A Tale Of Two Cities
Yesterday my partner Brad told me that he thinks something special is going on in two cities, San Franscisco and New York. That something special is a creative culture that is leading to an explosion of new web services.
This post from Om Malik bears that observation out. Here is the money quote:
San Francisco saw 36 Internet deals that brought in $131 million, while New York City saw 31 Internet deals garner $126 million. In comparison, Mountain View, San Mateo & Palo Alto saw 21 deals focused on the Internet and they brought in a total of $174 million.
If you want to talk about capital efficient web servics, then there are two ideal places to start them, San Francisco and NYC. How about the valley? Well, there you apparently need to spend more money. The average Internet deal in SF and NYC was $3-4mm. In the Valley, it was over $8mm.
I'm pleased to see NYC getting the attention it deserves. NYC hasn't been a technology hotbed since Bell Labs left town in the 50s, but now in the age of Internet startups, it sure is.
Any statistics on the city of Los Angeles?
click thru to the Om post and then to the CB Insights postmight be some in there
Thanks for the mention Fred. The CB Insights’ 61 page Q3 2010 VC activity report is available here to download for free here:http://www.cbinsights.com/b…Best,Anand
LA has definitely been creating some buzz, I agree. Despite the buzz, I think the community is pretty small still, maybe akin to what NYC was 7-10 years ago? I’d be interested to see what the startup success to failure ratio is by geography and industry – probably a nearly impossible statistic to truly quantify as not all startups get funded, etc…but still interesting to see regardless.
It’s happening alright. It’s awesome being in NY right now and being a part of this startup community. This is just the beginning
I never felt there was much of a difference in the startup financing ecosystem between san Francisco and the valley. How do you see a difference?
I saw a bit of a difference this summer – many startups want to be based out of San Francisco because that’s where young(er) people want to live. I was based out of Palo Alto, and although it’s a charming city, it’s not where I’d choose to spend my early 20’s socially. That was part of the reasoning for why I/O ventures opened up their incubator in San Francisco – they also picked up on this emerging trend of startups wanting to live and work out of San Francisco.
Hard to quantify or explain but our bay area portfolio is almost entirelyhoused in SF
Ah! Exactly what I was about to say. See my other quote. Not surprised at all.SF is historically young single creative types, more cool and mellow. Valley is family-oriented, with more serial entreps. Deals tend to be bigger.Largely due to demographics and vision differences, deals at the stage in which USV would enter are naturally more present in SF vs the Valley.Sean Parker is an interesting case: young and single but stayed Valley-based because that’s where the big action was.
That puts Twitter in SF.
Two expensive cities to live in! Guess the network benefits outweigh the costs!
Always hasCost of living is a red herringSteven Johnson’s new book, where good ideas come from, has some good research on this
the sheer scale of eclectic and obscure history Steven got his head round to write his book is mind-boggling.
Once a city attains a certain level of mass then the gravity (infrastructure, available talent pool etc.) pull makes sure the business gets automatically trapped into the pulling force.Get your spin and generate the magnets in those large cities… good luck to those entrepreneurs in NYC.
Wow, New York’s really catching up.
How I see it.
Interesting, and they dont intersect.
it’s a seed that needs work. I’ll Iterate and develop my first slideshare & an accompanying movie. Probability of Profitability will become an outcome. Top bubble will become Team
It’s also going to be a hotbed because it’s home to the American publishing industry, and there’s tons of upside in creating new systems to connect the realtime news organizations and realtime tech.We tend to look for things that replicate the model of Silicon Valley, which is of course totally understandable, but I think when it shakes out, there will be something new that happens in NY that could only happen in NY.
So true dave On Oct 13, 2010 8:09 AM, “Disqus” <>
Very true. Each successful ecosystem ends-up carving its own uniqueness at the end. There’s always a graft from Silicon Valley, but the rest is shaped by local characteristics.
Fashion and Media companies have a louder voice out of NYC as well. These industries are going to benefit from innovation from the exciting Web scene for sure.
Totally agree with you.I was in SF/SV last week, met awesome people, but the clearest thing that came out is for my specific business — the things we’ve already done and the plans we have — pockets of distinction we’re creating are specifically available to me by being in NY.And it’s not just manhattan island, mind you (as much as I love it) and it’s not just with young kids fresh out of school (much as I adore them too).We have access to incredible depth of expertise. Especially publishing. I’ve met super seasoned folks who’d never been accessible in the past but recently they are.I think a lot of online publishers have functioned more as ‘line extensions’ of paper. And that doesn’t go very far, either for reader experience or to create new business models. Media birthed online tends to be superior in terms of speed but lacks richness and perspective.I was ‘born’ in the TV business and have spent years hopping from one advertiser-supported medium to another and back again (tv, print, radio, national and local, online, international, film).I feel like we have finally hit a nexus where enough of the old world has deteriorated — and enough of the new world is developed and accessible — that we can take content from 2d to 3d and far beyond.And also deliver true marketing ROI, at scale. Nirvana.
Right on right on.I am so with you on all that.
Agree, Dave.My experience of working in SF/MV area is that it’s much more suited/attuned to IT in the enterprise sense where ISVs and the like need (or needed) to be, being more attuned to targeting the needs of the big enterprise players (who were typically hardware oriented). Boston has also felt that way to me.NYC is a whole different proposition – it doesn’t have those habits (which become constraints). So, it innovates in different areas.
The other factor to bear in mind relative to SV/MV versus almost anywhere else in the country is that this area really grew originally around the results coming out of Stanford and then HP and was further fueled by the one time huge rate of growth of the local defense industry as Lockheed and Ford Aerospace, in particular but by no means exclusively, grew requiring, and providing opportunity for, an abundance of ingeniuos capital equipment related venture businesses to start up in support of this burgeoning customer demand. In that period, and very much prior to Marc Andreessens’ efforts with his team to produce Netscape in the early ’90’s and Nolan Bushnell’s earlier efforts in video games, the only software development of consequence was database systems related such as Oracle and a couple of others I do not recall of the top of my head, so the GAME-IN-TOWN to be involved in in those early days really was the hardware and software/hardware integration related business: A far cry from what the type activities we see today in the majority of startups flourishing in SF, LA and NYC.
Great data – very interesting stuff.Couldn’t it also be that there’s a more mature/bigger VC industry in the Valley, pumping more money into deals? Obviously a weakness of this interpretation is that to a Valley VC, investing in SF or Palo Alto is probably the same thing, but it would be interesting to figure out.
Toronto is also emerging as another hub of start-up activity. It’s one notch cheaper than New York…(ok, maybe 2 notches).A trend we are seeing is that- Canadian-based companies either anchor themselves to a New York office or SF/Valley office upon expansion.
I am curious – which startups out of Toronto in the web/net space are hot right now?
Feel free to follow http://portal.eqentia.com/c… if you’d like to stay on top of the Canadian start-up scene, or on Twitter @canadatechnews
I lived five years in 5 years in PA, Mt View, and Los Altos.I lived 10 years in SF.I worked at both ends of the peninsula.I think the difference between SF and the Valley gets skewed by what companies in each are trying to do. If you need a real lab or any kind of fabrication you are unlikely to end up in SF. If you’re in hardware, you are not in the SF. If you’re doing anything that anyone might construe as dangerous, you are not in the city.I think the companies in SF skew more to the media side of the media/tech spectrum while the companies in the valley tend to skew towards the tech side. Generally tech takes more cash than media.
YupThere are two VC industries nowSoftware driven/cap efficientEverything else
I would also dig deeper into the data to look at founder bios. I would think that companies in the valley are founded by x-googlers, x-yahoo, x-facebook etc and they might be raising more money at a higher valuation.
is that a good idea though? just the name, x, and that’s that. It’s just enough to be statically significant, I know, but its correlation, not causation. it could be highly correlative, but a chunk of that is dumb luck.
Well, Fred pointed out that companies in the valley raised over 8mm while those in SF & NY raised 3-4mil. One dimension that Eric thought that the investments should be segmented was H/W vs S/W. I had a hypothesis that founder pedigree (which could mean x-something or previous successful exit) might be a factor too. Younger/First time founders live in SF, Repeat/Older founders with kids live in the Valley “TYPICALLY”. (Of course Zynga, Twitter & Yelp are in the city)Even if it is correlative, I would just look at the data for curiosity sake. 🙂 If there is something interesting then I’ll dig deeper. Maybe I’ll find nothing useful. :)Also as you pointed out in another comments Enterprise Vs Media.
Where do I find that sort of data, and when does new york get to do not media?
Software driven cap efficient only is there for simple things.It is a totally different ball game when it comes to building any new technologies in areas such as renewable energy or designing new sustainable mobility vehicles etc. The risk to reward ratio in those fields is much higher and I am not sure if the VC’s in SF or NYC have the desire or propensity to invest in those areas. It is much easier to invest up to $1-2MM in 25 companies and hope one of them will make up for the rest, it is another thing to invest $5-10MM in say 10 companies and hope one of them hits a home run.I think clearly there is a distinction that has to be made and possibly the media attention is more focussed on the web services.The heavy lifting isstill done by Valley VC’s and companies in the Valley.
There are definitely more barriers to porting that model to other kinds of technology. However, there’s also a huge incentive for that to change: cheaper, efficient, and scalable product. I think it’s not a question of if but when that hits healthcare, energy, etc., and it’ll be game-changing. There’s a lot to be passionate about there, and I find it very exciting.
+1 Erik.I was going to say that but you said it better.
Another money quote: “New York can thank folks like Chris Dixon and Fred Wilson for bringing investemnt dollars to area startups.”
I like that quote too, William.I greatly look forward to thanking Chris Dixon and Fred Wilson for bringing investment dollars to MY area startup.hahahaha!
Do you think that it is the quality of deals in these areas or that these cities are just where the money lives? I know that if money is in a city – the deals will follow. They usually don’t start or grow there but immigrate.I know that Austin and Dallas have great emerging companies that have the potential to raise a lot of cash – but, don’t get the attention.As a side note, why are venture backed IPOs struggling so bad?
2 creative cities…both very liberal….just sayin
….and both very broke?Liberals are awesome….it’s their policies that suck.
ssssh.why you gotta go and ruin a perfectly good point by bringing facts into the picture
NYC is hardly broke Andywe have $2bn+ socked away because our mayor knows how to run a businesshe’d be an amazing president of the US but because he is an independent, he can’t winand he won’t be part of either major party
Bloomberg is dealing well with a problem that is decades old, but $2b onhand is a pretty meaningless stat when you’re running a $4b + deficit and a$60b debt. That’s $7500 per new yorker.I just don’t understand how people can keep voting to burden their childrenwith tomorrows debt in exchange for the promises of being nannied andcoddled today.
Just tumbled upon this article … after reading this article it sounded obvious … NYC and SF are the top ranked innovation cities in U.S.Good to see Philly in the list.http://www.innovation-citie…
Density of population has to play some part in this.NYC and SF are perfect sandboxes for off/online social apps. You need people bumping into each other for these paradigms to find market proof.
The easy travel logistics of NYC is a win-win for me and pretty unique to anywhere in the world when combined with the demographic in such a relatively small area. Now, more than ever, travel is an anachronism. It’s great to travel away for stimulation but when travel is a factor in day to day living/business it’s a negative factor (to me).I will hopefully be back there one of these days for another start-up/etc.
Ping me when you are here Carl:) The West Village beckons….
Absolutely. Hopefully sooner rather than later! Miss the place, especially now it is Autumn/Fall. It’s been too long since last there.Your Vienna trip is imminent I recall? Am meeting up with some of my Vienna associates this week and introducing them to my very own ‘local’ NYC – Sheffield! :-)Have a great trip – look forward to reading about your experiences. You’ll love it, I suspect.
Yup, Vienna mid next week. Tumblr travel log for certain.
Enjoy, Arnold! (of course)
Great point. There’s another edge to that sword though….. market proof may be easier to achieve there, and may not be the proof you’re looking for.Almost every app/business that I’ve seen lately and “don’t get it” is built for NYC or San Fran or other beehives. Don’t get me wrong, there are plenty of ultra-urban areas in this world and a ton of people and wallets in them…..I just think that it’s possible that “success” bars are set too low when you’re in the “perfect environment” from the start.
Well, the bars are bloody high over here then, I can assure you, Andy! 😉
whats wrong with being in the perfect environment. if that’s your target market and your product is niche for huge urban centres – i’m not sure which other ‘success’ bars you need to achieve
I agree, but those are two big IFs. I’ve seen quite a few companies testingfor success in NYC an application that they plan to be useful across thecountry. Like testing your new custom lemonade store chain idea in Phoenixin July….That’s all I meant…..just make sure it actually IS your likely market.
Because while we’re urbanizing and urbanizing rapidly, that means something really different than what we mean in internet time. People take their time to move to cities. They may seem to pop up overnight. They don’t. And they don’t reach critical mass overnight either. Nor do they shrink overnight. So the test for everyday services that will last 50 years from now is how will they be able to adapt to other environments as those other environments shift too. (become more city like/country like/ adapt to different community structures, work structures, all sorts of civil questions)The biggest problem facing computing (really serious problems) anything dealing with constructing infrastructure. (IE building buildings, aqueducts, bridges, tunnels, trainlines). The US regularly gets a C- according to our corp of Civil engineers. They don’t seem to be a computer friendly bunch either (construction, like selling Caterpillar equipment, still requires carbon paper copies of checks!)The idea of sticking sensors into our infrastructure and having it last for 25-200 years….The stuff we build for people in big cities have to become sticky to some other purpose around how the possibly of their lives shifting, since there is no guarantee they will stay in NYC (money, children, etc.) 40 years ago, they fled.
Not to take anything away from anyone but as the capital of the global economy it was almost inevitable that as digital transforms every business NYC would explode with digital startups and those here, in the best position to prosper from this transformation.
Super pysched to be moving our company to NYC from Europe… we start November 1st, have already made NYC hires and are overwhelmed by the reception given to us by the NY tech ecosystem.One thing that stands out is how proud and closely-networked the NYC startups folks are. Very impressive.
Dave Albert from HireHive, a NYC company that just went through YCombinator, wrote a post a few months ago about why NYC is a great place to start up:http://blog.hirehive.com/new-york-is-the-greatest-city-in-the-world-an
I think that article gets it right. The distinction between nexus cities and hub cities is a great description. Living in Austin, I can tell you that while Austin is very, very cool — it will never be NYC and it doesn’t want to be. We just like to visit.Oops, replied to the wrong comment.
I live in the NY metropolitan area, I was born here and grew up here. I love living here.That being said, a lot of what Antonio says is true. There is no real tech startup culture in NYC, save for a few companies. People keep giving Gilt as an example but honestly, to me, that is basically a company in the fashion industry that uses simple technology to deliver the goods. The only company that really stands out at this time is FourSquare, and I’ve been impressed by what they have accomplished. (although I wonder if they were a Valley company, would they have better integrated with fb/twitter)In a real tech startup environment people work – they code and code and code. Somehow the office park setting that Silicon Valley provides, minimizes distraction and allows one to do nothing but work. Combine that with a super solid institution like Stanford – and you produce some tech behemoths. Remember the Valley area didn’t start out trying to become the tech mecca of the world – it simply turned out that way because of it’s environment.also HireHive, as per the link, is currently operating out of MountainView. And you can’t take anyone who says Five Guys or Shake Shack (ugh) is better than In-N-Out seriously 🙂
ricki totally disagreewe have over 20 NYC companies in our portfolio and they all “code and code”
Leaving aside the question of whether NYC companies code and code — I’ll just make a small note that HireHive is only out in Mountain View because of their YC stint. That has been great for them, for their product and their network, but they are headed back to NYC soon.As David does in his post, I would argue that the intense / busy / diverse / wonderful atmosphere of NYC (and SF, in a similar but different way) is incredibly helpful and inspiring for certain kinds of startups, including many in the USV portfolio.But I totally agree about In-n-out.
I’m a cofounder of HireHive and just want to clarify two things:1. Nick’s right: We only moved out to Mountain View for YC. We’re flying back to NYC to grow our company at the end of this month.2. Nick’s wrong on his other point. Shake Shack is *vastly* superior to In-n-Out.:)
hell even five guys beats In-n-Out
Are we in bubble-land yet?
How do you feel about the tech start up scene in Europe? A couple companies come to mind such as Spotify, Skype and Playfish to name but a few…
we have made four investments in europe and are close on our fifth
I’m all for NYC and San Fran. Go get em, and try not to run em off.That said, there’s a ton of hype to this stuff….fluffy feel-good nonsense.Example: In Chicago there is Groupon, which is absolutely crushing it 0 to 10 digits in 2 years style. There’s also thinkorswim, 0 to a billion in 6 years in a different industry. The funny thing is, these two companies are in the same downtown building, along with several other small companies that all seem to be doing well….. Yet none of us has ever read about their cultures (which are INCREDIBLE) or that building or any of this nonsense. In fact, I worked in the TOS offices for over a year without knowing groupon was even in there…They don’t really talk to each other, because they aren’t in the same business, and they don’t give a shit about building a “startup community” or “entrepreneurs culture” or what rank their city is. They just want to build a great business that customers love— and make a lot of money.In NYC or San Fran, we’d be looking at press coverage out the wazoo of the other companies in that building and the “secret sauce” of that area, because that’s what people there like to read about themselves.Is it possible that the cities ranked 1 and 2 are ranked 1 and 2 because they are the only ones who even think about ranking such things?
I worked in that same building as Groupon and thinkorswim as well 2006-2008 at another start up that had its IPO last fall – Echo Global Logistics $ECHO. (Granted, the original investors in ECHO are the same people that cranked out Groupon behind the scenes).They used to sell $2 PBR’s in that “Kitch’n” bar on the first floor. Win.
Don’t some of these people hold a holiday party every year through some of the coworking people on the Northside?If they are acting that way, then ignore them somewhat. Pull a hipster brooklyn and find new territory and stop the northside cool thing.And isn’t there a guy named Eric from Booth/GSB doing some work in this area? TechCocktails.And for god sakes, talk to the Hyde Park Angels more? And talk the people at IIT, and take over the area between the two (totally bombed out right now, I know I know) and make your own killer startup area to do things. People ignore the U of C massively, the design talent coming out of IIT seems to be fleeing. Seriously though, Comscore’s main offices are downtown, there is no excuse for this. I’m super proud of Chicago. And I think it will find its niche.That, and it’s cold? No one goes anywhere when its cold? You could always promote it as the ideal place to code and learn to code because all night hackathons sound appealing when it is that cold in Feburary.
i was going to chicago regularly in 2006 and 2007 working on feedburner which sold to google for $100mmit’s a great city and certainly is on the upswing too
Funny you should mention this, because over the last few weeks there has been a stream of articles with the Groupon angel investors (who call themselves founders?) about what Chicago needs to step up as a technology hotbed- several visible people around town seem to think it is suddenly important to put out crap pr about this “momentum”, which is not in any way what made the companies successful in the first place. I’m slightly skeptical of anything that comes out of lightbank given their history and attitudes, but it does seem like several of these companies are doing quite well. Always thought that was an odd location for their offices, near downtown but not that close to transit
Yes! Having worked there, the long walk to public transit blew…especially in the Chicago winter!! And you used to have to walk past one of the most notorious Ghettos in the entire country to get there! Luckily, they’ve since town “Cabrini Green” down in the past couple of years. (Fun fact: Cabrini Green is where they filmed NEW JACK CITY).But the worst part was lunch. You have three options for lunch in the building (though one is Japanais which is a bit out of the price range of the majority of ham-and-egger employees in the building). So basically, you were tired of your two options in about one week. All the nearest restaurants are a significant walk away. It sucked….Cool building though, otherwise.
You’ve obviously never experienced the in-house, gourmet free lunch at the TOS office. Un. Real.
glad to read my commission dollars are going to a good cause 😉
Dude, wintersilks.com is for you…..
because chicago likes drama and people there are gossipy and hamfisted. The one party I went to there I remember a lot of gossip about this. (almost a year ago)
From my ‘partial outsider’ perspective, NYC has a unique topography and demographic – all other cities are simply ‘cities’ (great, good, bad and ugly) with the usual array of conurbation/zoning, etc. I’m maybe being simplistic, having not seen all of the USA in detail (but much of it, via work/living there in recent past, and leisure, etc).For example, I cannot imagine a contemporary start-up (in the sectors we typically discuss) coming out of, eg, Houston or Dallas. Or a dozen other major US cities.
Something involving data and drilling could come out of Dallas, 100%
True..NY especially embraces its role of being a world stage and has a personality of celebrating itself.
I liked this comment but want to develop it further because there’s so much about New York (and any place for that matter) that’s not monolithic.Is there an NY “scene”? Probably.I’m pretty sure that I’m not part of “the scene”. I’m sitting in the woods in the exurbs.I’m not sure how many full-fledged adults who have real business experience care about a “scene”. What they care about is ready access to the key people, info and assets that they can combine to set their businesses on fire.And access to key customers and partners so you can kill it.So what I find works for New York, for me, is that a huge chunk of the people on my target list to get close to, are a train ride away. Most of them are folks I can network into through someone I already know. It is efficient. The downside is I don’t always make it home in time for dinner.I definitely don’t have time to “hang out”…anywhere. The only hanging out I do is here at AVC, because it’s highly efficient, and gives me far better “hanging out” reach than in person can.I also believe the entrepreneur IS his or her own “Scene”. That’s our job.And we have to be creative about who we pull in and how we define their roles. It may not be the Central Casting geek. I have a divorced mom of two in Trumbull who is KILLING it. She has a unique asset but needs a flex schedule. I can give her that! Works great for all of us. There is a huge amount of women where I live who are overqualified and underemployed.We are creating our own scene.Andy I’ve no doubt that wherever you are, you’re creating your own scene, too, in an awesome way.
I’ve been told I cause a scene every time I walk into a room. Especially following bourbon…..Good comment and I agree.
Andy is there an App…for Papp?If there were one, what would it be? What would it do?
Great question. Pappy is how I invariably kick-off my celebrations of win,so it would have to be directly tied to the accomplishment of a significantmilestone. Perhaps tied to some type of data feed that measures toward thegoal (# of users, $ in bank, etc), the progress of the data is depicted interms of the the progress of the glass of pappy you will enjoy. From thedistilling process to the barrel, the rotations, the 23 year period of agingand then to the bottle and finally into the glass. The app would not be forthose who like to indulge in immediate gratification….but then, neither isthe bourbon. Like exceptionally fine bourbon, true victory comes from anenduring commitment to quality and patience. This app reflects that.
Cool. Love it!So it needs to reflect the complexity and richness of the reward at the end. And the goal itself has to prove itself big enough to satisfy the Pappy hurdle? Must be Pappy-worthy.
A Pappy worthy accomplishment is a high bar to set. Luckily Julian makes a nice range of products – 10 year for those every day victories, 15 year for beating your monthly numbers, and 23 year reserve for only the truly worthy moments in life.Good to see some fellow Bourbon fans here!
Chicago also has 37 Signals.Maybe NYC and SF have most of the reporters who cover tech, and they don’t like to travel far for their stories? And on top of that, tech usually gets conflated with Internet, when there is a lot of tech and engineering at work in less glamorous industries.Think of Layne Christensen, for example. How many of us heard of them before their drillers helped rescue the Chilean miners? Granted, they weren’t doing anything social media-related; they were just figuring out how to get a couple of mildly important fluids (water and oil) out of the ground.
just look at the datathis is not about who has better PR
I’ve lived and worked in Chicago, SF and NYC (in that order), and I’ve visited the ‘600 West’ building that houses Groupon and Lightbank. I’m not so sure that folks in that building have no interest in creating a community, and I think most would wince at the use of ‘scene’ to describe it.A good friend leads early-stage company development on behalf of the City of Chicago, and an interview with him is below. As I provided him feedback on his comments, I wondered if the CITY of NYC or SF has someone as focused and dedicated as he. If there is such a person in NYC or SF, I’ve not seen them come out of the city. Owen Davis in NYC is one exception.But just as NYC’er and readers of this blog pull for a ‘come from behind’ ranking of NYC, I always do the same for Chicago, and think there’s more happening there than meets the eye.http://www.illinoisvc.org/p…
Very cool. I’m sure the building takes pride in its residents….I didn’tmean to suggest otherwise…..just that I doubt anyone cares as much whatthe media says as people in NYC do 🙂
No snark or anything, but: I think the future of hubs of innovation inAmerica and globally will not be about one city having more than another. Ithink that they will be interconnected and sharing features, people andresources.
Very interesting, that seems to match with Michael Porter’s regional cluster theory – see http://www.isc.hbs.edu/econ…The development of an eco-system comes from fast reproduction and selection. The success of companies like tumblr, meetup, Gilt, etc, creates a strong emulation for entrepreneurs -> reproductionAs for selection, Fred I think you can take great pride in having been the hand of Darwin in NY 🙂
How about Portland, Oregon for startups? We’ve been doing more with less for a long time. It’s an open source hub with a good sized talent pool – OSCON is (back) here every year, there are user group meetings almost every night of the week, and Linus lives here. And the cost of living (thus cost of salaries) is quite a lot lower than SF or NYC. Best public transit system on the West Coast.Who’s here? Jive, Elemental Technologies, Webtrends, PuppetLabs, NewRelic to name a few…
mmm… sort of. Re this money quote, while factual, there’s an element of lies/damn lies/statistics here:SF is 1/10th the population of NYC, and a small fraction of the latter’s land mass. The numbers would be a bit more in sync if we compared manhattan to city of SF. I’d rather see the comparison in terms of *growth* and *rate of change* (to prove how remarkable NYC’s rise now is).Either way, NYC’s number are super impressive these days and i’m bullish and proud to have shifted my personal attention and living further to this coast.The Valley vs SF numbers are easy to understand and predict actually: SF has historically been the home of artists and young creative types. Valley is totally suburban and more industrial, and “going bigger” has always been the case there. Before 2001, the average star coder lived in the City (for lifestyle reasons) and commuted to the Valley (for superior pay). Almost all the VC’s were in the Valley. Today, the biggest change is that much of the action has moved to the City. There are now a couple juggernauts (ie Zynga), and a hipster developer can finally make great money without leaving town. But the VC’s that are now in the city are catering to the new lower investment requirements realities, Web2.0 deals. And Valley VC’s deals tend to be smaller for SF vs Valley deals. I’m not surprised that the numbers are lower.
What’s going to be interesting is watching what happens next.SOMA used to be filled with artists because you could get a lot of space, cheap. There was no supermarket (you had to go up to the Potrero Safeway (pre-renovation)). There were a few scary bars. There were very few places to eat. I bought a 1200sf place near 7th and Brannan for ~$170K in 1995.Now SOMA is filled with hipsters and condos. There’s a Whole Foods.I sold my place in 2004 for ~$650K. That’s not a price range that most artists play in.
Fred,exactly my thoughts. We’re based in DC so for November’s soft launch we were scratching our heads which location to target first (we’re location-based service connecting consumers with local brick and mortar stores). Finally we decided to select NYC area for that particular reason you just described – NY startup scene is getting hot and growing fast. It should.Dmitry
Problem is that those two areas are going to be saturated (if not already). It’s difficult to get telent to move to only two cities. Yes, there are some who are drawn to NYC and/or SF, but it’s not everyone’s cup of tea. You may have HQ in SF or NYC, but be willing to have development spread out in other areas in the US that have a lower cost of living. In a lot of cases you’ll find a good developer who does not live in either place and doesn’t want to – let him/her live wherever they want and start a dev office around them.
I can see how there are development side synergies and opportunities in these places. However, I think it is the investing community that really makes these places what they are. I live in Ann Arbor where there is no lack of energy and creativity. Hell, the environment in A2 is great. However, unless you have revenue, ideas have to leave MI to be heard. Larry Page went to UofM, we have a Google office here, but Google could never have happened here. :/
San Francisco is definitely younger, hipper, and more web-app entrepreneurial than the valley, but it can’t yet compete with San Jose/SV for “serious” technical talent — folks that have built the engineering-driven companies that aren’t sexy enough for much press hype.We’re already seeing growing startups in SF place an emphasis on locating near the CalTrain, for example (or offering shuttles from the train to their office), when they start looking to build out more senior/experienced engineering teams. As a rough rule of thumb: the harder the technical problems you’re working on, the further south you’re likely to be. The city, on the other hand, is becoming the locus of culture hacking.
yupboth twitter and zynga have managed to recruit “serious tech talent” from the peninsulaand twilio, disqus, and others are starting to do that as well
Are there differences in product trends and/or verticals that you’ve noticed between the two communities?
Useful information, it would be nice to see a vibrant startup community in the Washington DC Metro area. Thanks Fred
Although outside of the reach of San Francisco and New York, if I were investing other people’s money the first person I would talk to is Notch, otherwise known as Markus Persson.He’s the developer of the indie game known as Minecraft, which has rapidly become a world sensation. http://www.youtube.com/v/asImTDkPWKAA google search show’s 2.6 million links, and 250k global monthly searches are made against it. Alexa show’s minecraft.com growing hockey stick fast
I think as a city we don’t see in front of everyone enough “enterprise” and we associate startup=media, I just would like to see a change, I think there is more going on
FredThanks for the link. Just wanted to say that it is great to see startups in NYC really rocking. Given that I lived in the Big Apple, it makes me super happy about things. We have a new reporter in town just to cover NYC startups. Details coming soon.
Before you know, you are also going to get bought. By NYC.
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i met him todaywe will get together soon
The 2010s Belong To New York City http://goo.gl/fb/Fxdyf
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Thank god. Downtown lofts are so much more my style than drab office parks in the burbs. The startup scene in NYC is particularly impressive lately. Hunch, Foursquare, Gilt, Etsy, Stackoverflow, Boxee… I’ve got East Coast envy! So much so, that I’m thinking about moving back. A lot of that startup momentum has to do with the investing USV is doing and the NYC evangelizing you’ve been doing all these years, Fred.
not just USV Joeit’s a real investor community now
I have always been surprised that there aren’t more finance startups in New York. I suppose you could consider prop trading firms startups, but there are plenty of other finance related ideas that are apt to grow in a market like New York.
I’d like to add that I had read earlier that VC funding for tech startups was at a five year low, so I don’t know if this is good or bad for NYC and San Francisco.Good, in that these are a positive upward shift in numbers in a bleak funding period.Bad, in that these numbers could be so much higher, if things weren’t so crappy.Either way, I see the light here. I’m happy to be in the area. East Village 4 Eva!
Fred -I’m a long-time reader and first-time commenter on AVC. I’ve worked in VC for a couple of summers and – as a senior at Princeton – I’m considering writing my thesis about the relationship between immigration and an innovation-based economy in the US. You’ve written about the Startup Visa campaign in the past, and my work will seek to shed more light on the more granular issues at the intersection of immigration policy and entrepreneurship.This post – not intended as a Startup Visa plug – is valuable anecdotal evidence that immigrants are playing a more important role on our country’s innovation stage. It’s possible that the booming startup activity in SF and NYC has been led by non-immigrants, but an immediate comparison of the populations in those two cities and Silicon Valley reveals that a more diverse pool of entrepreneurs have access to – and perhaps involvement in – the sort of businesses that drive our country forward.I’d be interested to see the underlying data – about the identities of founders and management teams in two of our most cosmopolitan (and now most innovative) cities – and to connect two of your favorite themes: NYC entrepreneurship and immigrant entrepreneurship. Can any other commenters offer any further anecdotal evidence to support or refute the hypothesis that the more diverse communities in NYC and SF are part of the reason those cities have become innovation hotbeds? Or are other factors (location of capital, access to markets, etc) more significant?Max
I can’t offer much data. But you could write about this issue on edreformer.com, Max. Two of your fellow Princeton classmates already have written for us.Douglas CretsExecutive Editor, edreformer.com
I live in San Mateo right now, and I previously lived in New York for seven years (and miss it :-), and SF for one year. While they all exhibit different types of diversity, I think it would be a mistake to think that the valley is less diverse than either. All three are very diverse compared to the other parts of the US. Which, in support of your thesis, is a big part of the reason we’re talking about them. I’m certain diversity has contributed to their being — nexi? nexuses? — of innovation.SF and the valley are closely connected — many people live in one and work in the other, and it goes both ways. I’d love to see granular data about where specifically in these regions innovators and entrepreneurs are coming from, and if nearby but outlying places like the east bay and Queens are feeders for these regions. I both live and work in San Mateo, but my engineer colleagues commute from Palo Alto, the east bay, and SF.
Welcome Mr. Branzburg! Umm, unfortunately, a lot of people are busy. what I suggest you do is going to http://www.ssrn.com/ and seeing if there are any academic papers there by researchers that confirm/disprove your hypothesis as a starter. You should also take a look at the search to see what has been posted and read the comments to see what is going on about immigration, maybe you can dig up data. sometimes the wsj and nytimes articles/editorials put in interesting statistics from a variety of different sources, and you should track down how they got there.(and if this is your first time posting, say so, like this guy)
Last week at a panel discussion related to raising debt and equity capital, Stephen Hughes, Sr. Relationship Manager for Silicon Valley Bank made the statement that Los Angeles is currently ranked #2 for VC investment activity.This doesn’t seem to be very widely publicized…
there are two VC industries, cap intensive and cap efficientif you look at the two separately, you’ll see widely different numbersi am working on a post on this but i’ve got too much to do these daysand not enough time to crunch data
Thanks, Fred. This is a fascinating distinction. Look forward to the post.
Dear Fred,You tend to regularly travel to Europe. If you had to choose a city in Europe to set up USV, which one would it be? Is there a NY or SF equivalent in Europe?Thanks,Daniel
we have no plans to have offices anywhere other than NYC
very interesting post. I think there is a generational shift going on in deal flow that supports this movement and it is really governed a shift in the nature of startups.the valley vc circuit was built from the by massive tech giants that churned out talent. Companies like SGI and Sun Micro and more recently Cisco had uniquely talented individuals that commanded respect. In the older days of VC, the primary driver of value and (more importantly) path to success was intellectual property and these companies were necessary prerequisites on a founder’s resume.In the more recent era of vc deal-flow, the primary driver of value for the VC is “network effect”. The optical networking startup has been replaced by groupon. Groupon (and to a lesser extent facebook or twitter) don’t depend upon patented intellectual property to defend their business model, they depend upon the all important network effect that rewards first mover advantage and rigorous attention to product quality and user experience.In this new paradigm, the phd and the cisco pedigree are less valid than a good idea and a lean-startup mentality.
If you behave like this, so I leave them slightly. Pull the hipster Brooklyn, and to discover new areas and to stop Northside a cool thing.
The only hanging out I do is here at AVC, because it’s highly efficient, and gives me far better “hanging out” reach than in person can.
They do not really talk to each other because they are not in the same business, and they have a “startup community” or “cultural entrepreneurs” or what rank their city does not give a crap about building. They just built a great business that customers love — and want to make a lot of money, the myth really make a startup community to strengthen the nutrition is important, but success is based on anchor .
They do not really talk to each other because they are not in the same business, and they have a “startup community” or “cultural entrepreneurs” or what their position on the city’s construction does not give a crap. They just built a great business that customers love — and want to make a lot of money, the myth really make a startup community to strengthen nutrition is important, but success is based on anchor
Very good point. Along with the density of it, so easy to ping between places, as per London.However, how much real synergy is there between the ‘traditional’ financial sector (eg, investment banking) and innovation/contemporary IT, media, etc?
Law sector, there are more lawyers in NY than anywhere else. Followed by California and Texas.
Pharma and bio can change the world and bank serious coin just as much as CLOUD API 2.0, no?
1) Where have they failed?2) So true….don’t get me started on the Reagan wannabes like our lastprez
Charlie I have some old family friends who just moved to Lancaster. May I introduce?
Coming from Delaware I know what you’re going through. Not easy being your own scene. Helpful to have a community of tech & entrepreneurs to get feedback / network with people going through the same thing.
In some respects, the other advantage of SF over Palo Alto (and San Jose) is “BART” – the Bay Area Rapid Transit system that, in my view, is a real gem to the SF Bay area connecting everyone from Fremont in the south to Pleasanton, Berkeley, Oakland, Walnut Creek and Concord in the East and, I believe it now includes SFO airport.The SF Peninsula also has a separate regular train system connecting from San Jose to SF via Mountain View and Palo Alto but BART really is a major travel connector.Hence for relatively very little cost you can live out of the city but get to it easily and quickly from a great many points of relatively cheaper housing.When we were handling a contract for Morgan Stanley Dean-Witter in the city that required what seemed like an ever burgeoning bunch of eager-beaver, very young, coders, many of them did not live in the city but commuted from the surrounding environs. Aside from the ease of access, there is no denying that SF has an enormous number of very great attractions for eating and entertainment: Only complaint I ever had was the degree to which the 25th floor of the BOA building swings in a minor earthquake …… gulp!!!
BART is great. I was a little surprised when driving to the east of the city once when I saw a bus labeled “Foothill Area Rapid Transit” – just doesn’t roll off the tongue quite as well.
Oh, I don’t know… I think that rolls very nicely. Kind of has a trill toit.
So true but, if I remember correctly, the services are interconnected with the bus side of it being a feeder and an adjunct to the rail side of it.Whether or not my memory is correct, the SF Bay Area has some of the better modes of public transit of any US City as far as I’m aware. However, nothing compares to London when it comes to ease of getting around a city but bringing London into this thread takes us too far afield from the man subject.