Why foreign leaders love Silicon ValleyFebruary 20, 2014: 5:00 AM ET
When heads of state travel to the United States, they make sure to visit its technology mecca. Here's why.
By Verne Kopytoff
FORTUNE -- Foreign leaders visiting the United States can fill their itineraries from a long list of fabulous destinations to conduct international diplomacy. Scenic mountains, balmy beaches, and a certain city that never sleeps would seem like top contenders. But instead, presidents and prime ministers from around the world are flocking to Silicon Valley, the land of office parks and suburban sprawl. Getting to know top executives from Google (GOOG), Facebook (FB), and Apple (AAPL), it turns out, is almost as important as photo-ops and meetings in Washington, D.C.
Last week, French President François Hollande became the latest such figure to make a pilgrimage to the world's technology capital. In the last few years, leaders from Israel, Ireland, New Zealand, Turkey, Russia, Netherlands, Lithuania, and Malaysia have also visited. Their interest reflects the growing muscle of Silicon Valley companies and venture capitalists, with which heads of state are trying to curry favor in hopes of attracting business, investment, and any political cachet that comes from championing innovation.
"They're looking for jobs," said William Miller, a former provost at Stanford University who accompanied a number of foreign delegations in Silicon Valley over the years. "They also have a feeling that a larger company -- whether Intel or Google -- could locate there and become a magnet for others."
During his brief visit, Hollande met with dozens of top Silicon Valley executives. A private lunch included Eric Schmidt, Google's chairman; Sheryl Sandberg, chief operating officer at Facebook; and Twitter (TWTR) co-founder Jack Dorsey. In addition, Hollande opened a new technology incubator in San Francisco for French startups, which aren't exactly taking the world by storm from home.
Incubators devoted to just one country, which are often sponsored by foreign governments, have fast become a Silicon Valley fixture. Israel, Ireland, Denmark, Germany, and Australia are among those with beachheads that support young companies and help with access to U.S. investors and partners.
The playbook followed by foreign leaders is well-established. Get off the plane in San Francisco, hold a few events to highlight their enthusiasm for all things tech, then mingle with a few well-known tech executives over a gourmet lunch or at a town hall meeting.
In 2012, Shimon Peres, Israel's president, made the trip to Facebook's headquarters during a four-day tour of Silicon Valley to promote Israeli startups. During an interview on stage with Sandberg, he described himself as a fan of social networking. People can use it, he said, to work around governments and achieve peace on their own -- although peace in the Middle East seems to be just as elusive now as ever.
Last year, Haiti's prime minister, Laurent Lamothe, made a rare trifecta by visiting the headquarters of Facebook, Google, and Apple in one stateside trip. It was an opportunity to ask wealthy technology companies to help his impoverished country, which is reeling from a devastating earthquake, with jobs and aid. The companies donated free servers and some premium online tools. But few Haitians have online connections at home, and pledges were small compared to the country's myriad problems.
Like many heads of state that visit Silicon Valley, Hollande was trying to send a message back home that he supports innovation and is working to turn France into a "startup republic." But many French entrepreneurs accuse Hollande of undermining them with a new law that sets the top tax rate at 75%. Avoiding the tax issue in public comments, Hollande threw out a welcome mat for American investment in French companies. Of all the American investment in French companies, one-third comes from California, he pointed out.
"In California, you want to change the world, and it's a beautiful mission -- a very ambitious mission, but one we really understand because we have the same vision," he said in a speech at San Francisco's City Hall. "For centuries, France wanted to change the world, and together we can change the world. We can change the way we consume, we produce -- the way we deal with health or technology in order to make the world a better place."
Usually, foreign leaders steer clear of the differences they have with the technology companies they're courting. No need to inflame tensions, after all, over issues like privacy, human rights, and regulations. Hollande's government is probing whether technology companies like Google, Facebook, and LinkedIn (LNKD) illegally dodged taxes. Moreover, France recently punished Google for privacy violations by requiring it to post an embarrassing notice about its misdeeds on its home page for 48 hours.
Google did not respond to requests for comment about Hollande's visit or his government or targeting it with investigations. Facebook would only give a vague statement along the lines of, "Let's all work together."
"We welcomed the opportunity to meet with President Hollande and some members of his government for an open discussion about France and its role in fostering innovation and attracting foreign investment," Facebook said.
The phenomenon of foreign leaders flocking to Silicon Valley isn't entirely new. François Mitterand, another French president, toured Silicon Valley in 1984, during which his wife Danielle, peppered Steve Jobs with uncomfortable questions about worker welfare like overtime pay and vacations rather than gushing about the technology, according to Walter Isaacson's 2011 biography of Jobs. Before Silicon Valley's rise, foreign leaders visited factories in the Rust Belt. Now, it's the same idea, just a different growth industry.
Silicon Valley leaders reciprocate some of the attention they receive. When they go abroad, they often find a warm reception. Mark Zuckerberg, Facebook's chief executive, met with Prime Minister Shinzo Abe during a trip to Japan in 2012. And last year, both he and Sheryl Sandberg, Facebook's chief operating officer, met with South Korea's President Park Geun-hye.
Meetings aren't always courtesy calls. In some cases, some real business-diplomacy is done. Last year, in a joint meeting in Paris with Hollande, Google's Schmidt signed an agreement in which the company pledged to pay $80 million to help French media companies build their presence online. The deal settled a dispute in which French news outlets accused Google of stealing their content by showing snippets of their work in search results.
What do Silicon Valley leaders get in return? Plenty. Friends in high places can only help when it comes time for their governments to draft regulations about intellectual property, immigration, and permitting, for example. Actual business deals are few and far between, at least in the short term. But the meetings can sometimes get the ball rolling.
"There's a sense that if the rest of the world is doing better, we'll do better," Miller, the former Stanford provost, said of the CEO mindset. "It's not competition but cooperation. Product innovation doesn't just occur in one place anymore."