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The NYC tech scene is exploding

February 1st, 2010 | new york city, startups, venture capital

The pace of innovation in the New York area is very impressive right now. Some of the top entrepenuers in the country are building and scaling companies in the NY ecosystem - Ron Conway, yesterday in an email to me (published with his permission)

With the announcement of Roger Ehrenberg’s new fund – IA Venture Strategies – NYC now has another top-tier seed fund.  I’ve had the pleasure of investing with Roger a number of times. He’s not only a great investor but also a huge help to the companies he invests in. It’s great that he’s going to be even more active and I hope to work with him a lot more in the future.

The NYC tech scene is exploding. There are tons of interesting startups. I’m an investor in a bunch and started one (Hunch) so won’t even try to enumerate them as any list will be extremely biased (other people have tried). I will say that one interesting thing happening is the types of startups are diversifying beyond media (HuffPo, Gawker) to more “California-style” startups (Foursquare, Boxee, Hunch).

In terms of investors, NYC now has a number of seed investors / micro-VCs:  IA Capital Partners, Betaworks, and Founder Collective (FC – which I am part of – has made 7 seed investments in NYC since we started last year).  The god of seed investing, Ron Conway, who I quote up top, has recently decided to become extremely active in NYC. One of the nice things about having small funds is we don’t need to invest millions of dollar per round so we all frequently invest together.

NYC also has mid sized funds like Union Square (in my opinion and a lot of people in the industry they have surpassed Sequoia as the best VC in the country).  We also have First Round, who very smartly hired the excellent Charlie (“Chris”) O’Donnell as their NYC guy.

Then we have the big VCs who have also been increasing their activity in NYC.  Locally, we have Bessemer (Skype, LinkedIn, Yelp) and RRE.  Boston firms that are very active and positive influences here include: Polaris (Dog Patch Labs), Spark, Matrix, General Catalyst, and Flybridge. Finally, some excellent California firms like True Ventures have made NYC their second home.

The one thing we really need to complete the ecosystem is a couple of runaway succesesses. As California has seen with Paypal, Google, Facebook etc, the big successes spawn all sorts of interesting new startups when employees leave and start new companies. They also set an example for younger entrepreneurs who, say, start a social networking site at Harvard and then decide to move.

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  • stefi
    I want to reiterate that we really need more hard core engineers here - for example in the areas of machine learning and nlp, to name a few. Even with the number of engineers that Google brought into the ecosystem, his continues to be a gating factor because it is a very tight market in NYC - it is always so overwhelming to see how much extreme talent there is in the Bay Area. Maybe we can find a way to successfully attract some of these folks - I'd be happy to be part of such an initiative, since I'm starting to build a team now that I'd like to have locally in NYC (my freelance engineers building the prototype are, alas, in San Mateo!)
  • addicted
    One advantage Silicon Valley maintains over NYC is the presence of so many great technology colleges in that general area.

    While NYC has great schools, they are primarily non-tech schools. I think NYC startups need to forge a stronger bond with the New England technology schools to really grow.
  • chrissheehan
    Definitely lots of startup activity and buzz happening in NYC. I will be down there tomorrow meeting with some interesting startups, a trend I expect to continue. Chris
  • Completely agree. I love the NYC start-up scene and have found it enormously inspirational and supportive. I am particularly impressed with the significant number of female entrepreneurs I have met here and the very significant number of female-led start-ups I observe the NYC start-up scene supporting and encouraging, which is a particular point of distinctiveness. Who knows, the 'runaway successes' requested in the post above may well be some of these, which would clearly be a point of pride for everyone posting here vs elsewhere in the US!
  • I feel very fortunate to have been embraced by the NYC start-up scene. Its a special place filled with some of the best people I've known and have had the pleasure to work with. Not sure where this recent landrush will end, but I'm certain that whether it blossoms or busts people like Fred, Andy, John, Charlie and you, Chris, will be there to reap the rewards or start putting the pieces back together.
  • thanks bryce. the fact that top VCs like you are spending time here is a great sign for the city.
  • Really enjoyed this post and was mulling over some of the response items. I wonder what impact the recession has and will have going forward on the NYC start up community. I heard a fact that 60% of ivy league grads (though I'm not standing by the #'s) went into finance after graduation. With these perennial recruiters no longer as active it paves the way for an awful lot of talent to go into new companies. I could very well be wrong, but just some food for thought.
  • exactly. a lot of these people are starting companies now instead of going into the evil finance borg.
  • Hey don't go too hard on us finance guys, most people that work in the business are smart, hardworking and willing to take risk. The problem is that the finance monoculture tends to suppress creative impulses, and the pay (at least in the past) was too high to make joining a startup a worthwhile risk. I think you'll see more and more of these guys start interesting ventures going forward. The startup I recently joined (Accordion Partners) is hoping to play a part in this as we are all former i-bankers but think we can build a better business model for clients without the broker-dealer component.
  • Chris -

    From a capital perspective its going to take more than a runaway success to open up the market for early stage money in NY like it is on the west coast. It's a culture chance, many of the wealthy in the NY area have made their money on Wall St, which is about pricing risk. There is no easy way to price risk of two guys and a powerpoint, nor a logical way.

    Also add Zelkova Ventures to that list of early stage vc's in NY. While we may not be as public as some of the other (smaller team) we have done 15 deals in 2 years and 8 of them have been in NY.
  • I've always viewed NYC as a great place to start a company - I've been involved with plenty of the years. In our most recent fund (raised in 2007) we've already made three investments in NYC - AdMeld, Medialets, and Organic Motion. And I count myself as a very proud LP in several NYC-based VC firms.
  • Also the startup community is organizing itself much better with many great events and groups. We need much more support from the VCs and the city though, in terms of space and facilities. Here is a list of groups and events (and investors) in the city:
    http://www.eroundtable.net/starting-out/
  • fdestin
    appnexus ?
  • It's nice that nyc is blowing up because, as an out-of-towner, I find it so much easier to do business in nyc vs. SF & the valley.
  • Agreed. I moved here from Vancouver, where we have an amazing technical workforce, because of the great opportunities and complementary companies in NYC. I feel the collaborative nature of NYC tech is excellent and would benefit nicely by attracting other companies to come join them here.
  • Two l's. :)

    Grazie... now let's go find some deals to go to together.
  • fixed and added your new nickname :)
  • Re: Not Impressed Yet - Although not exited, Gilt Groupe and The Ladders (both $100M+ '09 revenue) are good examples of likely success in "not another Twitter API hack" spaces. No, I'm not affiliated with Matrix, just ones that come to mind. And the grand-daddy of discount/private sale sites, NextJump, is a massive success and NY-based. I think Yext is a very interesting up-and-comer in the local+ad sales space. 10gen/MondoDB, while techie, is real operating infrastructure and not fluff. On the environmental side, RecycleBank is a very interesting experiment getting to scale. I think there are many other examples, it's just that (as in most places) the sexier consumer startups get the most coverage.
  • alphazero
    Chris,

    From a developer perspective, what's the best way to tap to the startup job market?

    Thanks.
  • Jordan
    Forgive my naivete, but how does one get in touch with all of these firms/people?
  • Location location location, man I'm thinking about moving west but there's certainly something magical about NYC tech right now.
  • On a related note, why do you think there haven't been a lot of runaway successes from New York yet?

    (The only one that comes to mind is DCLK and that then spawned AlleyCorp and it's related companies).

    Has it been the lack of early stage capital? entrepreneurs? mentors? or the attraction of finance as a career path?
  • We all seem to forget about N2K/Music Blvd which was the first important music tech IPO, and was based in NYC. Many of the leaders of the interactive music movement were groomed there and were instrumental in companies such as CDuctive, WinAmp, eMusic, iTunes, Vevo, the majors, etc.
  • i have thought a lot about this question. i think it mostly has to do with role models (or the lack of them) and somewhat to do with the wall street trader mentality that pervades NYC. to build a truly huge company, it often takes a decade or more. and along the way you get a number of bids for the company. here in NYC, we've been way to willing to hit those bids. there haven't been many role models (other than our mayor mike bloomberg) who have built large billion dollar tech companies here. contrast that with silicon valley that is full of those kinds of role models. doubleclick is the closest thing we've had in the past decade and look at what Kevin Ryan and Dwight Merriman are up to with Gilt Group and a number of other startups. they can be the kind of role models we need. i feel a change underfoot, maybe not yet an explosion, but i am pretty optimistic that half way through our second decade we are going to get some big companies soon
  • alanbrody
    Start-ups like DoubleClick are an adjunct to a pre-existing industry - in their case, Advertising. (With Boxee, it is TV)

    One reason for NY's tech uptick is that Wall Street has put a lot of their techies out on the street. As the person who literally brought DoubleClick to ADWEEK, I can tell you what made the difference for them: hiring a top exec from the Ad Industry which had been very leery of DoubleClick and targeted online advertising. (Similar situation for Google and their hiring of Eric Schmidt).

    We think tapping this "key executive" pool is a potential road to success for many Start-Ups. Since the economy has made so many of these execs available our group, the iBreakfast, is now focusing on it though a program called "Job Generation": matching these savvy leaders with promising Start-Ups.
  • I think the financial bubble is a big part, plus as you say lack of smart seed capital, mentors etc. It's also a numbers game - we just need more startups.
  • I've been in NYC for 11 months to the day, its an awesome community, but becoming successful is all about access to mentors and role models who were successful themselves. they're here but not to the degree that they are in CA. you're right chris and fred - its a numbers game and someone just needs to break the cycle
  • For anyone who might be interested, a bunch of startups in the North Brooklyn area have started hosting monthly breakfasts and happy hours. Please join us!

    http://www.meetup.com/North-Brooklyn-Breakfast-...
  • maybe in tech, but the financial tech scene has just a few innovative companies, StockTwits (one of my investments) being one of the few...very sad, whats wrong with finance people, it's like they lack the creativity, innovative gene...probly because they're all making so much $ ripping others off, why innovate and risk that unethical biz model
  • Gerson Lehrman Group is a huge success (perhaps one of the most successful startups of the decade anywhere, although people don't know about it) and very innovative. But generally agree we could use a lot more.
  • It is certainly a very exciting time to be involved in startups in NYC. Over the past few weeks I have met some interesting companies that have chosen to be based in New York rather than California. One in fact was started by two recent Stanford MBA grads who would prefer to operate from Manhattan rather than Silicon Valley.
  • I've seen the same thing. There is a reason NYC has been a draw for entrepreneurs for centuries. The energy, diversity, density, and general excitement level of the big city.
  • I like to think of it as Density and Intensity on the World Stage.

    Density--where else can local/urban apps like FourSquare use as a sandbox?

    Intensity--Intersection of arts, finance, tech and innovation at the street level.

    World Stage--The lights focus brightest here. No place likes its successes and heroes more than NYC.

    I'm a believer and refugee from the SF and LA tech start up scene moving back home to NYC to help it happen.
  • There is no place like New York and what really sets it apart re: being a place to start a company is exactly what you said - the energy and diversity. There is just a different feeling in the city than any place else in the world and it is truly inspiring. And, the diversity makes for a great source of learning and opens many more opportunities than exist in a more homogeneous environment.
  • collintmiller
    I'm excited by all the activity in the NYC tech scene. :)

    Another thing I like about NYC as a host for a startup is the density. Density provides opportunities mere population does not.

    But it can be a little overwhelming to understand how to get started as an entrepreneur anywhere; it's encouraging to see the momentum picking up here.
  • Curious if you wager a guess which NYC startup might be a runaway success(es)? Etsy? Foursquare? Tumblr?

    I'm a way outside observer to this industry. It's just a hobby I like to read about, but I don't see any existing NYC tech company becoming a huge runaway success. It's coming, but I don't think that company has even been started yet. Though with so many great startups happening now in NYC it's just a matter of time.
  • Don't forget seamlessweb! Or my company LTU tech - OK, we are Paris based originally and not a startup anymore, but we are in NYC!

    I do agree with cdixon, NY is probably going to rebound in the tech area - it has all the potential to be a serious rival to Silicon Valley.
  • Don't count out Boxee.
  • No One
    Well ... Boxee is a Union Square investment, and their PR is in New York, but nothing else is...
  • NYC is Boxee's HQ, where our product, web and business teams are based. We have a significant R&D team in TLV, with a small outpost in SF for marketing and BD.
  • That is what I thought Zach.

    It became crystal clear at your launch in Williamsburg at the theater that this was a company who's soul was in NY and that the community had really embraced you.

    Great product.
  • their head of product zach klein is based in NYC. i think their ceo is back and forth between here and in israel.
  • I really like Boxee, too. But, I was trying to think of ones on the level mentioned in Chris' post (PayPal, Google, Facebook). I don't think Boxee will have 175 mm people logging in every day like FB does. Then again, I'm wrong often. ; )
  • Honestly you never know till it happens.

    The NYC scene is new but intense and focused and lot's of folks like Chris and Fred...and us, who will work to make this happen.
  • There's a brilliant young business that is working towards developing virtual assistants to aid in personal net search and automate discovery. They haven't gone after funding yet.

    It all depends on how big of a reality distortion field the founders can build. It has to be big enough to grab that talent that can help execute and scale the tech.
  • I may have a Hunch as to what company that is.
  • In addition to Hunch ;)
    Collective Knowledge systems are a big deal to developers now. Very cool seeing how different groups chase after value with group knowledge, discovery, and connection.
  • Like I said, I'm too biased to say, but think there are a bunch of (existing) candidates.
  • fdestin
    Meant to comment here first time (thanks Disqus). Appnexus ?
  • Good news, especially for startups who haven't yet established a home base. In any case, Californian monoculture can't be the only right answer.
  • Yeah, we need enough critical mass here for more new startups to come here.
  • Not Impressed Yet
    The NYC tech community is obsessed with solving incredibly small, relatively benign, almost entirely media-oriented problems. I will be impressed with this community when I see some of its brainpower and capital turned toward real-world environmental, finance and human services problems. Unfortunately this tech community seems intent on functioning more as an adjunct to the city's decrepit advertising and media industries. There are HUGE problems out there to solve and we're sitting around building Twitter apps and patting ourselves on the back? Come on, folks.
  • It sounds like you are naive, overly idealistic, and really just bent against the tech community in general. Your examples of HUGE problems that the tech community should be tackling are somewhat laughable... Following your advice, Google should drop what they're doing now and focus on fixing the economy, a HUGELY more important problem than search advertising.

    You might have to tackle a smaller problem, which could very well be a boring Twitter app that makes just enough money to employ a small team of developers...
  • I'm not impressed with the comments of people who won't leave their name next to their words. If you're confident in your opinion, put your name next to it, otherwise we won't take you very seriously.
  • Not Impressed Yet
    Sorry if it touches a nerve.

    Is CEONYC is your real name?
  • It's a screename and I'm a registered user. My account links to lots of
    places I am on the web... not to mention you can google it... so my
    comments are at most a click or two from a real person.

    CEO is my initials.
  • I'm with Charlie. I would much rather hear from people who are out there making the change happen and signing up to be a part of it rather than throwing tomatoes from offstage. If you're not impressed, that's fine feedback, but that feedback and $3 buys me a latte at Starbucks. Chris, great post. (Now I need to get back to working on that runaway success...)
  • Not Impressed Yet
    Good for you!
  • Hey don't knock the Twitter apps, information frameworks have to begin somewhere ;) Building on existing data pipelines makes perfect sense as long as you're not 100% tied to them indefinitely.
  • david927
    amen
  • Examples? I see far more Twitter apps in CA.
  • Not Impressed Yet
    Well... Let's just take one real-world sector with a load of problems that need to be solved: Transportation. There's a ton of stuff that NYC's tech community could be doing. Here are a few ideas....

    Fixing the MTA. Real-time bus and train info on my iPhone. Wireless access in subway tunnels as in parts of the London Tube and D.C. Metro. Opening up the MTA's financial data to the public and making it parsable. Perhaps even setting up alternative, tech-enabled, privately-run surface transportation systems to compete with the MTA's deteriorating service -- call it Smart Car-Pooling.

    Then you've got your schools, green buildings, ConEd, the state legislature... all of these entities need fixing. All of these need the problem-solving brainpower and capital that NYC's tech community is currently using to solve a wide range of relatively trivial problems.
  • I agree with this post because I am the developer of "find a metro dc," which is almost a year old and provides realtime train arrivals and bus arrivals. Sometimes I get dissapointed by dc metro because it is behind the times and hurting big time financially, but then i think about other cities like NYC which are even worse.
  • I can't say I agree with you completely re: NY's community focus, but I do agree that there are great real world problems to be solved. Shoot me an email if you're willing to reveal identity. Would love to chat about the opportunities here and something I have in mind...
    graves.ryan@gmail.com
  • There are plenty of techies doing stuff like that. See for example http://www.nycbigapps.com/
  • Not Impressed Yet
    BigApps and similar ventures are still just a lot of talk and little action. It's also overly focused on government and overly subscribed to by do-gooders rather than business people. I want to see private sector techies solving some of these problems with profit rather than (or in addition to) altruism as motive. There are huge opportunities being left on the table as NYC's best tech talents faff around on small-bore media problems.
  • The MTA is a State authority, it's not a City thing. As for NYC BigApps (which we helped run at ChallengePost), there were several million dollars in apps created in exchange for $20K in prize money. This was little talk and lots of action.
  • fixing problems with the MTA is just not a VC scale opportunity unfortunately.
  • Right, and it takes about 4-5 years to build a runaway success. Perhaps Meetup and Etsy are close.

    It also depends on whether the tech IPO's really return in 2010 or not, or perhaps we're going to see Yelp style PE investments be the new IPO.

    In any case, it's a great time to be in NYC and be doing a tech startup right now. :-)
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