“There’s something happening here, what it is ain’t exactly clear...I think it’s time we stop, children, what’s that sound, everybody look what’s going down….”
- Buffalo Springfield
There is something going down in New York City below 14th Street and if you have not been paying attention, you should.
Last week, I attended the Founder’s Forum in New York, an event that brings together leading digital entrepreneurs from around the world to exchange ideas, share new innovations, and build relationships. It was no coincidence that it was held in New York City, which is fast becoming an epicenter of digital innovation. While New York's core financial and media industries have undergone wrenching changes in recent years, a silver lining has emerged and a new city full of innovation and emerging growth companies is being built on top of New York’s foundation.
To those who ask why, there is a straightforward answer:
As we learned at AOL and now at Revolution, talent always comes first. When the financial models that governed high frequency trading, securitization, and risk arbitrage met their demise in 2008, leading programmers, coders, and developers began looking for their next act. Similarly, a wave of creative executives, tired of the defensiveness (and frequent staff reductions) of traditional media companies began seeing a growth opportunity. The talent pool for jobs that were no longer available (or less attractive) migrated to the jobs that were available, boosting their prospects and those of the new economy companies.
Aside from talent, you need an environment that is supportive of innovation and technology, and it does not hurt to have a great entrepreneur running your city. Mayor Bloomberg knows what it is like to parlay being laid off from a Wall Street job into building a high growth technology company – he did it in 1981 when he started Bloomberg LP. Mike has been very supportive of creating a friendly ecosystem for high growth companies, going so far as to help launch the Varick Street Incubator in 2009, a collaborative project between the City of New York and NYU-Poly. By July, the project is expected to “graduate” 22 companies. As of today, companies that were incubated at Varick have raised $38 million from venture capitalists and created more than 400 jobs. Last year, the Mayor also announced the Applied Sciences NYC initiative and a $100 million commitment to build a two million square feet applied science and engineering campus on Roosevelt Island in New York City in collaboration with Cornell University and the Israeli Technion Institute. We need more commitments to entrepreneurship like those of Mayor Bloomberg and his administration.
Of course, once you have the talent in place and the support of the local government, it is only a matter of time until major players take notice. Google, Facebook, eBay, Microsoft, Twitter, and others have all made significant commitments to growing their presence in New York. This is important for several reasons – it keeps the talent local (people no longer have to move to Silicon Valley); it makes New York the breeding ground for entrepreneurs who will inevitably spin out of these companies; and it provides high-growth technology companies proximity to potential acquirers and customers. It is a self-perpetuating virtuous cycle that should keep New York’s tech community growing for some time.
All of these important factors have also led to a substantial growth in the venture capital community in New York. Funds focused on early stage venture capital like Union Square Ventures, Thrive Capital, Lerer Ventures, and the Collaborative Fund, supplemented by incubators like General Assembly and accelerators like TechStars and 500 Startups, are leading the capital formation in New York and making it easier for entrepreneurs to raise capital. In 2011, New York City venture-backed companies raised almost $2 billion in funding. Companies based in Massachusetts, long thought of as the leading East Coast hub for venture capital, raised $1.1 billion. Move over Yankees/Red Sox rivalry.
I still think, as I have since the AOL days, that the Washington, DC, area is a great environment for startups and the community continues to thrive with companies like LivingSocial, oPower, SBNation, Videology, Millennial Media, FedBid, Personal, and NewBrand Analytics gaining significant traction and national attention. And while we will continue to bring capital and support to the DC area, we are spending an increasing amount of time in New York, seeking ways to continue to support the entrepreneurial and venture capital communities in the city. At Revolution we have partnered with New York based companies like Everyday Health, Loosecubes, and GramercyOne and several of our businesses (Clearspring, SnagFilms, and Resonate Networks) are building significant presences in the city. We are not only excited by what we have done, but by what we are seeing. Companies like FourSquare, Fab, Warby Parker, ZocDoc, SecondMarket, Kickstarter, Codecademy, The Fancy, and thousands of others are being born in New York City every day. As we continue to build our platform, we look forward to having the opportunity to help these companies build their businesses.
My recent trips to New York have made it exactly clear what is happening here – a startup revolution. We look forward to being along for the ride!