Boston Vs. New York: Tech Startups and Investors Add New Spice to Classic Rivalry

1/15/11Follow @gthuang

I’ll come right out and say it: I hate New York. OK, maybe it’s worse during football and baseball season. Maybe it’s especially bad this week as the J-E-T-S and their loudmouth coach (see right) are talking trash about the Pats. Maybe I just need an excuse to wind people up.

But tech investors love New York. Especially Boston-based tech investors. There has been a rash of early-stage investments in New York startups lately. Just this week, OnSwipe raised $1 million in seed funding from a group that includes Boston-based investors Spark Capital and angels such as Wayne Chang, Jennifer Lum, Roy Rodenstein, and Dharmesh Shah. Meanwhile, SalesCrunch raised a $1.4 million seed round from investors including First Round Capital, Accel Partners, and NextView Ventures, a Cambridge, MA-based micro-VC firm.

And in recent months, New York-based Offerpop raised $1.3 million from CommonAngels’ Chris Sheehan and others, while New York and Boston-based Svpply got $550,000 from investors including Founder Collective and Spark. Throw in other Boston-financed companies in New York like Boxee, Tumblr, OMGPop, Yieldbot, and Gilt Groupe, and we’ve got an epidemic on our hands.

What do these companies have in common besides geography and the Internet? Not much really. They span advertising, analytics, social tools, shopping, gaming, TV, and retail/fashion. But taken together, they represent a fast-growing cluster of tech innovation that has the full attention of early-stage investor groups like Founder Collective, CommonAngels, and TechStars—which started its New York program this week—as well as traditional VC firms, which all seem to have more representation there as of late. (Heck, Xconomy is recruiting a top-notch journalist in New York—so you know this is serious.)

Despite all the talk of inter-city collaboration and kumbaya, this is a competitive situation for Boston and New York entrepreneurs, who are all vying for a limited supply of investor dollars. But, as usual, I wondered how “new” this trend really is—and what other interesting context is around it. So, as a start, I reached out to a few young investor types around town, and they had slightly different viewpoints.

“Nothing has dramatically changed in recent years,” says Rob Go from NextView Ventures. Go points out that VC firms such as Spark Capital, First Round Capital, and Union Square Ventures have been investing in New York startups for years. “There are just more people jumping on the bandwagon recently,” he says.

That might be true, but others in the startup community say there’s a real (and relatively recent) trend going on—and also some important issues to consider. One driving factor is the “legitimate growth” … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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  • http://tydanco.com Ty Danco

    Where’s the new age love? Investors without borders? I myself am a totally partisan sports fan (unfortunately, Cleveland Indians, Browns, and Cavs), and so I see the emotional need to hate the enemy. But you can be a local booster but still invest out of state, as is shown by the track record of the best firms, who as you noted go all over. With the flat world, all you need is that skype connection. As for myself, I try to think global, act regional, and that includes going to Montreal, where the investor/startup ratio is enticingly low.

    I’ll leave the partisan bashing to those still mad at Paul Graham for leaving Boston. As an outsider in little Vermont, I’m envious of all of you big city guys, at least until each big snowfall.

  • http://www.dailygrommet.com Jules Pieri

    Greg, I love it when you talk trash. Seriously, this debate and the SF/Boston one, are so chronic they feel like pesky outbreaks of excema in the press.

    BUT….I just spent a week in NY with a bunch of startups and I did want to share one theme. The entrepreneurs who have worked in Boston (and the West Coast) and are now in NY complain that the NY startups (and their investors) confuse sizzle with steak. These entrepreneurs miss being on teams that know the difference, and who put their heads down, and really build a business. I was visiting some of the “flashiest of the flashiest” and they all quietly brought up a version of this topic. That was a new one on me…kind of rings true, just from a common sense standpoint. The vibe of NY is all about flash so it would easily permeate startup culture.

  • http://www.krush.com Gina Ashe

    Greg, rapidly becoming a big fan of your writing…love the drama. How about a new spin on the NY vs. Boston investor for real? Entrepreneurs with a good idea usually have a choice about who they take money from. It’s almost like “getting married” and there’s a lot more to it than a city and some cash. It’s about a special combination between an entrepreneur and an investor that accelerates a new business, disrupts an industry, excites a consumer who thinks they’ve seen it all. A plug for Roy Rodenstein…any high tech founding team that has him as an investor gets a “real catch”–discriminating eye for product design, business models, and consumer appeal.

  • http://www.OnSwipe.com Jason L. Baptiste

    Great article Greg.

    I just don’t see it as competition. Both cities have certain advantages that might be helpful to each. We chose New York because our customers are here. I’ll still be in Boston often and still a part of the Founders/Mentors group.

    The distance isn’t a huge factor either. Grab a bolt bus for 15 bucks with wifi and a power outlet, then you’re good to go.

    I think a good followup would be: where can each city help fill the gaps of the other? NYC has a lot of design talent, which can help Boston’s strong software focus.

    @Gina Yes, we’re beyond lucky to have Roy involved. He’s a great friend and a great investor.

  • http://www.wire-spring.net Lily

    Roy is a great a great investor.

  • http://www.xconomy.com/author/ghuang/ Gregory T. Huang

    Thanks for the comments, guys. I’m in mourning after the Pats game–remembering what it’s like to be a true Boston sports fan. But I’ll give the NY trend some more thought. I’m sure it’s ultimately good for startups and innovation.

  • http://www.commonangels.com James Geshwiler

    The whole NYC vs. Boston thing is overblown and the wrong focus. It’s Boston AND NYC vs. Silicon Valley. The I-95 corridor combines software skills, technology and digital marketing to make a powerful combination against the Valley. Go East Coast!