The secret to creating the next Silicon Valley

New York. London. Los Angeles. Dublin. Chicago. Berlin. Every one of these cities (and more) have been mentioned as having the potential to become "the next Silicon Valley," a new technology hub that could rival the Bay Area's dominance when it comes to tech.

All of these cities are working hard to compete with Silicon Valley. London just hired a prominent Facebooker to become the CEO of its technology project. Dublin has f.ounders and the Dublin Web Summit. New York has a collection of high-profile tech companies, including Foursquare, Gilt Groupe, Fab, Tumblr and Quirky. Chicago has been churning out more high-quality startups, thanks to Excelerate Labs and Lightbank.

None of that matters much, though, when it comes to building a technology hub for the ages. The thing that matters most is capital. Not capital from wealthy individuals and VC funds, but the fast and high-profile capital infusion that only comes from a high-profile IPO.

I'm not saying there aren't other factors to fostering technological innovation in other geographic regions, and I'm not saying that cities should stop building support structures that foster startup innovation. In fact, Benjamin Joffe of +8* has a very good list of important factors, including culture, infrastructure and local regulations.

But none of those are the fuel that powers a technology hub like Silicon Valley.

Silicon Valley is a fine-tuned, well-oiled machine whose consistency at churning out multi-billion dollar companies is unprecedented. Startups are the engine, and IPOs are the fuel that keeps the thing running.

Why are Sequoia Capital, Kleiner Perkins and Accel Partners able to raise massive billion-dollar funds from investors? Simple: these funds are early investors in companies like Apple, Yahoo, Google and Facebook, which provide the vast majority of their returns. What do the thousands of early employees of these tech companies do with their newfound wealth? They become angels and invest their capital into local startups. If you live in London, you're simply going to invest in more London startups. Location matters.

And finally, what do companies with an influx of cash from a successful IPO do? They acquire startups, which injects money back into the engine.

Bringing startups to your city is only the beginning of the game. Having a $25 billion, $50 billion or $100 billion exit is the endgame. And until New York, London, Chicago or any other city has a successful exit of that scale, the title of "the next Silicon Valley" will remain unclaimed.

(Chicago-based Groupon failed to live up to expectations, otherwise we'd be having a different conversation right now.)

There is only one secret to creating your own Silicon Valley: churn out multi-billion dollar exits. Silicon Valley excels at this, and I'm certain that it's going to have another one in the next few years (Square). Until a tech hub can show that it has the next Google or Intel in its midsts, it's anybody's title to claim.