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The TEP Times | Fall 2014
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BUSINESS IN NYC
5 Reasons Why New York City Has an Explosive Startup Scene
BY JOSH HUBER
Six years ago , New York City experienced a huge economic downturn as the financial crisis of 2008 left thousands of unemployed workers , many disproportionately coming from Wall Street and the big industries supporting the financial sector . The wipeout was epic , akin to the financial collapse leading to the Great Depression . It was as if you could hear a giant sucking sound as the city ' s financial clout disappeared .
News of the city ' s demise may have been exaggerated , however . A little over a half decade later , the city has a burgeoning tech scene and startup community ; more than 450 startups have launched in New York over the last six years , bringing to the city technology , investment , and innovation .
What attracted the large number of entrepreneurs , investors , and professionals to the Big Apple ? Here are five driving factors that helped New York become the startup hub it is today .
1 . New York City Is A Business City
New York City has long been known as the international business hub of the United States – so why not use this as your launching point ? The infrastructure for small businesses to succeed – a vibrant market , a large pool of investment capital , and the professionals needed for legal and accounting services – has been in New York for years . These formidable market resources have been easily deployed to benefit the technology sector . The vast majority of the biggest foreign-owned banks have their US headquarters in New York City because they know it is the preeminent hub for accessing both US and international business . This financial clout is one of the main reasons why New York remained competitive in 2008 , with new industries rebuilding the economy and attracting small businesses and entrepreneurs from around the globe .
2 . New York Has The Ecosystem Needed For Startups To Grow
It is one thing to have a great idea and to find the partners to start building your company – it is another to get it completely off the ground . In New York City , entrepreneurs consistently find the environment needed to get their businesses going from conception to launch .
Startups need capital , and the city ' s vast venture capital environment is ready to help . From seed level funding to late stage boosts , venture capitalists ranging from Founders Collective to Union Square Ventures are nearby and always looking for promising investments .
New York City is also home to a number of accelerator programs aimed at discovering and helping the next great startups . From the Entrepreneur Roundtable Accelerator ( ERA ) to NYC Venture Fellows , from the NYCEDC to NYU-
Through luck , circumstance , reputation , and careful planning , New York City has created a citywide incubator for startups that has created its own gravitational pull .
Poly , these accelerators offer funding , office space , and mentors who have been entrepreneurs themselves and can give experienced advice . These accelerator programs help turn ideas into products , prepare startups in the right way to approach venture capitalists , and negotiate acquisitions when the time comes for a successful exit .
Other institutions are in place for entrepreneurial development . One example is General Assembly ( GA ), which acts as a hub of innovation . GA gives entrepreneurs the chance to bounce ideas off one another , take classes that are customdesigned to teach the skills they need to learn , and build their network contacts in the startup community .
3 . The Government Wants To Help
Initiatives have long been in place to help small businesses and startups grow in New York , including programs introduced by the former Mayor Michael Bloomberg and non-profits . These initiatives offer assistance in all five boroughs across a number of industries .
One frequently mentioned institution is the New York City Economic Development Corporation ( NYCEDC ). The NYCEDC offers a number of programs for startups and entrepreneurs . International entrepreneurs should take note of NYCEDC ' s international programs , including the NYC Venture Fellows and the World to NYC programs . Industry-specific initiatives include the fashion industry , clean technology , biotechnology , and emerging media technology . These initiatives help by providing tax breaks , exposure opportunities , and business development assistance .
Another boost from the government is the Five Borough Economic Opportunity Plan . Originally introduced in 2001 , the plan has mapped out strategies to create jobs and to make all five boroughs livable for businesses and individuals alike . Through tax breaks , initiatives to connect professionals and entrepreneurs , and promotions to bring attention to specific industries , the plan has been an unquestionable success .
4 . The City Inherited Wall Street ’ s Talent
John Axelrod , founder of the successful accelerator program ERA , described how the financial meltdown of 2008 had a silver lining for the startup sector . The ensuing shakeups freed up a lot of smart people to pursue new business ventures .
" You know what happened when Wall Street went down ? Lots of talented people were out of jobs – and many of them opened companies ," Axelrod said in a discussion with Quantum Media .
Analysts , programmers , and other professionals were suddenly without jobs when the housing bubble burst . They found it necessary to think outside the box to find other work , and they were more willing to take chances . It was the perfect recipe to get someone to think in an entrepreneurial spirit , and many launched their own businesses .
Even if these individuals were not technological engineers , new technology allowed them to avoid the high startup costs that would come with hiring employees to make up for the skills they lacked , thus lowering the hurdle for success . From VOIP phone services to crowdsourcing – the solutions to many small business issues have become available without hiring new people , and these easy-to-use labor saving tools certainly have played a part in growing NYC ’ s startup scene .
5 . People Want To Live In New York City
When you do need good people to help grow your business , it is much easier to attract and keep talent in New York City than elsewhere . The city is exciting , involving , and full of opportunities and is steadily gaining population , creating an even bigger Big Apple with even more opportunities .
It ' s not just a matter of quantity but quality when it comes to these new residents . Prestigious universities in the city bring students eager to be professionals in fields ranging from professional services to engineering . With a highereducation student population of nearly 500,000 , the city can tap into a population of some of the brightest young minds the country has to offer .
The End Result
To see how these 5 factors have combined to reshape the tech scene in New York City , it might be helpful to look at the experience of two neighborhoods in New York City :
The Flatiron District ’ s Silicon Alley has emulated Silicon Valley ; this lower Manhattan neighborhood has become populated with a number of startups , tech giants , and venture capitalists . You ’ ll find General Assembly ’ s campus just steps away from Google in Chelsea , among other startups , accelerators , and incubator spaces .
Brooklyn ’ s DUMBO district has also become a hot spot of innovation and continues to attract accelerator programs and innovative ideas . Retail giant Etsy and a number of other notable tech companies , digital agencies , and other startup businesses now call this district home .
Each borough has its own success story . The city is home to some of the world ’ s largest tech companies , including native-born companies like Gilt Group , FourSquare , and Tumblr . New York also has some of the most exciting up-and-coming startups . E-commerce startup Warby Parker operates out of Brooklyn , while FreshDirect set up shop in the Bronx .
It takes a synergy of positive factors to create the momentum needed to create a fully realized tech ecosystem . Through luck , circumstance , reputation , and careful planning , New York City has created a citywide incubator for startups that has created its own gravitational pull . While the 2008 financial crisis shows us that there is no certainty in the growth of any industry , all signs point to the idea that the city will enjoy continued startup success in the years to come .