal and cost conscious way.

"Businesses today are undoubtedly leaner and smarter," said Kevin Rose, the founder of Digg.com which lets people share and discover content from anywhere on the web.

"There are no lavish parties and hiring crazy rock starts to perform at your events as there once was in the past.

"It's more about tweet-ups and meet-ups at bars and stuff. It's a more grassroots way to spread the word and get the message out about what you are trying to create," added Mr Rose.

While there has been a lot of focus on staying lean to ride out the rough times, angel investor Ron Conway said many new companies have weathered the storm well.

"All the start-ups I know are getting funding. The beauty is that not many are going out of business and the survival rate is very high.

"In fact it really is a great time to start a company right now, to be poised to capitalise on the economy when it finally gets back to normal," said Mr Conway.

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