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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.