New York: The Next Innovation Hub
New York has long been synonymous with Wall Street, Madison Avenue and the Garment District, flagship markets for the city’s economic lifeblood that attracts an endless and competitive pool of talent to fuel its growth. When it comes to technology and innovation on the other hand, most entrepreneurs and startup companies have historically turned their sights north and west – to Boston and Silicon Valley. New York is rapidly joining these ranks, enjoying a good amount of buzz as a new hotbed for entrepreneurism. How this came to be is an interesting exercise in the tipping point that combines the right people, ecosystem and economy for innovation to thrive.
In 2010, venture capitalists invested nearly $22 billion in new companies in the United States, according to the National Venture Capital Association. As expected, the largest share of that money—$8.5 billion—was poured into 961 deals in Silicon Valley. New England followed with 387 deals that took $2.5 billion. No. 3 on the list? New York, with nearly $1.9 billion in venture money invested in 350 deals.
How did this well of innovation spring up in New York? The elements have always been there, but they have needed the right climate to thrive and time to develop. A first glimmer came during the Internet boom in the late 1990s, when many people left their traditional careers to start companies with the hopes of reaping the financial benefits of the Internet craze. These entrepreneurs primarily came from typical New York businesses such as investment banking and consulting, as well as from business schools.
But these startups faced a major hurdle that did not exist in the Northeast and Silicon Valley. The talent pool necessary to make a startup succeed did not exist in New York—yet. New York’s wealth and success had come from traditional sectors, investment banking, media and advertising, where cash compensation was the standard. Employees were not accustomed to the notion of accepting stock options, and importantly, they had not seen their friends and neighbors reaping this kind of success from startups yet. Those with engineering backgrounds were hard to come by, and companies had a hard time relocating people who had the required backgrounds from the innovation hubs.
When the bubble burst, lots of startup companies were left hanging without the resources to secure the requisite follow-on capital to stay afloat during the tough years that followed. Many simply abandoned the notion of building a startup and returned to their original fields. There is a joke in New York about that time period: “B2B” meant “back to banking” and “B2C” meant “back to consulting.”
However, there were those who had the entrepreneurial DNA and stuck around. These entrepreneurs have been smart enough and resourceful enough to rebuild their success stories of the 1990s or pursue their next startup idea. Fast forward to now, and these are the people, along with many … Next Page »