Heidi Messer, Alan Patricof, Others on What It Takes to Grow in NYC

At a gathering of players from the New York innovation scene, there was blunt talk and optimism about the city’s future in technology.

This week, AlwaysOn founder Tony Perkins hosted the annual OnMedia NYC summit at the NASDAQ Marketsite in Times Square. The event brought out the honchos of Collective[i], Greycroft Partners, First Round Capital, and other firms.

Some of the talks focused on the experience of growing technology companies in New York, and how that has changed since the days of the first Internet boom.

Heidi Messer, chairman and co-founder of Collective[i] in New York, chatted with Perkins about the rise and challenges of her prior company, LinkShare. In 1996, the days of dialup modems that made grinding noises, she co-founded LinkShare with her brother Stephen. LinkShare became an early provider of affiliate marketing and other services for e-commerce companies.

The company was sold in 2005 for some $425 million to Japan’s Rakuten, but before that sizable exit, Messer said she caught the brunt of the Internet bubble bursting. “We had filed to go public in 1999 and were on our road show in 2000,” she said. When the market imploded around that time, about one-third of LinkShare’s clients went belly-up. “We went from profitable to being unprofitable very, very quickly,” Messer said.

In fact, she said one of LinkShare’s biggest customers tried to sneak off in the night after shutting down with little notice. “They fled the country and owed us like $1 million,” she said. LinkShare had to lay off staff and work to collect money it was due from customers, but managed to survive. Despite the hoopla and sour turn of the Internet bubble, Messer said something definitely had changed.

“Prior to 1999, there was this hype about eToys and Webvan and all these companies that had enormous valuation,” she said. Even though the expectations for such companies never matched reality, Messer said it became clear the Internet was growing as a medium and as a source of data.

These days she is busy with Collective[i], which she co-founded with Stephen and her husband, Tad Martin. The company provides analytics for sales and marketing. Messer said a deluge of data flows through the Internet today—now everyone is scrambling to figure out what to do with it. “You now have all the data that you need to see what’s going on,” she said, “but there’s so much overload, so much noise, and so much waste, you’re going to see technologies develop to simplify it.”

As the world relies more and more on technology to do the heavy lifting with information, Messer said it seems like old ideas are being reborn at a bigger scale. “Almost every company that received a lot of hype and a ton of funding and crashed has been reinvented,” she said, “and the valuations now are three to 20 times what the original company was.”

She cited Excite@Home, Lycos, and the other search engines that preceded Google as examples. “It’s easy to look back and say, ‘Oh that was a bubble.’ But maybe it wasn’t actually a bubble—maybe it was just poorly timed,” she said.

Kay Koplovitz (l) of Springboard Enterprises and Kathryn Wylde (r)  of the Partnership for NYC.

Kay Koplovitz (l) of Springboard Enterprises and Kathryn Wylde (r) of the Partnership for NYC.

More startups are likely on the way, Messer said, that gather information from home appliances and other connected devices, such as Google-owned Nest thermostats. “There are going to be hundreds of companies that reinvent what you take for granted as a data collection devices,” she said.

A panel that followed Messer trumpeted New York as a place for startups to grow—with some caveats. “I don’t think there is going to be a ‘next Silicon Valley,’ but New York can be a tremendous tech hub,” said Lou Kerner, founder of The Social Internet Fund.

Others on the panel offered a mix of expectations and desires for the city to maintain its momentum. “What we need is more engineering talent in the city,” said Kay Koplovitz, co-founder of Springboard Enterprises. She believes the engineering campus being built by Cornell, along with the presence Google and Facebook, will attract more of that talent.

Howard Morgan, a partner with First Round Capital, said exits such as Tumblr’s acquisition by Yahoo are important for an innovation ecosystem. He also said, however, that the city needs to open up additional affordable areas for startups to put down roots. “Everybody is getting priced out of Union Square, which was the hot place to be,” he said.

Kathryn Wylde, CEO of the Partnership for NYC, said the first iteration of “Silicon Alley” saw the rise of DoubleClick and others in digital media. These days, the city sees startups working in such areas medical, life sciences, fashion tech, financial tech, and e-commerce. “It may make more sense to build a chip company on the West Coast; it makes a lot more sense to design and sell your apps on the East Coast,” Wylde said.

She raised concerns though about politics at the national level regarding immigration law, which Wylde believes could constrain the hiring of talented professionals to work at local startups. She also pointed out that certain local laws clash with the business models of some startups, hindering their ability to operate in New York. “We probably have the most difficult regulatory and legal environment in the country and a lot of protectionist laws,” she said.

The woes of Airbnb, Uber, and other disruptive startups that have at times butted heads with local lawmakers are not specific to New York, Greycroft Partners managing director Alan Patricof said. “It’s happening in Berlin; it’s happening in Paris; it’s happening in London; it’s not just New York,” he said. “We’ll get past that.”

Patricof, a native New Yorker, was naturally bullish about the city’s prospects, believing it is a legitimate place for technology to scale. “We’ve passed the stage when some venture capital firms would only invest in a company in New York on the condition that they move to Silicon Valley,” he said. “If they tried that today, they’d be laughed at.”

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