Rise and Shine: Waking up to the NYC Tech Community

Chris Dixon attempted to do the NYC tech community a favor with his latest post, but I think winds up doing it an injustice.  He acts as if New York being a good place to build a startup is a new thing, which it isn't.

"One thing that was puzzling about the “web 2.0 boom” from 2003-2008 was how irrelevant the East Coast, and particular New York City, was compared to the first dot-com boom. There were a few big hits – Right Media comes to mind – and a big near miss – Facebook – which started in Boston but moved to the West Coast.

I was mostly checked out of the internet scene in the 90s (in perpetual grad school), but from everything I’ve read and heard, New York City and the East Coast in general was much more competitive with the West Coast. One interesting supporting data point: Matrix Partners in Boston had the best return of any VC fund in the 90s (an astounding 516% IRR)."

Jeez... where do I begin here?  He seems to be making two separate points here.  One, that we were "irrelevant" here in NYC, and two, that the gap between the coasts is widening. 

Comparisons between Silicon Valley and NYC are sticky issues.  Sure, Silicon Valley is *bigger* but does that necessarily mean better?  Better how?  And for who?  Someone told me yesterday that it was easier to get a job as a web product manager in the Valley--which I took to task immediately.  Sure there are more product manager jobs available, but there are also way more people with product manager experience--so the ease of getting a job really depends on supply/demand, not overall market size.  It's the same thing with engineering.  It doesn't make sense that there would be more engineers per idea in the Valley.  If anything, since every Valley engineer probably has an idea for a startup, while there are many NYC engineers just solving interesting enterprise challenges and not into the startup thing, there are probably more hireable devs in NYC per good idea. 

But the term Chris uses is "irrelevant" and that's where I'll take issue.  In addition to Right Media, there have definitely been exits of significant size in NYC over the period in question:  Doubleclick ($3B), About.com ($410m), LinkShare ($425m), Tacoda ($275m), Quigo ($340), and Massive ($187m).  In addition, there are companies here that will no doubt (based on significant current revenues) be triple digit exits like Huffington Post, TheLadders, Meetup, Etsy, Paltalk, Indeed, Thumbplay, and Gilt Groupe. 

On top of that, the influence that the New York scene has is significant, even if it has missed out on some opportunities to capitalize on it.  One of the most impactful companies of the Web 2.0 was del.icio.us, built right here in NYC.  It was scooped up very early, but it's impact on web service navigation is far reaching--what site doesn't have tags?  You could also argue that the search DNA that will make Twitter a huge exit came from NYC through the Summize acquisition.  Certainly Twitter's initial VC funding came from here. 

As for whether the spread is getting wider, well, Chris largely discounted his own ability to even have an opinion on that--since he wasn't involved in the web during the late 90's.  His idea that the east coast was more impactful on the web is "proven" by the performance of a single VC fund.  Of course, a nice chunk of that Matrix fund's performance came from Alteon WebSystems, a west coast company, and other network hardware plays, not web startups. 

The stats just don't prove that out either.  As Fred Wilson pointed out about 3 min into his Web 2.0 Expo talk, NYC had 4 times as many VC backed deals in 2008 as it did in 1995, while the Valley only grew by 1.5 times.  While the startup scene in the Valley is certainly larger, the gap is narrowing. 

Chris goes on to try and explain his incorrect assumption about the lack of startups in NYC with the same flawed logic that the NYC government has when they keep thinking that Wall St. folks can easily be turned into entrepreneurs:

"The finance bubble of 2003-2008 was a giant talent suck on the East Coast.  The people I knew graduating out of top engineering or business programs on the East Cast were all trying to work at hedge funds or big banks or else felt like fish out of water and moved west.   Money was flowing so freely in the finance world that there was no way the risk/reward trade off of startups could compete.  Eventually it just became downright idiosyncratic to be a startup person on the East Coast."

I'm sorry, but if short term financial gain is your primary goal, you're probably not right for a startup anyway.  Last I checked, engineers like to work on interesting technical problems.  Sure, they won't do it for free, but given that the size of the venture backed startup market is a third of the Valley, not to mention the number of consultants who fund themselves by doing consulting work for agencies, there are plenty of people not getting sucked into the finance world.  I just don't buy that finance is a talent suck because most of the people I know in the startup world who came out of finance hated it and couldn't wait for a startup to scoop them up.

At the same time, their time in financial firms served as a training ground for working on large systems that needed to scale and be absolutely bulletproof.  My Co-Founder at Path 101, Alex Lines, used to work on the financial side, as did many NYC area founders. 

NYC is not the Valley, and I'm glad it isn't--but the local tech "revival" has been going on for several years now.  nextNY, a group of over 2,500 local tech and digital media folks, was founded in February 2006.  I joined Union Square Ventures a year earlier after the final close of its first fund.  First Round Capital started around the same time as well.  The NY Tech Meetup needed a venue as large as Cooper Union's Great Hall back in 2006.

The point...  If I were starting a company right now, I'd put New York right up there against any city--because good companies can attract talent and funding from anywhere.  Also, you're not going to wind up with crybaby Facebook engineers here who complain that their equity isn't worth anything after two years and need to be bought out before the company even exits.  Your quality of life will be extremely high--since NYC rents are pretty cheap now and transportation costs, unlike in the Valley, are near zero if you're biking to work like I am. 

So wake up people.  The New York tech boom isn't new news!  Dave Lifson made the comment via Twitter that "until google showed up, NYC was a barren wasteland for college grad tech people who did not want finance jobs" and "generally, startups are out of reach for those with no experience, so young entrepreneurs went elsewhere (I was one, in 2005)".  Well Dave, since you worked for a Bethlehem, PA company in 2005 and then went to Amazon, I'm going to respond by saying that a) you must have conducted a pretty crappy job search if you found more startups in Bethlehem in 2005 than in NYC, and b) Amazon is an interesting conception of an "entrepreneurial path".  He wrote on Chris Dixon's post that Google was the only NYC company he applied to.  Again, if you work for Google, you might as well be working for Goldman Sachs or any other big corporation.  Just because it's finance doesn't make it a place where you can't learn tech, and either way, it's definitely nothing like doing a startup in New York or anywhere else.