What caused New York’s startup boom?

Google's New York officeSince the crisis of 2008 New York City’s massive financial sector — the city’s richest economic engine, once seen to have unlimited potential for growth — has languished. In the meantime, attention has turned to its nascent startup sector, home to Foursquare, Tumblr, 10gen, Etsy and Gilt, where VC investment has surged even as it’s been flat in other big U.S. tech centers (PDF).

I’ve started to poke around the tech community here with a view toward eventually publishing a paper on the rise of New York’s startup scene. In my initial conversations, I’ve come up with a few broad questions I’ll focus on, and I’d welcome thoughts from this blog’s legion of smart readers on any of these.

  • How many people in New York’s startup community came from finance, and under what conditions did they make the move? In 2003, Google was a five-year-old, privately-held startup and Bear Stearns was an 80-year-old pillar of the financial sector. Five years later, Google was a pillar of the technical economy and among the world’s biggest companies; Bear Stearns had ceased to exist. Bright quantitatively-minded people who might have pursued finance for its stability and lucre now see that sector as unstable and not necessarily lucrative; its advantage over the technology sector in those respects has disappeared. Joining a 10-person startup is very different from taking a job at Google, but the comparative appeal of the two sectors has dramatically shifted.
  • To what degree have anchor institutions played a role in the New York startup scene? The relationship between Stanford University and Silicon Valley is well-documented; I’d like to figure out who’s producing steady streams of bright technologists in New York. Google’s Chelsea office, opened in 2006, now employs close to 3,000 people, and its alumni include Dennis Crowley, founder of Foursquare. That office is now old enough that it can generate a high volume of spin-offs as Googlers look for new challenges. And Columbia and NYU (and soon a Cornell-Technion consortium) have embraced New York’s startup community.
  • Does New York’s urban fabric make its labor market more liquid? Changing jobs in Silicon Valley can mean an extra 40 minutes on your commute if you have to slog up the 101 during rush hour. New York’s main business districts are much more compact; if you change jobs from a bank in Midtown to a startup on 28th Street, your commute won’t change by more than 10 minutes.
  • What are the dominant practice areas in New York’s tech scene, and how do they relate to the human capital available here? Have refugees from the finance, media and advertising industries brought with them distinctive skills from those areas? How much of the startup community here is targeted at acquiring those industries as clients?
  • What’s the city doing in response to the growth of its tech industry, and what can other cities learn from New York’s model? Other old, established cities like Chicago, Pittsburgh, Philadelphia and Washington claim to have robust startup communities. What do these cities have in common, and how have their governments reacted to the emergence of their tech communities? The emergence of a tech startup scene here could be particularly fortunate for New York in light of its dependence on the finance industry (at the peak of the finance boom, the industry contributed 20% and 13% of New York State’s and City’s income tax revenues, respectively; those figures in 2011 were 14% and 7%). To what degree can a city or state government desperate for diversification bring a startup community into existence?

Send along any ideas in the comments below!

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