Jeffries profiles a number of young entrepreneurs who have returned to NYC after a brief tour of Silicon Alley.
Adrianne Jeffries via Betabeat
Whatever the reason, a passel of companies have recently boomeranged back to the city after a season on the far shore. The longtime tech mantra of ‘go West, young founder” is being revised for the simple reason that New York’s tech scene is up-and-coming, more social and more fun. Recent Y Combinator grads Codecademy, The Fridge, MessageParty, Hirehive and Tutorspree all moved back the New York within the past 18 months. Sam Rosen, plucked from Flatiron’s General Assembly for the Mountain View accelerator 500 Startups by superangel Dave McClure, returned after the program ended. “My friends in New York City—one would be in marketing, my good friend was a producer at MTV, other friends are lawyers. Whereas in the Valley you go to the party and everyone is in tech,” he told Betabeat in January. “It’s not like I’m tired of talking about my company, but it’s all we talk about.” Josh Weinstein, founder of the Facebook competitor CollegeOnly who later pivoted to interactive web television with a startup called YouAre.TV, ventured out to the Valley to work with a cofounder and be closer to investor Peter Thiel. In September, he returned—mostly because the cofounder bailed on him, but partly because he felt “isolated,” he said.
And in that last case, maybe because Josh Weinstein discovered the Thiel is barking at the moon nuts, too, and not just the insularity of the monoculture tech world in San Francisco.
New York City’s challenge to Silicon Valley’s high-tech dominance continues apace. By the time Mayor Bloomberg’s brainchild of an applied sciences campus takes root in 2013, the momentum may be too great to stop.
Latest case in point: Infor, the world’s third-largest creator of manufacturing software, is moving its headquarters from Atlanta to the Flatiron neighborhood of Manhattan — joining Google, Facebook, Twitter and other leading-edge firms in establishing a major presence in the city.
CEO Charles Phillips says the prospect of the new engineering campus — the prize Stanford, Cornell and others are fiercely competing for — was a big part of the reason behind the relocation.
Another example of New York as a multicultural, multi-scene high tech hotbed, competing against the monocultural Bay Area.
Rosen: NYC has the intersection of the creative arts with technology, but overstating to say we’re the next Silicon Valley. #disrupt
I disagree with Jay. There is almost nothing standing in the way of NYC becoming the leading tech center of the world.
New data shows what we have been seeing at a grassroots level: NYC is surpassing Boston at the second largest tech scene in the US, especially when you discount the biotech area:
The data being released today by New York investment research firm CB Insights show that New York has had 261 technology deals over the last six quarters, versus 250 for Massachusetts. New York tech companies received investments worth a combined $1.6 billion. Massachusetts companies got $1.4 billion in the same period. Both are behind California’s Silicon Valley, which has a firm grip on the number one position by a wide margin.
New York’s growth is fueled by the kind of technology start-ups that venture capitalists currently find attractive: digital media and advertising companies, which build on Manhattan’s base of older-technology firms in the same fields.
“There’s no disputing that New York is on fire now. It’s a very hot market,’’ said Michael A. Gree ley, general partner at Flybridge Capital Partners in Boston and past chairman of the New England Venture Capital Association. “Massachusetts investors now have a new respect for Manhattan.’’
The first indication that New York was challenging Massachusetts came at the beginning of this year, as the venture capital industry was starting to process investment data from 2010. On the eve of releasing last year’s venture capital investment numbers, CB Insights posted a preview of a “trend that caught our eye.’’
In the area of Internet technology, “N.Y. is starting to credibly close the gap between itself and its northern brother, Massachusetts,’’ the firm stated.
Massachusetts still beats New York by a significant margin in total venture funds invested, CB Insights acknowledged. New York has very few life sciences start-ups, for example. That sector generally demands significant investments from venture capitalists. Life sciences start-ups in Massachusetts attract millions of dollars in investment every quarter.
But in hot investment sectors such as the Internet, mobile technology, and social media, New York really had caught up to Massachusetts.
“Sentiment is very bullish in New York right now,’’ said Anand Sanwal, cofounder of CB Insights, “so we thought it was worth noting.’’
More proof that the NYC start-up scene is a real hotbed: Accel Partners are opening a NYC office.
Partner Theresia Ranzetta explains the motivations behing the move, “We had a critical mass of companies exhibiting early stage growth and saw an increasing number of interesting opportunities, we thought now would be a good time for Accel to have an outpost in New York.”
comment by Benjamin Neuwirth on AVC
[originally posted at Hotbed]
New York City’s tech scene is expanding at an astonishing rate these days, which raises the obvious question: why now? And, if New York has all the right ingredients to create a rich and deep technology culture, why didn’t it appear earlier?
My theory is that New York lacked, until recently, a critical factor: smart early stage investors.
The other parts of the puzzle were in place: great schools, brainy entrepreneurs, and abundant media and PR people. But without the manure that VCs provide, what looked to be a great greenhouse was cold, and very little would grow.
It is manure that makes greenhouses hot, that makes them hotbeds, and the critical factor is now being provided by folks like Chris Dixon, Fred Wilson, and John Borthwick. Chris Dixon recently made the case that the financial services downturn has dumped a lot of smart people out of financial sector, and also chimes in on the role that smart investors are having:
[…] why did New York City lag behind the West Coast this decade so much more than last decade? Especially since the internet in the 2000’s has been more than ever about consumers, media, and advertising – traditional New York City strengths?
I think the only explanation is that the finance bubble of 2003-2008 was a giant talent suck on the East Coast. The people I knew graduating out of top engineering or business programs on the East Cast were all trying to work at hedge funds or big banks or else felt like fish out of water and moved west. Money was flowing so freely in the finance world that there was no way the risk/reward trade off of startups could compete. Eventually it just became downright idiosyncratic to be a startup person on the East Coast. The Larry and Sergey of the East Coast were probably inventing high frequency trading algorithms at Goldman Sachs.
But this is why New York City now seems poised for a technology startup boom. The finance bubble has burst and the industry will hopefully return to its historical norm, about half its bubble size. The traditional advertising and media businesses are in disarray. The people who work in them will no doubt find new applications for their talents.
There is also a nice ecosystem developing in New York City. Union Square Ventures is one of the best VC’s in the country, with early stage investments in companies like Twitter and Etsy (that were followed on by top West Coast VCs at significant markups). Bessemer is an old firm that has a managed to stay relevant with investments in Yelp, Skype, and LinkedIn among others. There is also a new wave of scrappy Boston firms spending a lot of time in New York City – specifically Spark, General Catalyst, Flybridge, and Bain Ventures. First Round Capital out of Philadelphia is extremely active in early stage investing in New York. There are a bunch of veteran entrepreneurs actively investing in and mentoring seed stage startups. Google has a big office here and many people seem to be leaving to go start companies.
Fred Wilson of Union Square Ventures, recently made the point that NYC has been slowly growing as a start-up hub for a decade:
Chris argues that for the past decade, hedge funds and wall street have been a huge talent suck here in NYC and now that they are scaling back, our kinds of companies will find it easier to attract the best and brightest. I agree completely.
But I take some offense to Chris’ view that NYC was “irrelevant” in the 2003-2008 internet boom. TACODA, Right Media, Gawker, Quigo, Delicious, Etsy, Meetup, Indeed, Tumblr, Return Path, etc, etc. I don’t call that irrelevant. I call it misunderstood. Good thing people, including our Mayor, are waking up to what a good thing we’ve got going here.
I think a tipping point has been reached, though, where all the pieces are now connecting, and we are moving past an inflection point into explosive growth.
One of the other factors, that can’t be downplayed, was the cold water that got splashed all over the San Francisco tech environment in the fall of 2008.
Sequoia’s infamous ‘Good Times: RIP’ presentation — and the thinking behind it — infected Silicon Valley’s venture world like a zombie plague. In a nutshell, the venture firm had a secret meeting of its partners and key staff after the banking sector melted down, and shared a vision of rising financial insecurity and the need to decrease risk exposure. The result was a Valley wide cut back in deals, and a push to make portfolio companies more lean through staff cuts, decreased marketing, and slower technology roll-out. Over the next 18 months many companies would lose their funding, and thousands of developers, designers, and marketing folks would lose their jobs or contracts.
While the funded entrepreneurs and investors in the Bay area were busily patting themselves on the back for being so austere and forward-looking, the migration of start-up aspirants from Montana, Ohio, and Mumbai slowed. The big freeze stopped decades of software immigrants heading for the West Coast to start the next big thing. Now it looks like New York City might be the new tech Mecca.
Ron Conway, the great angel investor, made a presentation last November at a Betaworks brown bag lunch. He stated, more or less, that his group had made 25 investments in NYC companies by that point in 2009, out of 37 investments in total. (I may have the exact numbers wrong, but not by much.) In the previous year, he made only one investment in NYC, and in all the previous years he had been an investor, none.
Yes, this is a single investor, and it could represent a new-found willingness to invest outside of California on his part. Still, I find it indicative of the piling-on effect of smart money chasing other smart money in an environment that is creating enough innovation to justify it.
So, this new project, called Hotbed, is a vehicle for me to examine what is going into this creative frenzy, this exploding scene. I am an economic migrant, myself. In late 2009 I left San Francisco, a city I had used as my base of operations for 4 years, and I am now rerooting myself in New York City. This will be the journal of my inquiry into the peculiar chemistry of New York’s start-up explosion. I will continue to write about more global topics at /Message, as I have been doing since 2005. But Hotbed is all about New York tech start-ups, and the shifting, swirling scene that supports them.