NYC Tech Is Fueling the New Economy
Posted on: May 5, 2014
New York has always been an important hub of finance and fashion. Known for Wall Street, Broadway and the glitzy advertising agencies of Times Square and Madison Avenue, there is now another reason that New York is the “city that never sleeps.”
The city is now widely regarded as one of the top five startup ecosystems in the world, and in the top three in the US. In fact, NYC has seen twice the VC deal growth rate vs. Silicon Valley from 2009 to 2012 (source data from NVCA PWC Money Tree report). Additionally, as Nick Beim points out in TechCrunch, NYC has seen higher rate of growth in large exits of over $500M than both Silicon Valley and Boston.
This early-stage startup growth has been complimented with an “accelerator bubble.” NYC-based incubators numbered zero in 2008 and now boast over 30 accelerators/coworking spaces. Growth in technology professionals is also impressive. New York Tech Meetup now claims 39,000 members up from 7,500 in December 2008. That's more than a 500% increase in less than six years—impressive growth.
Talent Leaves Wall Street for NYC Tech
New York has always been a talent magnet as young people arrive in the big city to prove their mettle. The proximity to New England’s top schools has served Wall Street well in the past, providing eager new recruits for the trading floor and hedge funds. It also doesn’t hurt that New York is also home to major retailers, brands and ad agencies.
The recession hit the city hard, but was the impetus for a new policy push to remove the reliance on Wall Street. Mayor Bloomberg and the city’s Economic Development Council provided financial and policy assistance to spur tech-related job growth, such as the five initiatives on broadband access and incorporating tech into the city’s public policy, including programs such as ConnectNYC, WiredNYC and CitizenConnect. They also provided funding for the city’s accelerators and co-working spaces.
This has helped the startup cause, as many downsized Wall Street and Madison Avenue brains turned their talents to more entrepreneurial enterprises. In fact, from 2007 to 2011, technology-related jobs grew at a rapid 28.7% rate while employment was down in many of the city’s traditional industries such as securities, down 6%, and publishing, down 16% (source data from NYCFuture.org).
Talented people who wanted to stay in New York have poured their drive and energy into startups. And the availability of design and ad talent has tilted the type of companies that are nurtured in New York. This makes New York an interesting startup laboratory with a very different mix of talent and resources from the West Coast and nearby Boston and with new innovation potential.
Play to Your Strengths
The focus of startups in NYC is on Fintech, Food-tech, digital media, ad tech, retail and consumer-focused web companies, such as social networks, drawn from the traditional industries in the city. There are plenty of examples in each sector including companies such as Gilt and Fancy focused on designer retail, Blue Apron the food delivery startup, Cafemom and Tumblr focused on digital content, and Foursquare and SumAll in social.
NYC Tech today is no longer a follower in tech, it is leading the tech transformation of many traditional industries. A case in point is MakerBot, which has made 3D printing a household name. NYC is also poised to lead in the Internet of Things era and R/GA, in partnership with TechStars successfully graduated the first batch of its IoT accelerator class this April.
The current emphasis on design also favors the talent pool in New York. In the tech industry, the importance of front-end design is critical to a startup’s success. This particular resource is more abundant in New York than some of the other regions. And Design is increasingly important in all verticals looking to quickly grow their customer base.
One example is Kapitall, an innovative Fintech startup, who just launched their Windows 8 app that applies gamification and a drag and drop interface to Trading and Investment. Their CEO Jarett Lilien, who is also the former President and COO of E*Trade Financial, noted “the last chapter of online financial innovation was driven by access, speed and price. This current chapter is about taking the old and making it new again and this is all driven by design and a modern user experience."
The focus on domain expertise vs. pure tech also lends itself to more women joining the tech movement in the city. A study by Startup Genome found that New York City has almost double the female founders of Silicon Valley and London (80-20 vs 90/10 ratios, respectively).
Staying Close to the Customer
NYC is also home to some of the biggest retailers and media giants, such as Saks, NBC, MTV and Conde Nast. Some startups are even making the move to New York to be closer to their customers and partners and are experiencing success from this decision. Place IQ made the journey from Colorado and Qwiki moved out from San Francisco.
As David Tisch said in a recent TechCrunch interview, “The density of people and business are uniquely suited to certain kinds of business models, where every stop on the subway can be a different demographic…You can see why a company like Foursquare can take NYC, and own it and thrive here.”
Luan Cox, CEO of Crowdnetic, which provides real time data on crowdfunding, noted that “there is no better place to build a fintech start-up than New York City. Period. With the deep and diverse talent pool we have here, start-ups (like ours) compete against Wall Street firms versus Google or Yahoo! The amazing team we have been able to build is passionate about changing the status quo in finance and there’s no better way to do that then to be sitting next door to the very establishment you hope to enhance.”
The People Behind the Growth
With some large and successful startups under its belt, New York has a burgeoning ecosystem of mentors and early-stage angel investors. Twitter’s Jack Dorsey, the gang at FourSquare, David Tisch of TechStars and Fred Wilson of Union Square Ventures are just a few.
Traditionally, the investors on Wall Street, private equity and hedge funds focus on commodities and the stock market, but not the same risk capital game carried out in Silicon Valley. We see that changing with the growing influence of groups like Union Square Ventures, Spark Capital and Rho Ventures for example, as well as high-profile angel investors like Catarina Fake of Flickr fame, David Tisch of the BoxGroup and Techstars NYC, and Alexis Ohanian, co-founder of Reddit and HipMunk.
In addition to high net-worth individuals and institutional money, we’re also seeing a magnification of the same incubator and accelerator trend that is manifesting around the globe and helping startups gain access to global networks and resources. Major New York-based accelerators, co-work spaces and communities include, NYTM, TechStars NY, WeWork Labs, Betaworks, General Assembly, Digital DUMBO and ERA.
Microsoft and NY Startups
Who is paying attention to NY? The easier question is, “who isn’t?” All major companies have already opened or are in the process of opening incubators and outposts in the New York area. This includes Google, Facebook, EMC, and IBM.
At Microsoft, we’ve always had a deep partnership with New York City, with customers and partners spanning NYC’s key industries such as Finance, Retail and Advertising. Now we are taking our expertise to the new engine of NYC’s growth, its tech startups. We just moved closer to startup central in NY with our new offices at Times Square, and are here to help startups harness the unique scale and expertise Microsoft offers for their business.
David Bloom, CEO of NYC based food tech startup Order.in recently noted that, “Microsoft represents tens of millions of customers, has platforms as diverse as Bing and Xbox, and expertise in every imaginable technical field. Amazing opportunities for any startup to tap. I can point to specific wins at Order.in that were helped by Microsoft and their local team.”
You can catch our NYC team in action at Disrupt NY this week and also meet a few of the startups in the region who we’ve partnered with, like Kapitall, Parking Panda and YumvY. It is clear that New York is already playing a vital role in the startup ecosystem and will be even more formidable in the near future.
Focused on front-end mastery, ad-tech and branding—often the missing pieces in successfully crossing the chasm for many consumer-driven startups—the Big Apple has found a unique stronghold from which to take root and fuel growth. At Microsoft, we are rooting for NYC tech!