How to form a startup in Silicon Valley?
The foundation for the Silicon Valley startup ecosystem as we know it was placed in the 1940’s and the 50’s. The area between San Jose and San Francisco is famously known as the Silicon Valley and was almost single handedly created by one of the most successful entrepreneurs – Leland Stanford. There are several notable names behind the growth of this valley including Bill Hewlett and Dave Packard, who went on to create the brand “HP” and William Shockley from Palo Alto was awarded the Nobel prize in physics. The success stories are many and if you are planning to register a Silicon Valley startup then this is the article that will provide you with a path towards establishing your business here.
Silicon Valley Startup Heaven
Some of the top entrepreneurs and first time business owners want to form a Silicon Valley startup as the business environment and startup ecosystem is just perfect when it comes to valuable resources and business growth enablers.
The Silicon Valley located in the southern part of the San Francisco Bay Area is considered to be a global center for innovation and high-end technology. The largest city in this area is San Jose and is home to top startup industries in Silicon Valley. Some of the top names include PayPal, Cisco Systems, Adobe, eBay, Western Digital, and Hewlett Packard Enterprise among others. Some of the other major cities in the Silicon Valley that are home to startups include Palo Alto, Santa Clara, Sunnyvale, Mountain View, Redwood City, Cupertino, and Menlo Park.
The valley is not only home to more than 30 Fortune 1000 businesses but also receives one-third of total venture capital investment being made in the United States. Today, it is a global synonym for any areas or regions that consist of high-tech research as well as enterprises. The question is what does the startup ecosystem constitute?
Silicon Valley startup ecosystem
Silicon Valley is home to different types of business organizations and institutions, which have facilitated the creation of a robust business environment. This environment is a part of the Silicon Valley startup ecosystem and is highly conducive towards the successful creation and operation of startups, leadership in several high-tech specialization areas, and disruptive business models. The ecosystem is driven by several components and has a variety of characteristics, which make the Silicon Valley system work in a synchronized manner thus making it conducive to register a Silicon Valley startup.
At the heart of the Silicon Valley startup ecosystem is the Silicon Valley Innovation and Startup Model. The model comprises of three different levels and they are:
- The Micro level: Focuses on Product, People, and Pivot
- The Meso level: Comprises of Capital, Universities, Government, and Support Networks
- The Macro level: Revolves around Culture inspired by generations of startup founders
The 1,854 sq. miles of the Silicon Valley startup ecosystem not only represents the world’s 19th largest economy but is also home to several world-class research institutions including corporate research labs. The startup ecosystem of Silicon Valley is 3 times bigger than New York City and 12.5 times bigger than Berlin. Such a thriving and constantly evolving ecosystem helps top startup industries in Silicon Valley to achieve strong growth. The startup ecosystem of Silicon Valley comprises of six players and they are:
- Large tech companies
- Co-working spaces
Why is Silicon Valley good for startups?
The Silicon Valley startup ecosystem boasts of a dual ecosystem consisting of startups and large firms existing symbiotically. Silicon Valley is considered to be a comprehensively integrated as well as balanced business ecosystem that ensures startups are able to leverage from the leading-edge innovation, pro-startup culture, and pioneering entrepreneurship. The Silicon Valley ecosystem provides support to startups so that they can push forward their dreams into a global market. Some of the factors that play a key role if you plan to register a Silicon Valley startup are:
- Successful entrepreneurs as well as startups can enjoy high financial returns
- Availability of top-level global human resources for various stages of a startup
- Existence of strong business and industry like accounting, IT, law, etc.
- It is the most competitive market for venture capital (VC’s) and other investors
- Ivy league and top ranked universities like Stanford, UCSF, and UC Berkeley
- Most human resource clusters are anchored around these top universities
- Availability of top startup accelerators in the Silicon Valley provide startups with advice, mentorship, and resources
- The government plays an extensive role in shaping current and future technological trajectories
- There is a fine balance between open innovation, secret protection, and intellectual property protection amongst highly competitive industries
- There is a high mobility of labor at different management and talent levels
- There is a strong and positive culture of accepting failures leading to effective evaluation as well as monitoring
Top startup industries in Silicon Valley
The Silicon Valley as well as the Bay Area is considered as the greatest hub for new businesses and startups. This is because when you form a Silicon Valley startup; the existing and continuously evolving and expanding infrastructure provides the necessary platform to a business in its nascent stages. Silicon valley also provides a favorable advantage when it comes to the tech industry but the truth is that there are several other top startup industries in the Silicon Valley area that have garnered equal attention and reputation. Let us briefly look at the hottest industries in Silicon Valley.
- Fintech – Fintech or Financial Technology is a form of emerging technology, which focuses on helping financial institutions improve and automate the delivery of various financial services. If you are planning to incorporate a Silicon Valley startup in the Fintech industry then it is one of the most rewarding and rapidly growing industries. In fact, a report by Ernst and Young estimated that the California Financial Technology market was worth $7.1 billion in 2015. In the near future, there will be enormous growth potential for startups in terms of revenue generation in this industry due to the increasing use of Artificial Intelligence in Financial Technology. Today, it is considered as one of the top startup industries in Silicon Valley and some of the highly successful businesses in this sector include Braintree, Varo Money, Brex, Morningstar, Gravity Payments, and Acorns.
- Big Data – One of the areas or industries that are expected to even grow bigger in the years to come is Big Data. This is also one of the favored industries to incorporate a Silicon Valley startup as the existing market size globally was $41.33 billion in 2019 and its projected growth is $116.07 billion by 2027. This is more so because of early adoption of futuristic technologies like AI (Artificial Intelligence) and Predictive Analysis according to a report by Fortune Business Insights. Some of the top startup industries in Silicon Valley as well as global companies like IBM Corporation, Amazon.com, Microsoft Corporation, SAP SE, Oracle Corporation, Software AG, Infosys Limited, Cisco Systems, and Dell Technologies have been key players in the big data market.
- Blockchain – The Blockchain technology was first outlined in 1991 and was first implemented in 2009 for transactions being made using bitcoin. It is essentially a public ledger or a distributed database of records that comprises any or all transactions or even digital events taking place and is normally shared among participating entities. The wide variety of applications of Blockchain has attracted many entrepreneurs to incorporate a Silicon Valley startup in this industry. The market size of the global blockchain technology was valued at $3.67 billion in 2020 and is expected to grow quickly. You can register a Silicon Valley startup in the Blockchain industry as it is expected to expand or grow at a CAGR (compound annual growth rate) of 82.4% from 2021 to 2028. It is one of the most promising technologies in the IT domain and is projected to reach $69.04 billion by 2027.
- AI & Machine Learning – Artificial Intelligence is a big concept and machine learning is a subset of AI and together they are increasingly being applied in a variety of industries and areas including eCommerce, Workplace Communication, Human Resource Management, Healthcare, Cybersecurity, Logistics and Supply Chain, Chatbots, Space Exploration, and Smart Homes. If you are planning to incorporate a Silicon Valley startup in this industry then it is surely going to witness expansion and growth in the near future as market research firms like Tractica believe that Global AI market revenue is projected to reach $118 billion in 2025 while Machine Learning market size will reach $96.7 billion by 2025. The market share in the North American region for AI was $11.40 billion in 2019 while that of machine learning was $2.40 Billion. You can register a Silicon Valley startup as California is considered one of the best platforms for this industry and is home to industry stalwarts like NVIDIA Corporation, Alphabet (Google LLC), Apple Inc., Cloudera, Salt Security, and DeepMap among others.
- Medtech – Technology is at the heart of most industries today and this includes the medical industry as well. Medical Technology is commonly known as Medtech and it refers to a variety of technology enabled medical products, solutions, and services whose applications are mostly used for diagnosing and treatment of different diseases and medical conditions. Medtech applications can vary from ultrasound scans to high resolution laser machining, nano-medicines, and even electronic health records. The US Medtech market size for medical devices was worth $156 billion in 2017 and is projected to grow to $208 billion by 2023. This industry is an integral part of the US healthcare sector and one of the chosen areas for entrepreneurs to form a Silicon Valley startup. A report by Deloitte consulting revealed that the Medtech industry is well-positioned and geared up for driving the future of the healthcare industry and this is the right time to register a Silicon Valley startup in this industry.
- Biotech – Biotech is a field of technology where organisms or their products are used primarily for commercial purposes. It is also known as Biotechnology and uses living cells for developing or manipulating products for a variety of purposes including genetically modified food. It is a growth oriented industry that attracts entrepreneurs to incorporate a Silicon Valley startup. In fact, the U.S. biotechnology industry is expected to expand and grow at a CAGR (compound annual growth rate) of 9.2% between 2021 and 2027. This is more so because of its varied applications including in the field of genetic engineering, reducing environmental impacts of industrial processes, DNA fingerprinting, and increased crop yield among others. The US Market Size for biotechnology in 2021 is valued at $105.3 billion and its projected value in 2027 is $952 billion. This is an industry where entrepreneurs can register a Silicon Valley startup as it is considered to be expanding and evolving globally.
- Cybersecurity – One of the key areas of technology today is Cybersecurity. Its importance lies in the fact that digital attacks of technology driven systems, networks, and programs have become prevalent in recent times and hence, such systems or technology needs to be protected. Cybersecurity is a type of unified threat management system that helps in detection, investigation, and remediation of cyber or digital attacks thus protecting sensitive data or information. Identity theft is one of the most common examples of cyber attack. It is one of the top startup industries in Silicon Valley as the Cybersecurity Market is forecasted to grow from $152.71 billion in 2018 to $248.6 billion by 2023. The North American market was valued at $156.24 billion in 2020 and is projected to reach $352.25 billion by 2026. There are several areas of Cybersecurity where you can form a Silicon Valley startup like Deployment (On-premise and On-cloud), Manufacturing, Public Utility, Retail, IT, Financial Services and Insurance (BFSI), and Banking among others.
Start a new California business in Silicon Valley!
Forming Your Startup in Silicon Valley
Silicon Valley located in the San Francisco Bay Area is home to some of the top technology companies in the world. It is the headquarters of digital giants and other companies like Apple, Alphabet Inc.-Google, Netflix, Wells Fargo & Co., Facebook, Visa, Inc., and Chevron Corporation among others. The “Big 5” tech companies in the Silicon Valley generate revenue of $802 billion, which is more than the GDP of Switzerland and Saudi Arabia.
Since Silicon Valley is one of the major epicenters of technology, innovation, accelerators, and startups; it presents an ideal business platform to register a Silicon Valley startup. Entrepreneurs and innovators have always favored the Silicon Valley startup ecosystem for launching their new ventures and so have venture capitalists and other investors. Let’s take a look at the fundamental requirements for starting a new business in the Silicon Valley region.
Prepare your startup idea and business plan
If you have a genius or innovative business idea then it’s time to incorporate a Silicon Valley startup. One of the first steps towards forming your new business is preparing and developing your startup idea and drafting a business plan. There are certain aspects that you need to consider while developing your startup idea as the business plan will be created accordingly. The most important aspect is to analyze the relevant market.
If you are planning to register a Silicon Valley startup then it is important to compare the markets in the cities situated in the valley like Santa Clara, Menlo Park, Sunnyvale, Palo Alto, Mountain View, Redwood City, and Cupertino. The next step is to execute a market survey in the chosen city and finally, develop your product, service or solution. Once you have defined your startup idea, it is time to create a business plan. There are some core areas that your business plan should focus on and they are:
- Executive summary: This will include information about your startup and objectives in brief
- Market analysis: This includes information pertaining to industry research, competition, and launch market
- Company Structure: The structure of your startup like Corporation or LLC
- Branding, marketing and sales: This area will focus on modes and plan of advertising, marketing, and selling
- Product or service: Description of what your product or service is and how will it be beneficial for customers
- Financial projection and business model: A broad view of the earning potential of your startup and future financial scope
- Strengths, weaknesses, opportunities and threats (SWOT): A SWOT analysis will provide a realistic view of challenges, bottlenecks, potential threats, and opportunities available.
Networking/connect with industry experts
In this digital age, it goes without saying that the more people you connect with; the better it will be for your business. If you are planning to form a Silicon Valley startup then networking or connecting with industry experts will help further your startup plans or business expansion. Whether your business is currently in an ideation phase or moving towards a minimum viable product (MVP) stage; it is important to connect with industry experts as well as investors through a variety of networking channels and platforms including events, opportunities, coworking spaces, and meetups. The opportunities you can leverage when you register a Silicon Valley startup are:
- Meetups: One of the best options for networking within the Silicon Valley startup ecosystem is by becoming members of various Silicon Valley entrepreneur groups as they organize both events and meetups. Some of the top groups for meetups are Silicon Valley Young Professionals-SVYP (Santa Clara), Silicon Valley Entrepreneurs Toastmasters Club (Santa Clara), SF Tech Ladies (San Francisco), and Bootstrappers Breakfast – Silicon Valley Startups (San Jose) among others.
Events: One of the greatest benefits for aspiring entrepreneurs or first time business owners in the Silicon Valley is the large number of tech and startup events that take place in the region. Some of these events are attended by executives of the top startup industries in Silicon Valley. The events can be categorized under:
- Inspirational startup events
- Startup Events on Best Practices
- Events focussing on Network and forming a team
- Investor Networking Events
Incorporate and register your startup
In most states including California, all you need to form a business corporation is submitting articles of incorporation to the office of the Secretary of State of the chosen jurisdiction. However, if you are planning to incorporate a Silicon Valley startup or a high-growth tech company then the business formation will require much more than simply submitting the articles and bylaws. Some of the aspects integral to Silicon Valley startups are rapid growth, issuance of equity incentives to employees, scaling your business, and creating the ability to take outside investments. So, how are most Silicon Valley startups formed?
A majority of Silicon Valley startups have been formed as corporations and more importantly, they have been incorporated in Delaware. The primary reason for this is that Delaware laws and management are business friendly as opposed to California corporate laws. When you incorporate a Silicon Valley startup in Delaware, it also increases the chances of finding investors and they are familiar with the Delaware laws. Once you have formed in Delaware, you will not be required to re-incorporate anywhere else, which means you are not required to register a Silicon Valley startup but instead apply for foreign qualification.
IncParadise can not only help you to incorporate a Silicon Valley startup in Delaware but also assist with the process of foreign qualification in California.
Secure funding for startup
Every business requires a startup capital; some require higher investments while others can kickstart their business with minimal capital. If you are planning to form a Silicon Valley startup then depending on the industry the startup belongs to, you may need outside funding. The question is, how do you secure funding for your startup?
The good news is that there is a large number of funding resources in Silicon Valley right from angel investors to seed accelerators. One of the key aspects towards securing funding is a strong business plan that encompasses business objectives, strategies, competition, market research, and product or idea that you want investment for. The early-stage startups can approach Angel Investors once they form a Silicon Valley startup. Some of the top angel investors include Adeo Ressi, Alexis Ohanian, Andrea Zurek, Christine Tsai, Eric Reis, and Zachary Aarons among others.
There are also several Angel investor groups, which is essentially a pool of investors pooling their resources together. Some of the big names include Angel’s Forum, F50, Open Silicon Valley Forum, and Sand Hill Angels to name a few. Some of the top startup industries in Silicon Valley have businesses, which have achieved higher growth by securing funding through angel investors in the initial stages.
The other forms of funding available are Growth Stage Funding and Seed Accelerators. The latter accepts teams and not solo founders and the investment may vary from $15,000-$150,000 in exchange for an equity of 6% to 10%. Growth stage funding involves Venture Capital firms that provide growth equity or startup capital to promising ventures.
Looking to register your Startup in Silicon Valley?
Silicon Valley is one of the most economically vibrant, technologically challenging Diaspora of innovation. It is home to some of the biggest tech or IT companies in the world and is considered to be the gold standard for technological advancement. If you have an idea and are planning to form a Silicon Valley startup then we at IncParadise are here to assist you with business formation requirements. We can help you to incorporate and register your Silicon Valley startup, so that you can begin operations at the earliest and maximize your benefits of launching a business in the famed valley.
IncParadise also provides a wide range of additional services like foreign qualification, obtaining an EIN (Tax ID) number and California Certificate of Good Standing among others.