NYC: Tech Hub of the Future?



Alessandro Piol has been involved in tech for 30 years, having witnessed the birth of Silicon Alley (he even wrote a book about it: Tech and the City: The Making of New York’s Startup Community), while always having kept an eye on the tech cultures in Boston and Silicon Valley all the while and even prior to New York’s emergence into the tech scene.

A brief history of the tech ecosystems, according to Piol:

For a long time, it was Boston that held sway when it came to tech, and Silicon Valley was little more than giant orchard, with Stanford in its midst. A University professor of engineering, Fred Terman (aka the Father of Silicon Valley), tired of seeing his best and brightest student head east after graduation, decided to build an ecosystem around the Stanford Research Institute and funded two of his students: Mr. Hewlitt and Mr. Packard. Yet Boston remained the center of innovation, even then. The Silicon Valley ecosystem didn’t start taking off until the 1960s and ‘70s, and it all had to do with the cultural differences between the Boston and Silicon Valley ecosystems.

Silicon Valley was informal; fostered a sense of community; it was easier to find partners there;and there was more job mobility. Stanford encouraged startups, and the area’s investors were more tech savvy, as opposed to Boston, which uptight and formal, more protective and insular; where job-hopping turned you into a pariah, MIT extracted a bounty for technologies developed on its campus and the VCs were less technical.

So now that the New York tech ecosystem is coming into its own, is Silicon Valley losing its edge – and is New York the Tech Hub of the Future? That was the topic of the evening, which was organized by the London Business School’s Tech and Media Club, and included panelists Piol, Columbia University SEAS Entrepreneurship Advisory Board Member, and at partner Vedanta Capital and AlphaPrime Ventures; Brian Cohen, Chairman of New York Angels and considered the father of science and technology communications, having founded TSI Communications; Claudia Iannazzo, cofounder and partner of Pereg Ventures, who started her first company while still in college in Australia and who has facilitated more than $10B of acquisitions, divestment, IPOs, alliances and partnerships for public companies and new ventures on five continents; and Lewis Gersh, successful serial entrepreneur,and founder at Metamorphic Ventures.

All of the panelists were also Web 1.0 veterans.

“I started doing angel investing when it was called stupid investing,” said Cohen, who took zero investor funding for his startup, TSI. “And it’s still stupid.”

“It’s a great time right now to be an entrepreneur in New York,” said Gersh, who recently jumped back to the entrepreneurial side with disruptive direct mail startup PebblePost. “There’sgreat connectivity to all industries (in New York).  Now you can get connected to major media companies within six months – it used to take years.”
Although he is still skeptical about how big the New York ecosystem will get.

“There are still smaller amount of capital than in Silicon Valley. A Rounds are fine but (we’re not seeing a lot of big) B rounds.”

“It’s all about money,” Cohen added. “I’m in the exit business. I want to make a lot of money. Silicon Valley has made lots of money in exits, so they have expendable money. (New York) is driven by due diligence. They don’t do due diligence in Silicon Valley. That’s like having unprotected sex.”

“I would only start my company in NYC,” said Iannazzo. “If you start your business on the West Coast, you have to stay there.“

West Coast VCs like to stay close to their portfolio companies, she added. “If you want to build a revenue-generating business, you have to build it here. As an entrepreneur, I’d want to be close to my customers.”

In New York, the question is ‘How are you going to monetize it?’ In Silicon Valley, the question is ‘How are you going to build it?’ They’re very different lenses, said Piol.

“I’m looking for $100m company, not unicorns. The average exit is  $85-$100m – that’s bad for Silicon Valley,” Iannazzo noted.
So, specifically, what do New York investors look for and what does all of this have to do with whether or not this is the tech hub of the future?
“You have to up your game,” Cohen advised the entrepreneur-filled room. “If I see you’re not in control of the fundraising process, how are you going to be in control of your business? Being in control is important. If I hear tentative words, I’m concerned. I’m in the ‘no’ business. I have to say ‘no’ 98% of the time. And we love exits. Use ‘exit’ sporadically in your conversations (with potential investors). We get very excited when we hear that word.”

“We see so much tech, it comes down to personality,” said Iannazzo. “You guys know your landscape. Be charming. Don’t be an asshole and don’t be cocky. Be organized.  Have your plan – don’t try to win your arguments. Win your investors.”
“Spray and pray is why VC model broken,” she continued. “The investors aren’t involved. You want a fund that has a network and will give you support.”
“Once you take the king’s coin, always be developing,” Gersh added. “Have an elevator pitch and a simple pitch. I have a seven-syllable pitch for a billion dollar business.  And when the meeting ends with, ‘good luck,’ you’re fucked.”

“NYC is a Petri dish and all the ingredients are in there. We’re getting there,” said Cohen. “NYC is one giant incubator unto itself. It’s not a race. A lot of slow things are happening in NYC, but risk has been taken out of the equation. We need more risk.”
“It is a tech hub, but it’s not going to be as big as Silicon Valley,” Iannazzo added.”It’s different. Although compared to Australia and London, it is a tech hub
“It is, but it’s at a point of transition,”Gersh observed. “From B2B to B2C.”

And lest we forget, Piol reminded us that Silicon Valley had a 50-year head start, and you can’t go anywhere in Silicon Valley without there being a conversation about tech going on. “Even in the bathrooms!”

Still, entrepreneurs seem to be flocking to New York from all over the world. Something is driving this migration to New York over Silicon Valley, and Piol pointed out that a big part of it is that every industry is here – finance, insurance, advertising, media, fashion, telecom, pharmaceuticals, and retail – and outlined some of the city’s competitive advantages:

– diverse demographics and multicultural population;

– it’s international and close to Europe;

– it’s a travel and transportation hub;

– it has a long standing culture of business and trading;

– New York is resilient.

“It’s the bar scene,” said Cohen. “In most places, the bars close at 9 pm. Not in here. New York has an active late night bar scene. There’s always some place to go.”

In fact, Cohen funded an entrepreneur-hopeful working as a bartender, whom he met while out in the city one evening. Ok, so that particular bartender also happened to have a background in astrophysics, but still…

And lest we forget, for all of their leaps forward in tech, as the New York Angels Chairman reminds us, “Comcast is still bigger than Google and Walmart makes more than all of ecommerce.”

It’s a story and an ecosystem that’s obviously still developing

And cheers to that.


Image credit: CC by David

About the author: Bonnie Halper

Bonnie Halper curates the StartupOneStop.com newsletter, which focuses on startups and entrepreneurs, and is currently being read in 50+ countries around the world.

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