Workforce Innovations

Feature

Business in Silicon Valley: A Shift toward the Small

Silicon Valley has focused on the small since the middle of the last century, initially with semiconductors, and more recently with bioscience and nanotechnology. As a result, the Valley has blossomed into one of the great industrial centers of the world, despite the frenetic highs and lows of a roller-coaster economy. Through the dust and debris of the past four years of corporate layoffs and closures, however, Silicon Valley is once again seeing signs of life and a renewed focus on the small.

Small business has always been a significant part of the Valley's economic infrastructure. Every HP and Apple was, at some point in its history, a startup. And for every Intel and Cisco, there are dozens if not hundreds of one-, two-, and twenty-person companies that help provide the pieces to their elaborate puzzles. Particularly within a region like Silicon Valley that is defined by its intellectual capital, the ability for individuals to strike out on their own as consultants or contractors is high.

It is not surprising then that the number of small businesses has grown even while the number of larger companies has fallen away over the past several years. According to California's Employment Development Department, although the total number of businesses in Santa Clara County increased by approximately 4% from the height of the boom in 2000 to 2003 (the most recent data available), this increase is due solely to the growth in small business. Companies with fewer than five employees grew by 14.2% (3,771 companies), which was enough to offset declines in every other size category: the number of companies employing 20 or more people decreased by 3.2%, while those employing 250 people or more declined by an aggregate 32.5%.

Despite the overall increase in the number of businesses, the net loss of 206,283 (21.4%) in the number of employees for all companies was too great a loss to be affected by the increase of just under 3,800 workers in small business.

As the economic slump continues on through its fifth year, the exorbitant cost of doing business, particularly within the ever-expensive Silicon Valley, continues to challenge small business. According to Inc.com, the cost of healthcare, which has risen an average of 11% for companies with fewer than 200 employees, is an increasingly greater burden on small business, followed closely by the escalating cost of energy. Small businesses don't tend to have the bargaining power of larger companies when it comes to participation in group health plans and the company and the employee, in many cases, must share the burden. A recent survey conducted by Salary.com shows that while two-thirds of small businesses share the cost of healthcare with their employees, more than one in ten has shifted responsibility entirely onto the workers.

On the bright side, a survey conducted nationally by the WellsFargo/Gallop Small Business Index shows that 67% of small business owners report that they are satisfied with their work-life balance and 90% said that they were satisfied with being a small business owner in general, despite the fact that, as a group, they work an average of 52 hours per week.

The chief economist at the Gallup Organization stated that owners of small businesses "see the benefits more closely tied to them. Working hard and long is a natural aspect of the kind of people willing to start their own business."