A tale of two cities: Bewildered by the city government's continued cluelessness on NYC's innovation scene

I generally like NYC City Council Speaker Christine Quinn.  I think she's smart, hardworking, and I think she'd probably make a good mayor someday.  However, her take on the NYC innovation economy during her recent State of the City Address confirmed my thinking: Most of what the NYC government should be doing to support technology entrepreneurship in NYC is to try and stay out of the way.  It's painfully obvious that, like many other folks in NYC government, Ms. Quinn doesn't have a finger on the pulse of where NYC is in terms of its ability to support tech entrepreneurship and what prescriptions, if any, are needed to improve the situation.

On the heels of ReadWriteWeb's glowing article about the NYC tech startup scene and Open Angel Forum coming to NYC, Ms. Quinn once again brings out the city government's party line on startups:

"Unfortunately, when it comes to new technology startups, New York City lags behind other parts of the country."

First, I'd say the only place NYC might legitimately "lag" is perhaps the Valley.  However, when you account for how much longer that startup scene has been around, I'd say the fact that we're at about 50% of their pace of venture funding is pretty damn phenomenal--not to mention the fact that there's about an order of magnitude more VC funds located out there.  

Sure, we might not be building semiconductors, but why should we?  Let someone else build the chips.  We'll market and sell them here.

Regardless, is this really the stance the city wants to publicly take on the startup scene?  "Hey everyone!  Come look at us!  We lag."

That will really get the companies coming here.  Nice going NYC government PR machine.

Why not instead trumpet the great business stories that are build built here?  The answer:  The city doesn't know the stories, because it's too busy building new programs to solve problems that don't exist.

The new proposal of the week: 

"In San Diego they have a great organization to do that -- it's called CONNECT.  It literally connects their best talent with investors, workspace, and the other tools they need... So this year, we’ll create the same thing right here in New York.  We’re calling it NYC High-Tech Connect – and it will act as a one stop shop for entrepreneurs, and a catalyst for the high-tech industry."

So, wait... the city is going to get into the business of connecting startups with investors?  What does the city think that firms like First Round, Union Square Ventures, RRE, Betaworks, Spark, Venrock, DFJ are out doing all day?  Heck, I was in the Ace Hotel lobby the other day trying to do work and not less than four different entrepreneurs came and sat down to chat with me within the span of an hour and a half.  On top of that, since First Round did it's first Open Hours in NYC last year, a number of firms have followed suit and simply opened their doors wide open to entrepreneurs who wanted to come in and pitch.  Are the investors in NYC really that difficult to find?  Are we really not accessible?  Not being able to at least find money in NYC is like not being able to find a cab here.

Of course, that doesn't mean you'll actually get a cab--and the same thing works with funding.  The High-Tech Connect can't really guarantee you'll get funded--and most times, companies won't get funded.  That's just the way it works.  90% of the startups out there, even more, aren't even close to being legitimately venture fundable businesses.  

Either way the "one stop shop" model went out with portals in 1998.  What does that even mean?  Your VC will now be your real estate agent and your hosting provider?  That doesn't even come close to making any sense.  You know what it will attract?  Aspirational entrepreneurs that don't have the savvy and wherewithal to figure out who the best investors are for their business and the connections to even get a lukewarm introduction on their own.  

Actually, more than anything else, investors are one stop shops.  After a company gets funded, they pretty much have access to anything else they need--space, people, technology.  All of those things are pretty efficiently buyable.   

What's really unfortunate is that, each week, community members run tons of high quality events where entrepreneurs connect and learn.  The community is that "one stop shop", but yet the NYC government hasn't shown one iota's worth of interest in supporting the existing efforts of the community.  They'd rather duplicate it.  Two of the recent Ultra Light Startup events--one about PR and the other about legal help--had copycat programs run by the city itself.  Why not just pay Graham Lawler directly do to this and spend the city's PR capital on supporting Ultra Light, versus going head to head with him?  The answer:  You can't win elections by saying you supported other people's programs.  You have to start your own.  New programs make it look like you're doing something.

And of course something needs to be done--because we have real problems.  Just look at the tragic outcome of Touchco--a local NYC technology company that just got bought by Amazon.  They make touch screen technology.  Here's how Ms. Quinn describes the situation:

"Let’s look at the very different stories of two tech companies – one in New York, and one in California. 

 The first company started when a couple of PhD students at Stanford had an idea for a new 
internet technology. 
 
Soon they had a patent, and a $100,000 grant. A month later they hired their first worker, and 
continued to expand. That business is called Google and now they’re the largest internet company in the world, still headquartered in California with over 19,000 employees. 
 
The second company started in New York City, when a group of researchers at NYU developed 
a new touch screen technology. They wanted to take their product to market, but struggled to get 
grants and navigate intellectual property rules. 

This company is called Touchco. Never heard of them? Well here's why... 
 
Last month they closed up shop and sold their technology to Amazon, who will be using it in 
their Kindle. And instead of Touchco creating jobs in New York City, Amazon will be creating 
jobs at their headquarters in Seattle. "

 

How utterly skewed and wrong could you get this story?

First off, let's compare these two companies.  One company was playing out on the wide open web with a new technology in a relatively immature market.  The other company was had a manufactured technology that had a very small number of potential buyers--basically device manufacturers.  Google always had the possibility of becoming big, but Touchco--what were they supposed to do?  Start manufacturing their own e-reader?  With what content?  They manufactured a cool interface.  No amount of funding or IP in the world was really going to change the most likely outcome that some device manufacturer was probably going to pick them up--and the company was never going to become a big business employing lots of new people in NYC.

Nor will this addition create lots of new Amazon jobs in Seattle either.  They bought technology and a handful of smart people who will then apply that product as a competitive advantage for an existing team and existing product.  It doesn't open up a new line of business for Amazon--it just makes an existing one better.

And rather than say they "closed up shop", the more close to reality version was that this technical team had a great exit--they got bought.  Most companies go under, they didn't.  They probably did pretty well for themselves to, since they didn't appear to take much investor money beforehand.  And how cool was it that a west coast company had to come here to buy a piece of technology.  Who knows--maybe Amazon will follow suit with Google and open up a research and product office here one day.  So maybe the Touchco acquisition will, in a roundabout way, actually create a lot of future jobs here.  

The point is, you shouldn't be making program and resource allocation decisions based on the anecdotes of companies whose situations you clearly don't fully understand.  

Let's put this in simple terms...

Dear NYC, 

There's lots of smart money out there for the right tech businesses.  We're doing a great job finding those opportunities, and as investors, we've never been more accessible than we are now.  In fact, it's funny to think that somehow, some city agency thinks it's going to be able to attract more good entrepreneurs for introductions when I've yet to see anyone working for the city be able to maintain any reasonable level of presence on the web.  If nearly every VC in New York is on Twitter, and few of the city professionals who are tasked with "connecting" entrepreneurs to resources are on, who do you think an entrepreneur is going to have an easier time approaching?  

So do me a favor... I'd love it if you were promote the existing efforts of the community to build an ecosystem.  You could start by showing up to our events, and maybe helping to secure venues to have additional ones run by the community.

You could use your PR machine to highlight the best companies if you'd like, too... but most of all you should buy the stuff our companies make.

*That* would be helpful--not more programs, meetings, councils, oversights, that don't ever amount to anything b/c it means you're stuck in an office and not mixing with the people in the trenches.

 

Charlie

 

PS.. .These opinions are my own, not of my employer or anyone else.