andrew.f.chen :: startup thoughts

As I write this blog post, I’m on the Acela Express from Boston to NYC, coming back from a mission to steal Boston’s best and brightest with a number of other startups and VCs (FourSquare, Etsy, Tumblr, Union Square Ventures, etc.). There’s not enough talent to supply the astronomic growth we’re experiencing here in NYC and so we’re starting to get organized (read here and here and here) for the beginning of a concerted campaign to grow NYC as the top tech hub destination in the US. We’re starting by running a NYC organized effort to steal Boston’s best and brightest.

What’s All The Hype?

If only 5 years ago, very few would have noted NYC to be a real tech hub. But now, with renowned startups such as Etsy, FourSquare, Tumblr and many others leading the second/third wave of startups in NYC, some very well known VCs (USV, Bessemer, Accel), and the presence of some of Silicon Valley’s biggest tech co’s (FB, Google, Amazon), NYC is emerging as the new hotness. With an ecosystem with incubators and programs like NYCSeed, TechStars, NYTech Meetup, General Assembly and the NYCBigApps competition, the ground is fertile with support. NYC’s Mayor also happens to be an entrepreneur who understands how important technology is to the future of NYC. Oh, and NYC just overtook Boston as the US city with #2 most Tech VC investments.

We are hot on your heels, Silicon Valley.

NYC has the Formula to Beat Silicon Valley

Which, leads to the question, what makes a good startup ecosystem and how can we make it even better? Luckily, Angel/VC Mark Suster wrote an article in TechCrunch yesterday about this very matter. His main point is around the importance of key individuals that make all the difference in building an idea, company and community and then goes on to lay out a framework for what needs to happen. He references Seattle and what it needs to do to become a better tech/startup hub but notes the framework is applicable to any community. Summarized (and referencing NYC from my perspective), a city must have:

• A Good Mix of Community Leaders & Organizers - Suster uses Brad Feld (Foundry Group) and David Cohen (TechStars) as key leaders that put Boulder, CO on the map.

NYC has no shortage of leaders working to push forward the community at every level. Fred Wilson of USV, Lawrence Lenihan of FirstMark, Nate Westheimer of NYTechMeetup, Chris Dixon of Hunch, just to name a few that are heavily involved in the NYC community and promoting it’s greatness.

• Passionate Entrepreneurs and Ambassadors - Suster says that one of the hallmarks of Silicon Valley is having a steady stream of graduates from top schools come in, in addition to passionate community leaders who want to stay local and work together to build that local community.

This is exactly what is happening in NYC right now. New York City is home to more than 626,000 students, including more than 4,200 graduate engineering students. Not only are more new homegrown startups planting in the city, the coalition of grassroots community building being led by people like Jane Kim of Hashable, Greg Gortz of Zemanta, and Gary Chou of USV are really beginning to formalize a community that wasn’t there before.

• Patron Companies - Suster notes the importance of having Google, Yahoo, Salesforce and other major companies that were once startups as companies readily partnering and supporting the local startups.

While NYC does have satellite arms of Google, Facebook, and Amazon, the patron companies that are really starting to work with and support the scene are the large media companies like WPP, NYT, AOL and Razorfish. These combined with the forward thinking fashion, retail, and finance companies in NYC create a hotbed of bizdev opportunities to go around.

• Elder Statesmen who will support the local startup community - Mark mentions Steve Case and his involvement in Startup America and people like the Google and eBay/Paypal founders as key leaders in bringing attention to the importance of Startups in their regions.

NYC has no lack of strong statesmen. From AOL CEO Tim Armstrong to our very own Mayor Bloomberg, the mature leadership supporting the community is coming straight from the top.

• Playing to local competitive advantage - leveraging what the local community already has to offer, rather than trying to build something entirely new helps in the long-run. Seattle has enterprise, cloud, and larger retailers. Silicon Valley has social, semi-conductors (and everything else).

NYC is the #1 hub for a number of industries, from finance, to fashion, to retail and media/advertising. NYC has no shortage of competitive advantage when it comes to being able to access and leverage local strengths.

• Local Marketing Muscle - Suster notes that, due to the collection of media, news, PR and ad agencies that exist in NYC, it is the foremost example of a city that has flexed its marketing muscle to its advantage. And having the foremost VC blogger reside in NYC helps a lot, too.

No need to expand here.

• Local Angels and Recycled Capital - Silicon Valley has a strong angel community, many who are/were entrepreneurs, that readily invests and recycles profits back into more deals with startups.

Here, NYC’s angel community is growing and we’re starting to see the existence of angel and seed funds coming together, especially with the opening of the NYC Tech Stars program. That said, I expect to see more Angels coming to NYC following the tidal wave of VCs coming to NYC.

• Venture Capital Firms - this one’s obvious. VC funding is a large part the life blood of turning ideas into successes.

With the coming of Bessemer and Accel to compliment those that already reside out here, NYC is starting to position itself well for a strong funding community.

• Foreign Direct Investment and Time - Suster notes the importance of bringing in outside investment and attention (such as his involvement in Seattle even though he is from LA) and then time and patience to allow the community to mature.

NYC is getting a lot of attention from angels and funds from Silicon Valley, no doubt. The trajectory will only continue as entrepreneurs, investors and companies begin to realize all the key advantages that NYC brings, many that possibly position itself for a stronger future than Silicon Valley.

Why NYC Could be a Better Tech Hub than Silicon Valley

While the power, draw and talent that is Silicon Valley is undeniable, I argue that NYC has the potential, now or later, to overtake Silicon Valley as the #1 tech hub. NYC has the educational institutions (Columbia, NYU, Cooper Union) to train great talent and it is investing in the future of tech education in NYC, with efforts like Bloomberg’s $100m engineering campus. It has hot startup companies and more continue to pop up every day. It has everything that Mark Suster points out above, from the VCs to the market players to the leaders. So what will make it different, and possibly better, than Silicon Valley? If SV might always maintain the technical advantage, where will NYC win?

Sustainability and Business Models.

NYC, by virtue of living costs and business people, is a city that demands, from day one, that a company makes money (or quickly figure out ways to make money). With so many classically trained business folk shaping the foundations of the East Coast economy, there will be a natural tendency for NYC startups to be focused on monetization while scaling. This need will also drive startups to work with and partner with more traditional companies flush with cash, integrating their activities further into the greater economy. We see this with FourSquare’s check-in deals with local retailers, SecondMarket’s insertion into the financial markets, Etsy’s creative marketplace and working with a community of craftty creatives, and of course, Gilt’s flash sales for fashion and travel, partnering with all the major fashion brands.

We Win.

Oh wait, did I also mention that NYC is widely known as the best city in the world?

So I say, watch out Silicon Valley (and Boston, Seattle, Austin, London…) we’re hot on your heels and we’re going to start by stealing your engineers.