What Makes The New York Web Startup Sector Special?
On September 29th in the evening I am giving a talk about the NY web startup sector. It's part of our portfolio company Clickable's monthly "cultural event series". They asked me to give the talk I did last fall on the history of NYC's web industry. But that didn't seem like the right idea to me. As I thought about it, I decided to focus not on the past, but on the present and the future of the NY web startup sector.
A few weeks ago, Chris Dixon wrote a post suggesting that the NY startup scene was "poised for a revival" and I linked to that post with more thoughts on the topic. I agree with Chris' sentiment that web startup activity in the NY area is on the rise and there are a lot of really interesting things going on here.
I want to talk about that and I also want to examine why exactly that is. It is my view that each startup center of scale, and there are at least a half dozen of them, brings something special to the table. Silicon Valley is the largest and most important of these startup hubs and it's strengths are pretty well understood. But that is not so true of the secondary markets which are important and becoming more so.
I am not particularly qualified to talk about Seattle, Boston, Boulder, So Cal, etc, but I have been studying the NY startup ecosystem for a long time and I've gained an appreciation for the things that makes it special. I am going to talk about those things and I am going to talk about where they are going to take us.
Like I did with the Web 2.0 keynote talk, I've put together a wiki where anyone can leave ideas for me to include in this talk. I've seeded the wiki with some data but it is very much in the nascent stage right now. I plan to work on this talk over the next few weeks and hope that anyone interested in this topic will stop by the wiki and contribute your thoughts.
It appears that the talk is sold out but I will make sure it is recorded so that everyone can check it out. If it turns out well, I'll make sure to deliver it more than once.
I think that one of the driving forces in the apparent proliferation of startup hubs is specialization and comparative advantage. Every startup hub has its own unique culture, people, and resources that in a hyper-competitive and flatter market landscape translate into real advantage for particular tech sectors.Silicon Valley’s traditional advantage has frequently been simple economies of scale by the metrics that matter to tech ventures, which translated into reduced costs and more efficient operation. Those scale benefits pushed the other relative advantages of other locales below the noise floor. What has changed is that ventures have become much cheaper in terms of those key economies of scale. The overhead costs, both direct and indirect, related to tech ventures have shrunk to the point where many other startup hubs are highly competitive by virtue of their unique advantages and specialization.In a way, this is a natural corollary of the observation that many tech startups are becoming less capital intensive over time. The operational efficiencies that used to be obtained by operating in Silicon Valley are no longer large enough by themselves to cancel out the advantages of other startup hubs. Being able to competitively take advantage of local strengths will create a much richer ecosystem where the city that is culturally the metaphorical “Silicon Valley” will depend on the type of tech venture you are building.
that’s a great point about capital efficiency being a “threat” to silicon valley’s dominance. but since capital availability has always been one of NYC’s long suits, that seems like it would apply here as well
It goes far beyond capital qua capital and into the economics that surround engineering ecosystems and the value of social networks. Before the days of ubiquitous broadband and modern web apps, Silicon Valley’s strength was its very deep physically-local social networks.There is a critical mass for an engineering niche, where once you have enough genuinely brilliant and socially-connected individuals it creates a very deep pool of knowledge and engineering creativity that kind of feeds back on itself. This almost certainly applies to many other areas outside of engineering (and which NYC has in spades), but for Silicon Valley it had a very dense network of engineers such that it was the only place to be for many bleeding-edge engineering sub-disciplines. Silicon Valley was never the engineering center-of-mass for all computer tech, but it had a lot of them and this was an invaluable resource for tech startups and made it much easier to be successful. If you needed to solve a particular problem, it was relatively easy to find the best brains money could buy in the local scene. It wasn’t always as simple as it is now to find the right brilliant engineer to chat with.What has happened is social networking and broadband. People forget how many of Silicon Valley’s ventures in the 1980s and 1990s were spawned in local Silicon Valley dives and face-to-face meetings with physically local engineers. I was at a lot of these informal social sessions, some of which spawned multiple successful companies. The product of that interaction reflected the pools of talent and specialization in the local area. I think in many ways the business value of those physically local social networks was such that it dominated most other factors.Today, most of this interaction happens online. Gaining effective access to pools of seriously creative and smart engineers is easier than ever even if your particular geographical area has a deficit of expertise. This allows concentrations of really smart people with one specialty to leverage the specialization of another group of people without requiring that everyone physically meets in a favorite pub.
Case in point. Quite a few SV entrepreneurs read the blog of A VC in NYC. That gives our firm acess to that market without having to open an office there
That sold out quick.
yeah, i am going to find another venue to give this talk again. seems like there’s demand for it.
Great news, would be groovy to catch the live talk.
Damn it, I’m leaving the state too for a bit, most likely I’ll miss the second one. 🙁
I’m in NY 6-10 Oct. Don’t suppose there’s any chance the second talk might be in that week?Slightly off-topic, but are there any NY start-up events in that week that may be of interest to a visitor?
Check the ny tech meetup at meetup.com and nextNY. They both do great events
I would be interested in a discussion on the key factors behind a successful environment: is it mostly the “traditional ecosystem”, and to what extent do other soft factors- culture, social communications, networking habits, sharing, intensity, and work ethics, play a role. I’m about to unveil an NYC-Tech news aggregator in few days- hopefully it will help at least shine the light on all the great things that are going on already.
Sounds like good view graph fodder William. The “why NY” based on features would be well received by local developers who are considering moving cross country (like me).Of course there are other important factors like, are their excellent bio research labs my fiancé can potentially work in nearbye.
Looking forward to the video, and I can probably add some feedback to the wiki. I dig collaborative presentations, at least the format you used previously. I suspect you’ll get a ton of feedback this time.Btw Fred, I only saw Shana Carp’s comment not the seeded stuff I expected.Too bad I can’t catch this one live (no chance to book a bigger room?)
It was just a comment…My sleep schedule’s been thrown, and I had seen a copy of Boxee in the last place I had expected it.Did I do something out of turn? I thought that was the point of having a wiki?
By all means contributing is good! I just expected a loose framework from Fred to get us started.
I added a section to the wiki page to discuss/develop a list of sub-sectors where NY is leading. I defaulted to “what I knew” — basically, the email newsletter sector. The industry is mostly if not all here. (What I put on the wiki is gone now, though, and I can’t find it in the version history to revert/replace what I put in.) But basically, established things like Thrillist, DailyCandy, etc are/were all here, and even newer players like The Toilet Paper and (my product) Daily Tailgate are also here.I think — but this is 100% guessing — that the reason NYC is a petri dish for these types of businesses is because the biz isn’t one that requires deep technological DNA. That is, you won’t see these companies developing any game-changing web technology. However, these companies *do* need deep media DNA, which you’ll be hard pressed to find at scale anywhere else in the world.Infusing the media world with technology is very different than infusing the technology world with media. New York is uniquely suited to do the former, and I think a lot of the emerging sectors which won’t make sense to Silicon Valley VCs (e.g. newsletters, the HuffPo model, etc.) will find homes here.
that’s a great point Dan. I think you are spot on with the observation that NYC based startups have deep media DNA but less tech DNA.i’m a bit concerned that your comment on the wiki is gone. it seems like that page got changed quite a bit since this morning
Great insight Dan. I think you are spot on with this point. I’m bothered that your comment on the wiki is gone
Embarrassingly, especially as a once-founder of a wiki-based site, I think I edited the wrong page. It’s not in the history but neither is the version of the page I (think I) edited. So don’t worry about it too much — I’ll just (re-)add it to the current page.
NYC has a lot going on – it’s best knowns: financial services, media/entertainment & advertising. Secondary: tech, film and more. Could having so much going on mitigate some of the strengths of its startup environment? SV is best known for start-ups/tech (Austin maybe in same category, ‘cept on smaller scale). DC’s known for gov’t/not for profits (although there are many more industries, including tech). Having such a concentration breeds a wide expertise in these areas. So I wonder if NYC could ever be huge in start-up/tech.
It already is in the software and services sectors
Not that it’s already there, but how big could NYC tech be (ie, a bigger attraction for talent than SV). DC has a number of successful tech start ups – Blackboard (ipo) and Clearspring (start-up phase) – but I would think that given the focus in the area, tech wouldn’t thrive as much as, say, Boston, SV or NYC. NYC can def be THE city (hope that it would), just wondering what the trigger would be.
That’s what I am going to talk about
It already is in the software and services sectors
Two words: mainstream adoption. Where I see a lot of early adopter tech sprout from the Valley, I see (or perhaps want to see) more mainstream adopter consolidations and syntheses coming out of NYC, and East Coast in general (I’m in New Haven and prior to Ripple100, ran university-based accelerator, so I’ve seen the scene). They ask what funky new tools can we come up with for geeks? We ask how can we use all the cool stuff out there and make it more usable for everyday people (feel the song). NYC’s financial and media base have to do with this – it’s the kind of folks (users) we attract, and the kinds of usage we reward. If this is true, what does this say about the direction and trajectory of VC and startup going forward?
Its coming our way
For startup hubs, you can look at 2 variables: people and industries. Inter-connected but different. People define users, usage patterns, subjects of use. In other words, people tend to solve/innovate their own problems. So in startup hubs the kind of people you attract tend to define the kinds of innovations you see. Industry clusters attract people clusters so they’re related. But industries also define the cultural, performance, bureaucracy and capital-and time- benchmarks that tend to be acceptable and rewarded in any given place. Look at the people and industries of NYC vs. Silicon Valley vs. X, Y, Z – does this make sense?
I think one of the great advantages in NYC is the depth of talent from the diversity of industries in NYC. Success in Finance, Fashion and Media (among others) all require strong entrepreneurial skills to succeed and as startups try to become lasting businesses, they require functional business experience that those industries provide. I’ve seen/had tremendous success with hiring folks from all sorts of other industries that bring great practical experience to the startup world. I think the type of ambitious talent that is drawn to NYC is a natural fit in startups.
Yes and the consumer sensibilities that come with that kind of experience
A few thoughts on why the NY startup scene is thriving:1. Rent and talent are expensive. As such, startups focus on revenue as fast as possible: Etsy, Gilt Groupe, Bonobos, Drop.io., etc. all have done well to move to significant revenues in a short period of time (by Silicon Valley standards)2. Talent is plentiful. NYC is a hub for graduates of some of the top universities. My sense is that NYC is growing as a destination hub for top technical talent, but it will always have a surplus of sharp, ambitious potential employees. (They may just be slightly over-valued in their self-assessments..)3. Collaboration tools seem strong. NYC Meetup, Founders Roundtable, DFJ brown bag lunches, etc. Across industries, startups seem to be working together to help share learnings & network on recruiting, fundraising, biz dev partnerships.4. As other comments have mentioned above, proximity to media/financial services leads to lots of possible clients, customers or employees-as-customers (in Bonobos’ case 😉
“1. Rent and talent are expensive. As such, startups focus on revenue as fast as possible: Etsy, Gilt Groupe, Bonobos, Drop.io., etc. all have done well to move to significant revenues in a short period of time (by Silicon Valley standards)”Two thoughts on this. The first is that aren’t talent and rent (to a lesser extent) expensive in Silicon Valley too? The second is that your general point reminds me of one made about Swedish industry: that its high labor costs were an advantage in the sense that they steered Swedish manufacturing into high-quality, high-margin products which could in turn support the higher labor costs.
For sure–I think the general tenor here is that SV and NYC aren’t really that different anymore, although certain reasons can be amplified for why NYC has become a startup hub (the purpose of Fred’s talk/post). I do think that NYC because of it’s higher living costs, does make it a more expensive proposition to start a company out here, rather than in Millbrae, CA, for example.Second point is definitely where I was going. We’ll need to see the US do the same thing with our manufacturing: clean tech, high tech, products will carry us forward, not manufacturing jobs from the rest of the 20th century.
I agree with you that we need more high-margin manufacturing in the U.S., but I disagree with your narrower focus on clean tech. Sweden profitably manufactures cars, trucks, aircraft, etc. We would be better off if we were building more cars, airplanes, etc. here*. Spain is the world leader in windmills and has 20% unemployment.*It’s worth noting that we still lead the world in manufacturing output, but I think we’d be better off if we stepped that up to where manufacturing jobs comprised more than their current ~10% of the workforce.
Excellent list. This is what I want to talk about and you’ve given me some great words to use!
One thing that I think NYC has going for it, which is more a state-of-mind than anything, is its status as the underdog, the start-up, the disrupter. What I mean is Silicon Valley is largely known to be top-dog, and Boston has a solid scene as well, but these cities are just great motivating factors for NYC. I mean this both for NYC startups individually, and for the entire NYC startup ecosystem. We’ve seen the SV model, we know how it works (and we know what doesn’t work). As is mentioned in the wiki, NYC has a lot of features that SV and other cities don’t have – a core competency of solving ‘real problems,’ media and finance institutions, etc . – let’s stick to what we do, and be the absolute best at it.In sports, in start-ups, in everything, there is always someone out there working as hard as you – if not harder – you can’t worry about them, you can only think about being your absolute best at what you do! (Fred had a good post about this a short while ago). Sure, it will be great to oust SV as top startup city someday soon, but in the meantime, us NYC entrepreneurs/investors/VC’s need to focus less on ‘beating’ Silicon Valley, instead staying true to our core competencies that focus more on building a powerful, sustainable startup ecosystem here in NYC.To us!
The old avis argument ‘we try harder’
Having read through a smattering of the comments thus far, there seem to be a tendency towards weighing a startup community by its locate being in close proximity to capital…its a piece of the pie to be sure of, but only one variable, and more so when one considers that there are vast differences in smart/dumb money…it also is dependant on the scale of the startups and the size of the verticals they are going after…More details to the discuss now on your wiki…
There’s a lot to be said for developing a business in an environment that is so compact, such as to be found in the compressed, intense scale of NYC – is similar to why the ‘Square Mile’ area in London has always been so successful in global finance, especially since inner-city living choices have exploded in inner London. Everything is in walking distance. In a time of global, real-time communications, opportunities and trends, the ability to be so physically intimate is a massive bonus in accelerating a business. The Valley just doesn’t compare in this respect, I’d humbly suggest.In a way we’re returning to the times when (an example relevant is where I live nowadays, in Yorkshire; a village called Emley, which is a former coal-mining village) people lived very close to their work environment:The compelling reasons back then were very different (subsidised housing, lack of transport, etc) but there are equally compelling free-choice reasons now why this appeals: Many people have tired of the inefficiency/costs of commuting and see the positives of living/working in the same area and being part of a community – I am especially seeing this with younger friends/associates. They want to live/work in the same area and not bother with a car, and be part of a living thing, 24/7 – socially and career wise.
When I moved to NYC 26 years ago our rental broker asked us where we wanted to live. I replied that we wanted to walk to work. We did then and I still do it now at times. But whether I take the subway, vespa, or walk, its about 10-20 mins and none of it spent in an automobile
Absolutely. Travelling time is not just (generally) dead time it also changes one’s psyche; usually for the worse. A sense of ‘being’ is priceless and can only be of benefit to the individual, the business and the community.
It’s the web. Live where you enjoy living.And yes, I agree that NYC is a great place to startup a startup (although once my startup became “successful”, I’d probably find residence in Florida or Texas for 6 months and a day each year….)
I gave a talk in Bari, Italy on ICT International Social Networks that might be interesting for you to read and reference. New York City as an International center for business has lot of advantages. See http://www.scribd.com/full/… for a copy of the presentation. You can use any portion you like for your presentation without attribution.
If I use it, it will be with attribution. That’s the way things should beThanks for the link. I’ll check it out
Fred, what do you think of the (city funded?) Polytechnic Institute of NYU incubator Mayor Bloomberg announced at a press conference on today? I just listened to an NPR story on this http://bit.ly/ETiWH and I thought its most interesting opinion was that big companies suck up all the air. Any truth to that?
I don’t know about the latter point. I’m on the advisory board of NYC Seed. Its a good program but a bit hamstrung by a limited amount of capital. I hope they get more. We need more things like this in NYC
Cool. Always in between Houston and New York anyways so this is a neat topic. Can’t wait to hear it.
i’m still not sold geographical hubs are a great thing that will last. if there is a great person who i would love to have on my team, i’ll find a way to work with them. especially for the pure web startups, i think geographical proximity is less important; the occassional meetup, phone calls, email, web conferencing, should make it easier to work with whoever we want, whenever we want. far more important will be people who have highly specialized knowledge that is needed, regardless of where they are.crowdsourcing and wikipedia are examples of how i think this plays out.
How are you even comfortable living in the U.S. if you believe what you believe?
the rest of the world is not much better, and in many instances worse. remember we live in a world where 1% of the population own almost everything, where war and poverty are the status quo.but there are many better places, and i have seriously considered emigrating. if i was more financially stable, i would almost certainly move.
Where to? (Serious question).
my top spots would beaustralianew zealandindiachinasingaporeargentinarandom islands in the carribean most people don’t really know much aboutbut emigrating is really tough. even if i had more money, i would be more inclined to invest in domestic security, as there is really no place to run, the problem is global (although i think USA will have some of the toughest problems). in terms of domestic security i refer to firearms, storable food, water filters, first aid kits, gold and silver….survival preparations, basically.
I can’t see you liking Singapore in the least. You start accusing the powers that be there of conspiracies and I don’t think they’d be cool with that.Economically speaking, Australia is probably the best place in the world to be right now. The country’s got a great balance sheet, rule of law, it’s first world, it has a rational immigration policy, it’s rich in natural resources, and it’s positioned geographically to profit from the growth of China and India. My biggest investment is in a tiny company based outside of Perth, in Western Australia. I’d like to invest more money in that country. I’d consider moving there if I didn’t have ties here.
I like your thinking wrt Australia, and if you’re really looking to invest there are heaps of smart people here with ideas worthy of consideration, but perhaps not as much commercialisation experience as you might like.There’s a very good paper here about the state of the tech industry in Australia:http://www.siliconbeachaust…Silicon Beach is a group of Australian tech start-ups and ex-pats from all over the country.Sorry this is way off topic.
Thanks for the link Phil, I’ll take a look at it. Just to clarify though: I’m not a V.C., just a small-time entrepreneur and retail investor. That “investment” I mentioned is in an Australian company that trades here on the OTC Bulletin Board. One interesting thing about that company though, in contrast to some venture-backed companies mentioned here: it’s a manufacturing company, and the founder and CEO has taken it to profitability and growth with a tiny fraction of the outside capital consumed by some venture-backed Internet companies here. I’d guess he only raised a few million dollars in his IPO (he still owns 60% of the company).I mentioned this company in the comment thread of a post last month, when the American billionaire entrepreneur Mark Cuban said he’d rather invest in the next “Reardan Metal”. The CEO is an inventor like Rand’s fictional industrialist.Incidentally, that company and yours have a client in common: BHP Billiton. The manufacturing company just landed a $50 million, 5-year supply contract with BHP.
free speech does not exist as much in the US as the mainstream propaganda would like to tell us it does, so i’m sure i could get by in singapore. most countries in the world suck because they have criminal governments, but the economic collapse the US is in for, coupled with the fact that it is the headquarters of the empire, is going to be make it especially unpleasant — third world status for sure. then add in the stigma that will be on america for the global mess that has been created and the refusal to accept responsibility for it — similar to the stigma germans felt after WWII — and i singapore will be a much better option, with a higher standard of living.if australia wasn’t so far away, if it was like as far away as cuba, i’d almost definitely be there now. while they do have a stupid and terrible government like almost everyone else, i honestly think they have one of the best economies out there. i’m a currency trader and i’m long australian dollar against the US dollar.
Australia is an interesting place/people – I lived there for a year or so and travelled around a fair bit. Really enjoyed it and I believe it has a great future but it needs to be more proactive and aggressive re: immigration, etc. Can’t knock their relatively stable, strong, growing economy, though – even in these mad times they do OK. I never got to NZ – Oz is too big, lol – but from what I hear that is a lot more genteel (which is nice in a postcard tourist sense). The emerging economies in Asia I know very little about – people I know who have done business/lived there find them ‘challenging’ but cannot be ignored, of course.At this moment, if I had complete freedom of choice, I’d elect for Western Australia – somewhere an hour or so from Perth. Best of all worlds.Or Montana – if it were an independent country … 😉
That works great until you are a dozen or a couple dozen. It doesn’t scale well in my experience. Could change of course as a result of web and tech but face to face is still the best way to get hard stuff done
I co-founded YourGrocer.com in New York in 1998 (it is still delivering bulk groceries) and loved the loft parties and always-on atmosphere of professional cocktail parties. I didn’t like the Hamptons scene after Lyme ticks invaded in the late 90s but summer nights in Yorkville were magic. A toast to New York.
How did your company survive while Web Van didn’t?
I don’t think I could fit in on the wiki but I wanted to add some points about why you would have a start-up in NYC 1. This is a city that survived 9/11, it can survive anything.2. There are a huge number of restaurants for every conceivable taste and budget, and you need that as a lot of business is done over meals.3. You don’t have to have a long commute to work or even buy and park a car, you can use the subway and find a place close to work.4. New York is a place where if you need to buy a sofa at 3:00 in the morning, you can do it. So it’s not a problem to get fast food for an all night work marathon either.5. Brooklyn is already being called Silicon Alley and Home of the Metaverse for the virtual world building done there.6. New York is a huge center for fresh immigrants from all over the world, so you can find eager young, smart people looking for jobs from all over.7. New York does not have the obsessively technical and geeky culture of Silicon Valley, it is more based on the arts, humanities and retail businesses and that’s a good balance for tekkies particularly in usability testing but also in synergy across discliplines.8. Some of the public schools are such a disaster that anything you add in terms of an after school program, a donation, an internship all would be a plus.9. People are more grounded here and we don’t have the high percentage of wacky cults you do in California, so there is less danger of technology running amok, although of course, there is Ray Kurzweil and the Singularity, but he’s in Queens.10. The universities here aren’t feeders into the industrial tech borg the way they are in California, but maybe that’s a good thing because they can academically challenge your ideas.
I think you’re reaching a little with that list. Other cities have survived worse than 9/11. Think of London surviving the Blitz, or New Orleans surviving (sort of) Katrina, etc. Does that make them better places for start-ups than NYC?Where can you buy a sofa at 3am in NYC? Despite the saying, the city really does sleep. There really aren’t so many restaurants open all night, for example. The city’s immigrants aren’t all smart folks waiting to contribute to start-ups. #8 isn’t a plus. #9 is debatable.
Thanks for the list. There’s some really good stuff in here
New York is indeed special because lots of “bright minds” go there to seek fortune and fame…in the business world, the other ones go to Hollywood. So this is the reason why you will have lots of entrepreneurs listening to the speech. Also I agree what was said about NY hosting tha largest media companies and financial firms. Check out the NY investors from the VCgate database here http://vcgate.com/
the timeliness issue is particularly big in the finance sector as you know Miles
Great points Miles. Thanks for leaving them here
So I should start my talk with sinatra? I was thinking The Sex Pistols to be honest