Abram Olmstead  | January 14, 2014

From the Shadow of Wall Street: New York’s Resurgent Startup Scene

The financial crisis rocked New York City. Tens of thousands of high-paying corporate jobs disappeared, leaving legions of smart, highly educated, and ambitious workers contemplating their next career moves. Many gave up on finding a steady 9-to-5 gig and directed their energy and talent elsewhere, thus planting the seeds of a resurgent startup culture that is blossoming today.

“Over the past five years, New York startups have taken off,” says Matthew Brimer, co-founder of General Assembly, a vocational education organization for entrepreneurs with 13 locations worldwide. Launched in 2011, General Assembly offers courses, classes, and workshops on everything from web development, user experience design, and business fundamentals to data science, product management, and digital marketing. “For New York in particular, the recession really shook things up as far as how people perceive their careers. It forced people to consider alternative career paths and made them more inclined to owning their careers.”

Not a Silicon Valley Wannabe

Tech startups, in particular, are magnets for venture capital investment and media attention in the Big Apple these days, but many of these startups serve a different purpose than the typical technology companies that dominate the Silicon Valley. In the Valley, programmers, engineers, and coders reign supreme. Not so much on the opposite coast.

“You see a lot of tech startups in New York that aren’t doing just tech, but are using and building tech to innovate in art, music, retail, fashion, e-commerce,” Brimer says. “Places like the Silicon Valley start from the position of technology. New York starts from a multitude of commercial interests, activities, and industries, then builds technology in a way that makes them more efficient and growth-oriented.”

Ben Branham of the New York City Economic Development Corporation (NYCEDC) says that New York’s startup culture is benefiting from a decade-long effort to diversify the city’s economy.

Since the early 2000s, the percentage of the city’s jobs related to financial services has dipped from 12% to 10%. The number of jobs in the professional and scientific services has increased 13%, and high tech jobs have climbed 15%. In 2010, New York passed Boston to become the second largest market for tech venture capital, trailing only the San Francisco Bay area.

New York’s tech bona fides have not gone unnoticed by the titans of the industry. Google started in New York in 2000 out of an employee’s apartment and has been gobbling up office space  in the city since, becoming the first and biggest engineering office outside of its Mountainview, California, headquarters. Facebook landed in the city in 2008, and now with nearly 200 employees there, it is moving out of its Midtown Manhattan office early this year for one nearly twice as big on the edge of East Village, where its neighbor across the street—in a space of equal size—is likely to be Twitter.

“There’s Silicon Valley, and we have Silicon Alley,” quips Nancy Ploeger, president of the Manhattan Chamber of Commerce.

Ploeger says the startup renaissance is unlike anything she has seen since she started at the chamber in 1994. She points to NY Tech Meetup, a 36,500 member non-profit organization that supports the growing local technology community. Ploeger says the membership was somewhere in the neighborhood of 10,000 members just a couple of years ago. “You can’t even get into one of their events. They are sold out weeks in advance. It’s like a mini Shark Tank. A lot of angel investors and venture capitalists go to find the next Apple.”

Ploeger gives much credit for New York’s burgeoning startup ecosystem to the city’s educational institutions and city resources. New York University and Columbia University offer support for entrepreneurs, but perhaps the city’s most impressive icon to technology and innovation is Cornell NYC Tech, a joint venture of Cornell University and Technion–Israel Institute for Technology for applied sciences and engineering education. The two institutions in 2011 won the bid over a rival partnership between Stanford University and the City College of New York.

Construction of the nearly 12-acre Cornell NYC Tech campus on Roosevelt Island in the East River begins this month. “Cornell NYC Tech will not only attract students from all over the world, but also create an economic boom on the other side of the river in Queens, which is mostly zoned for manufacturing. There’s a whole new sector there for startup companies,” Ploeger says.

During the announcement of the lease last month, New York Mayor Michael Bloomberg said, “Our goal has been to make New York City the global capital of technological innovation, and this new campus on Roosevelt Island is a central part of our strategy for achieving it. It is one of the most ambitious and forward-looking economic development projects any city has ever undertaken, and it’s going to help add thousands of new jobs to our economy in the decades ahead.”

The Bloomberg administration has taken additional steps to foster a startup culture. In 2005, it introduced NYC Business Express, an e-government project dedicated to creating a one-stop website from which new and current business owners can file for permits, licenses, and incentive programs from numerous city agencies. A more user friendly 2.0 version that is integrated with the city’s main website is due out soon, according to NYCEDC’s Branham. “Red tape is not an issue for tech startups in New York,” he says.

The city also operates the New York City Entrepreneurial Fund, the first city-sponsored seed and early-stage investment fund located outside of Silicon Valley. Launched in May 2010 as a partnership between NYCEDC and FirstMark Capital, the fund has invested $22 million in early-stage tech companies—$3 million of it city money, the rest from private sources.

High Rent

New York’s high-priced real estate precludes many people—entrepreneurs included—from living and working there. To attract the best and brightest, the city is carving out affordable shared space for entrepreneurs.

One of the city’s largest shared office space management companies is MicroOffice Solutions. Run by two young professionals, the company operates five co-working office spaces throughout Manhattan, and recently opened a site in Harlem in partnership with NYCEDC. The company offers a variety of professional options including both large and small private offices, flexible co-working, high-speed Internet access, receptionists and on-site mail handling.

The city has a network of more than 10 incubators offering more than 150,000 square feet of low-cost office space as well as training and networking opportunities. More than 600 startup businesses and 1,000 employees are currently located at the city-sponsored incubators.

The state is also lending a helping hand. START-UP NY provides major incentives for businesses to relocate, start up, or significantly expand through affiliations with public and private universities, colleges, and community colleges. Businesses are given the opportunity to operate state and local tax-free on or near academic campuses, and their employees are relieved of state or local personal income taxes.

A More Livable City

Affordable space is just one way in which the city has become more livable for entrepreneurs in recent years. A declining crime rate, a waterfront revitalization project, a wildly popular bicycle sharing program that has 95,000 members and 331 bike stations, the creation of additional park space, and even a smoking ban in parks, on beaches, and in pedestrian zones is attracting talent that, in turn, is drawing funding.

Says Branham, “Talent attracts capital more than capital attracts talent.”