The State of New York Technology / by Nate Westheimer

Colleagues, I am very excited to report that the state of the NY early stage technology ecosystem is strong. Very strong! In an analysis of every major component of the NY technology ecosystem, our industry scores nearly straight As; and, where we score below an "A," we have a clear path to improving and succeeding. Let's review:

Let say that in every major early stage technology ecosystem, one needs a healthy mixture of the following:

  • Supply of Great New Entrepreneurs
  • Foundation of great second and third generation entrepreneurs
  • Efficient capital markets
  • Access to large and diverse customer set
  • Unidirectional flow of Human Capital through local universities into the startup ecosystem
  • Bidirectional flow of Intellectual Capital between local universities and the startup ecosystem
  • A media industry interested in reporting on the innovations of the industry
  • Value-driven services infrastructure (lawyers, rent, etc)
  • High quality of life
  • Strong industry community infrastructure

In more detail, let's address and grade each of these issues:

Supply of Great New Entrepreneurs - A

One doesn't have to throw a stone very hard in NYC to hit an up and coming entrepreneur. This is a city full of ambitious risk-takers, most of them may not have what it takes to succeed, but many do and are laying the foundations of incredible careers. New Entrepreneurs in New York come from diverse backgrounds. Many have spent time working in one of NYC's Big Industries, which means they have exposure to business at a large-scale. However, they also tend to have strong connections to their local economies, making them aware of the "status on the ground," which is where many of their ideas for innovation come from.

Foundation of great second and third generation entrepreneurs - B+

For much of the last decade, this has been the biggest issue of some of the smartest observers in NY Tech. Every healthy ecosystem needs an old guard bringing up the new, and Boston and San Francisco have been great examples for why this is important (can you say "PayPal Mafia?").

But in New York the questions is, "As a New Entrepreneur, can I find a veteren to help show me the way?" I think we're on our way here. Certainly I've had that experience -- seeing that I've had the opportunity to co-found a company with serial entrepreneur Aaron Cohen, who's had multiple exits in the space. Elsewhere, media veterans like Strauss Zelnick have helped mentor first-time CEOs Sam Lessin and Ben Lerer. Now Ben and Sam have begun mentoring New Entrepreneurs like Andrew Kortina and Justin Shaffer. The waterfall of mentorship is at work here.

And the examples don't stop there. NY-centric mentors, all of whom have made themselves accessible to other entrepreneurs for guidance, capital, and/or management leadership, include: Steven Messer, John Maloney, Scott Heiferman, Andrew Raseij, Team Betaworks, Esther Dyson, David S. Rose, Jeff Stewart, Albert Wenger, Josh Kopelman, Dennis Crowley, Evan Korth, Howard Lindzon, Mike Lazerow, Darren Herman, David Kidder, Nancy Pedot, and on and on and on.

The point being, no matter what you're doing in this city, if you can't find an industry to get excited, you're not looking in the right places. While New York will be better off when the next generation of mentors come into the picture, things are quite healthy here and only getting better.

Efficient capital markets - A-

Let me echo something Charlie O'Donnell said the other day on his blog. If you can't get funded in New York City, your company shouldn't be funded.

Why is that okay for Charlie and me to say? For two reasons: 1) Because both of us had startups which were unable to raise VC money (while both had some level of friends and family/Angel money). We both know "it's okay" if you do a startup and fail. Us not getting money was as healthy for the ecosystem as Etsy or 10Gen getting money.

The second reason is that in 2010 global capital markets are very efficient. In New York there are dozens of investors -- VC to Angels to Friends-and-Family -- with direct experience in virtually every area of the industry. And where there's not clear point-of-contact (say, for semiconductors) are many more firms or people (from Chris Sacca to my friends at Flybridge) who operate in New York and bring that expertise into the ecosystem.

Wherever it comes from, dozens of millions of dollars get deployed at every level of the early-stage ecosystem in New York, and I have yet to hear of a deal -- including my own -- which deserved to get funded and didn't. Can you name one?

Access to large and diverse customer set - A+

Let me just name streets and neighborhoods, and you let me know if you have access to customers in New York City: Madison Avenue, Wall Street, Orchard Street, Chinatown, Upper West Side, Upper East Side, Williamsburg, Restaurant Row...

For all the talk about its Big Industries, New York's economy is also a great example of diversity. Have a platform for restaurants? No better place but here. Something for tiny shops? New York is your place. Something for house keepers? Banks? Political campaigns? DIYers? Mega-fashion? Time-tracking? There's no better place than New York City to get access to these customers.

Unidirectional flow of Human Capital through local universities into the startup ecosystem - B

The dynamic between startups and universities can be broken down into two parts. The first is the mostly unidirectional flow of human capital into universities and out to the innovation industry.

In order for this to work out, our local universities have to recruit top talent on a global level. In the case of early stage technology, we need this to be a healthy mix of engineers/hackers and "business kids."

In New York, our universities are doing great jobs of recruiting, educating, and feeding (into the startup industry) folks on the business side of the equation. Little improvement is needed here.

However, on the engineering side of the equation recruiting top engineering students -- on a graduate and undergraduate level -- and then getting them excited about joining or starting startups has been tough. Right now, professors like Evan Korth (NYU) and Chris Wiggins (Columbia) are too few and far between, and their departments and schools pay too little attention to the great work they are doing.

At the same time, startups pay too little attention to their opportunity to foster relationships with students at early ages. While folks like Evan and Chris push students to intern with startups, startup too often think of internships of as too expensive to provide -- the short-term output doesn't outweigh the salary and training expenses, they think -- and so often shrug it off, or offer positions without pay.

On this matter, we all need to step up to the plate. Universities need to do a better job attracting startup-minded talent and a better job of steering students away from Wall Street (or even big, established tech companies) and point them in the direction of the startup community. Meanwhile, those in the startup community need to make investments in this talent. While we can't compete with alternatives, we can pay decent salaries and invest the time into mentoring students.

We can do a better job, and must.

The good news is stuff is happening here. The NY Tech Meetup is now attracting dozens of student hackers each month through our Student Group, and Chris Wiggins, with a group of dedicated community members, is independently spearheading an exciting new project around internships (which I won't unveil too much of). NY Tech Meetup is also about to focus a lot of of its resources in the area of internships and recruitment.

Bidirectional flow of Intellectual Capital between local universities and the startup ecosystem - C

The second pilar of the University/Startup relationship is the bidirectional flow of intellectual capital.

I've given New York a "C" grade in this area because there are far to few people and startups working in this space. However, its the area we can most improve upon.

To make this bidirectional flow of intellectual capital work, we need more entrepreneurs and investors going on tours of university labs, diving into the great research projects already going on here, and thinking about how to commercialize the technology. I've been to both NYU and Columbia multiple times in the last year, but feel like I haven't done enough by not seeing the labs at Pace, Stevens, Poly, and other institutions. On the flip side, more tech transfer offices need to be visible in the startup community. David Lerner, who run's Columbia's office, is on the Board of the NY Tech Meetup, and is one of the most accessible people in the city. We need more people like him -- but we also need to do a better job seeking his counterparts out and bringing them into the fold.

Meanwhile, researchers should  also be paying attention to what's going on in the "real world" more often. While I appreciate and respect the separation between capitalism and academics, the truth is a lot of research is influenced by government DARPA and IARPA grants already -- so why shouldn't private companies, namely startups, be a bigger influence too? Researchers need to get out of the labs and into Meetups and VC offices to hear about the problems confronting real startups today.

A media industry interested in reporting on the innovations of the industry - A

The media lives in New York City and is paying attention. Not much to say here, except that I know of two stories coming out of two of the biggest news outlets about the startup community. Of course we'd love more attention, as an industry, but also our startups need to do more to deserve it. If you're finding something to complain about here, now you're really stretching.

Value-driven services infrastructure (lawyers, rent, etc) - A-

If one more person cites "rent" as a reason it's tough to do startups in New York City, I'm going to personally kick them out of New York. It's one of the most absurd statements anyone ever makes. It is the go-to issue of the shrill and unimaginative. First of all, rent is a relative cost. You live and work here for all the benefits listed above. The premium on NYC rent is far less than the premium you gain for your business. I have never met a single company who has not made it here because they couldn't find insanely cheap office space. In fact, every startup I know of finds exactly what they need at a price they can afford.

On the issue of other services (namely lawyers), again, this is where people are totally wrong. First of all, if you can't afford NY lawyers hire elsewhere. For BricaBox, I was able to use a law firm in Cincinnati. They have Associates and Partners admitted in the NY State Bar too! But you also don't have to go outside New York. As Chris Dixon wrote, if someone tries to make you pay more than $10k for your first round, tell them you'll go elsewhere.

High quality of life - A+

Nothing to say here. The fact that you can live a life of luxury AND have a lower carbon footprint than anywhere else in the country speaks for itself.

Strong industry community infrastructure - A+

Lastly on my list is the community infrastructure. I may be biased, here, but remember I've still spent more time in this community without my leadership role at NY Tech Meetup than with it. So aside from having the largest monthly meeting of technologists in the world (yes, that's true), we also have amazing people leading amazing groups like, nextNY, Y+30, Entrepreneurs Roundtable, Founders Club, Feedback Forum, Ultra-light Startups, Girls in Tech, New Work City, Video 2.0, TechAviv, Fashion 2.0, Gaming 2.0, Semantic Web Meetup, IxDA, and so on.

Conclusion

I said it before and I'll say it again: The State of the NY technology industry is strong. Yes, there are major things we need to work on, but at least we have focus here: I believe we should be doing everything possible around the flow of human capital through universities into the startup ecosystem, and the flow of intellectual capital between universities and the startup ecosystem.

If we could just focus on this alone, we could create tremendous value here.

Meanwhile, it will continue to be wasted breath to gripe and moan about the capital market or costs of doing business here. Those complains are from the unimaginative and are simply not true.

So, let's celebrate our successes as a community and rally around what's next to come. There's a lot we can do if we focus our energies on the right things.