BackNew York will never be Silicon Valley. And it’s good with that
New York's tech scene is growing up. Venture capital investment is ballooning, tech giants like Google have added thousands of jobs in the city, and homegrown startups are beginning to find multi-billion dollar exits
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New York: New York’s tech scene is growing up. Venture capital investment is ballooning, tech giants like Google have added thousands of jobs in the city, and homegrown startups are beginning to find multi-billion dollar exits.
Yes, the city is a long way from fulfilling the tired trope of becoming the “next Silicon Valley." But New York techies like it that way.
Investors, founders and employees point to all the things that make New York one-of-a-kind as the reason tech is growing in America’s biggest city: the presence of other industries like finance, media and advertising, much more gender and racial diversity and the metropolis’s centuries-old status as a centre of global commerce. New York provides a contrast to Silicon Valley, which has been criticized for tunnel vision, being insular, out of touch with the rest of the country and overly homogeneous–both company employees and the people for whom they create products.
Instead of being dragged down or drowned out by New York’s well-established mega-businesses, startups are feeding off them, hiring their disaffected employees, building products to make them more efficient and partnering with them in ways that help both sides.
“We wouldn’t have been able to start our company with this scale anywhere other than New York,’’ says Ryan Williams, the chief executive officer of Cadre, a real estate investment startup backed by Andreessen Horowitz. Being in the centre of finance gives the firm access to top Wall Street talent and helped it land $250 million to invest on behalf of Goldman Sachs Group Inc. “You have literally every major bank as well as a ton of private equity firms and hedge funds here," Williams says. “A lot of our early adopters and users are here."
It’s not just finance. It’d be hard to imagine a better place for Artsy, the leading online art auction house, to build connections with the world’s top artists and dealers. Oscar Insurance Corp., a startup that sells individual health plans and was co-founded by a brother of senior White House adviser Jared Kushner, found its feet by focusing on the city, one of the largest individual health insurance markets in the country.
The number of New York tech jobs has grown 30% in the last 10 years, twice the rate of overall economic growth in the city, according to a study from Tech:NYC, which advocates for the local industry. Last year, New York startups raised $11.5 billion in venture capital, quadrupling the $2.6 billion raised in 2012, according to PWC. That puts the city second only to the entire Bay Area, and ahead of Silicon Valley if the gigantic startups based in San Francisco proper like Uber and Airbnb are stripped out. “The ecosystem here has evolved and is a real market," says Beth Ferreira, a managing director at New York-based venture firm FirstMark Capital and former Etsy Inc. executive. “If the number of times I’m competing with west coast firms for east coast deals is any indication, everyone else has woken up on that too."
Whereas companies like Google, Facebook and Amazon invented, developed and dominated entire new industries like Internet advertising and e-commerce, the next wave of major tech companies are disrupting long-standing industries with a strong presence in New York, such as finance and healthcare, says Julie Samuels, the executive director of Tech:NYC.
Shan-Lyn Ma came to New York from a job in Silicon Valley in 2008 to help develop new products for fast-growing online luxury retailer Gilt Groupe Inc. When she left the company in 2012, Ma was one of many former Gilt executives who had the choice to stay in the city or decamp for California.
She stayed, taking seed funding from Gilt founder and New York tech godfather Kevin Ryan for her wedding planning and registry startup Zola. She’s now raised more than $40 million and netted a valuation of more than $220 million. “In retrospect it was the best decision ever," Ma says. The proximity to major offices of many of the brands Zola sells through its site was a major benefit to being in the city, she says. Having the headquarters of top media and advertising companies a ten-minute subway ride away went a long way too, Ma says, especially since one of Zola’s investors is the venture capital arm of Comcast Corp.
New York’s tech scene still has room to grow. Even though it leads the country outside of California in terms of number of tech jobs, they only make up 7% of the city’s total, compared with 13% in Boston.
Politicians, keen to brand New York as a major tech hub, are starting new tech training programs and welcoming tech giants to the city. Mayor Bill de Blasio announced funding to double the number of tech graduates from the City University of New York system by 2022. A new tech-focused campus of Cornell University and Technion-Israel Institute of Technology just opened in the city with a government grant of $100 million. (Michael R. Bloomberg, the founder and majority owner of Bloomberg News parent Bloomberg LP, has donated to the project through Bloomberg Philanthropies.)
The cycle of startups growing up, going public and former employees spinning out their cash and expertise into new ventures that built Silicon Valley over 40 years is being repeated in New York. The acquisition of DoubleClick by Google, Tumblr by Yahoo and Jet.com by Wal-Mart all boosted the city’s ecosystem. Though New York has yet to produce a Goliath like Facebook or Amazon, the steady stream of IPOs—Etsy and Blue Apron among them—and high-value acquisitions is encouraging.
Beyond the funding raises and promises from politicians, the city seems to be ahead of Silicon Valley in one crucial area. “New York is a much better place for fostering women entrepreneurs and women in tech," says Samuels, who worked in the industry on both coasts. Both Ma and Ferreira agree.
The flexibility of a city that incorporates industries outside of tech and New York’s status as a world city are factors too, Ferreira says. She could have found a job in Silicon Valley but doubted her lifestyle would improve with a move to California. “Even with all the wineries." Bloomberg
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