The pandemic saw many tech companies thrive as the world went more virtual. Despite talk of a drift away from Silicon Valley, local CAs tell Ryan Herman why its status as the world’s tech capital will remain unchallenged.
This article first appeared in ICAS’s CA magazine.
For Ninos Sarkis CA, there was only one place to be if he was going to pursue a career in tech. “I started accounting with a Big Four firm in 2000 and my clients included tech companies. The more I learned about the sector, the more I learned its heart was in Silicon Valley. If I didn’t get here, I would never truly experience what it’s like to work in the tech industry,” he recalls.
“I came to Silicon Valley on secondment with PwC in 2005. You get to enjoy a front-row seat to witness how technology is constantly evolving. Some companies, especially in software and cloud, are growing at 50%-plus top line, doubling headcount, sometimes within a year, making acquisitions, expanding internationally and bringing out new products.”
Sarkis joined Amplitude – which, through digital optimisation, helps companies build better products – as Chief Accounting Officer at the height of the pandemic in October 2020. He says the company hasn’t missed a beat: he has overseen new product releases, an acquisition and a recent public direct listing on Nasdaq.
Sarkis is one of a number of CAs who swapped the UK for Silicon Valley, joining some of the most famous, innovative and fast-growing companies in the world. And yet, if you take recent headlines at face value, the area now faces unprecedented challenges to its status as the epicentre of technology, innovation and investment.
The transformation of rural Santa Clara into Silicon Valley effectively began in 1957 with the birth of Fairchild Semiconductor. Although this pioneer in the field of transistors and circuity mightn’t be the most celebrated business of the 20th century – it might even struggle to make the top 10 in its own zip code – it proved a pivotal player in the history of the region.
The company was born when eight men broke away from Shockley Semiconductor Laboratory, which had been founded by William Shockley – a brilliant inventor but awful manager. Among the “traitorous eight” (as Shockley dubbed them) who decided they could no longer work for him and left to start Fairchild Semiconductor was Robert Noyce. Credited as the “inventor of the microchip”, Noyce would become co-founder of Intel in 1968. The key ingredient in the microchip is, of course, silicon.
My ICAS training allows me to be able to think about financial issues from a business perspective.
Another member of the Fairchild Eight was Eugene Kleiner, who co-founded Kleiner Perkins, which opened its first office in 1972 and was named “perhaps Silicon Valley’s most famous venture firm” by the New York Times, funding Amazon, Google, Skype, Spotify, Snapchat and Electronic Arts, along with almost a thousand other companies. Just as Silicon Valley is a metonymy for tech, Sand Hill Road, where Kleiner Perkins made its headquarters, is now synonymous with venture capital companies.
Silicon Valley was built on inventions and investment. But, as Shockley demonstrated, even with a brilliant inventor at the helm, the success of any tech company must still be underpinned by sound business principles. That might help to explain why so many CAs have found success in its highly competitive environment.
Location, location, location
Evette Sheehan CA came to Silicon Valley seven years ago with her husband. The couple leapt at the chance of moving to San Francisco. Sheehan joined cosmetics company Sephora before becoming Global Head of Shared Services at Uber, one of the giants of the Valley. Her CA qualification proves a huge asset when assessing whether Uber should invest in new ideas and products.
“My ICAS training allows me to be able to think about financial issues from a business perspective,” she says. “When you work with entrepreneurial or innovative companies, they’re always looking for the next thing. Then you need to put a financial lens on it. Is there a business value to it? Does it make sense for us to do it?
“You can have the shiny new objects, but they need to make a positive change in terms of where you’re trying to get to as a company. Financial expertise helps to put everything into perspective. You’re asking the business owners and managers the right questions to help them make the right decisions.”
That expertise has allowed many companies to maintain growth while also navigating a path through the Covid crisis. Des Lynch CA is VP of Finance for Rambus, which has been making semiconductors for 30 years.
“Obviously, having a technology backbone enabled us to immediately transition all employees to work from home,” he says. “There was that initial adjustment period. Otherwise, it’s largely been business as usual. This quarter, we acquired two smaller companies headquartered in Canada and France. All the due diligence was done remotely via Zoom, which was a completely different experience.
Financial expertise helps to put everything into perspective. You’re asking the business owners and managers the right questions to help them make the right decisions.
“Many companies have announced policies that range from 100% at home to 100% return to the office, with hybrid working in the middle – which is where Rambus probably falls. And I think part-time in the office and part-time at home will be the way forward across the Valley.
“There will always be a shortage of talent among highly skilled technology workers here. So a company that doesn’t offer a flexible environment will be less likely to attract and retain the best talent. The companies that are flexible in their approach will benefit and ultimately succeed going forward.”
Aman Kothari CA is Chief Financial Officer with Sojern, a leading digital marketing platform for travel marketers. Like Sarkis, he took up his present post amid the pandemic last autumn.
“My previous role was at a business that dealt with commercial real estate,” he says. “That sector is going to be seriously impacted over the medium term. If you think about the Bay Area, and the number of high-rise office buildings that are in play, those leases will start to come to an end. The renewal rates could drop because either there won’t be the demand for space going forward or companies need a different footprint. So there could be more demand for low-rise buildings, where there’s a broader, spaced-out campus.”
Sheehan adds: “A hybrid working structure is what we’re moving towards, and I think office spaces will morph into something more like collaboration bases, rather than just heads-down work. As human beings, we still need and enjoy offices. It’s just finding the right balance between the two.”
But how far has the past 18 months reshaped the Valley beyond its inhabitants’ working patterns? Soaring rents and house prices have sparked a migration away from the area, while challenger tech hubs, such as Austin, Texas, are experiencing rapid growth. Tesla set up a factory in the city and its CEO, Elon Musk, proclaimed it would be the “biggest boomtown that America has seen in 50 years”. It doesn’t take a computer to work out which roughly half-century-old boomtown Musk was comparing Austin to.
But many of the companies opening campuses in the Silicon Hills (as Austin’s tech hub is known) are still headquartered in California, including Tesla. As Mark Twain might have put it, reports of Silicon Valley’s death have been greatly exaggerated.
According to a story published earlier this year by Joint Venture Silicon Valley, investment in Bay Area tech firms increased by 8% in 2020 and, rather than declining, population levels were broadly flat.
A hybrid working structure is what we’re moving towards, and I think office spaces will morph into something more like collaboration bases, rather than just heads-down work.
Kothari believes the relationship between investment and innovation is so ingrained in Silicon Valley it’s virtually impossible to replicate it anywhere else. “I’m a firm believer that if you haven’t spent time in the Valley, it’s hard to truly understand the environment here,” he says. “It’s a bit of a bubble. Unless you’ve worked here I don’t think you can appreciate the pace at which it operates, both in terms of innovation, where new ideas spring up all the time, but also the level of commercial success.
“When you look around you see Facebook, Apple, eBay and Google. That enables us to draw talent, whether it’s already here and you’re picking from other companies or there’s simply the idea that the Valley is the centre of the tech universe. That gives us an advantage over any other metro area. That’s here to stay and I don’t think Covid-19 changes that – certainly not in the near term.”
Sarkis concurs, adding: “If you think about when you’re first starting out with an idea, you need your initial funding. So you go to your seed investors, your venture capitalists, and those people are all based in Silicon Valley. And once you get them invested in your company, they also fit in your board. That is a huge benefit, because they know how to grow and scale.”
Sheehan adds that because so many products and ideas are born in the Valley, you get to hear about them first. “Doing VC pitches is normal. That’s what people do,” she says. “If you’re in the UK, or in Europe, that’s not necessarily something that you’re doing as part of your day-to-day work.”
And then there’s the location. The CAs highlight the benefits of living in an area with a wonderful climate, that is close to the sea and, most importantly, culturally diverse. That, in turn, brings diversity of thought and ideas to the area’s businesses.
As Lynch concludes: “We will continue to attract people with drive and intellectual curiosity. They’re here for a reason. We have two top academic institutions in Stanford and Berkeley. And I think they will continue to attract and produce the brightest minds and talents. That will contribute to the nexus of ideas and talent and maybe the next wave of Silicon Valley.
“This place’s obituary has been written many times before, but it has been here for more than 50 years. Just look at recent examples of the dot-com crash or the global financial crisis. Each time it has adapted and come back stronger.”