New York's tech scene has stepped out of the shadow of her older, sunnier sister. While Silicon Alley might not yet have the scale or legacy of Silicon Valley, proximity to Wall Street means she's got her own distinct style – not to mention ballooning investments, multi-billion dollar exits and thousands of new jobs.
Johnnie Greenwood, Head of La Fosse New York, interviewed Jay Bregman, Kris Kemeny and Joshua Levine; three veterans from both the start-up and investment sides of the New York tech scene. He heard their perspectives on the ecosystem; how it's changed, what makes it unique, and what we can expect from the future.
A running start for start-ups
According to a report by Start-Up Genome, New York is the second highest performing ecosystem in the world. Home to more than 7,000 start-ups, it is the American ecosystem with the most unicorn companies after Silicon Valley and as such, is valued at more than $71billion.
Jay Bregman is a three-time founder, co-establishing eCourier and Hailo before starting the insurtech disruptor Verifly in 2013. He sees the New York scene as having matured considerably in recent years.
'We've reached a point where more and more organisations are not just being founded in New York, but are moving operations there. Nowadays, even West-coast funds think it's worth establishing a New York office.'
As managing director of Tefken Ventures, Kris Kemeny invests in the tech companies disrupting legacy industries. He described the 'special flavour' of both funds and companies which the city has cultivated.
'This is a focus which has been driven by the city, both from a top-down and bottom-up perspective. The landscape has reinvented itself in the decade following the financial crisis, producing a flourishing economy which is home not just to the Fortune 100, but also to the emergent ecosystem of early-stage businesses and the myriad of incubators, accelerators and investors who support them.'
Scaling and specialising
With a focus on particular sectors and companies, New York's tech ecosystem has developed its own distinct identity. The strong Financial Services legacy of the capital means that FinTech, Insuretech and the Capital Markets are thriving; Joshua Levine, a governor on The Financial Industry Regulatory Authority (FINRA) board, cites that a lot of energy has gone into payment innovation and updates to in-house banking technology.
However, this is far from the only area of growth; there is also a growing number of companies making an impact in AdTech, HealthTech and Media, as well as the Life Sciences.
Research initiatives help spur the atmosphere of innovation. Since 2012, Cornell Tech has been bringing together like-minded faculty, business leaders, tech entrepreneurs and students to produce 'visionary ideas' that will 'reinvent the way we live.'
Kris observes that this, and other initiatives, are 'putting a flag in the ground' – with much of their research going into industrial technologies like 3D printing, drones and manufacturing software like industrial IoT.
Investment, investment, everywhere
New York's growth in the past few years has been astronomical; in 2012 the figure invested in New York tech start-ups was $2.3 billion, which had sky-rocketed to $13 billion by 2017. What's more, there are frequent cases of massive investments in single companies: 12 NY Companies raised more than $100 million each in 2017.
Jay Bregman sees the New York landscape as characterised by bigger funds and an abundance of investment. All in all, it's a good time to set up shop as a start-up – or win big as an investor.
'We're seeing a flood of capital from bigger than ever funds – up to $8 billion dollars in certain cases.
There is an abundance of opportunity for businesses who can prove that their model can really scale. It's worth making big bets in the current economy - unless you throw your hat in the ring, you don't have a chance of being that billion dollar business.'
From an investment perspective, Kris added that the proliferation of funding, far from saturating the market, continues to inspire entrepreneurial spirit.
‘I don't feel like it is a crowded market. As long as there are investors, there are going to be hungry entrepreneurs with the drive to build businesses.
There are a lot of credible funds with a presence here, but this only pushes the industry to a higher standard. Investors are forced to continually self-improve to ensure that they are the best value-add partners for companies, and really earn their seat at the table.'
The rise of incubators in big FS
And it’s not just VCs who are investing in start-ups. Joshua Levine perceives that the widespread application of SaaS software from new upstarts has left big FS 'hurting' – but that many big organisations would rather be part of the solution than the problem.
'The problems which IT is facing today are very different from those they were facing a few years ago, and big company tech has a lot of soul-searching to do to keep up with it.
Whilst the FinTech Start-Up world has stabilised and avoided the much talked-of 'bubble,' Big FS firms, and even big pharma to some extent, are consolidating by choosing to buy rather than build. The IT department is more open to using external software than they've ever been.
Those who are winning are those that are good at systems integration, and are pragmatic when it comes to adopting cutting edge technology. I think it's likely we'll see a rise in incubators and in-house investment sitting on the side of these companies to bring more agile arms into bigger business.'
NY has great talent
New York now has more than 326,000 technology jobs. Perhaps surprisingly, given the rapid and very large growth of the sector, tech talent seems to be keeping up with the demand.
Whilst one might imagine that salary will be a contributing factor – average tech job wages in NYC are 50% higher than the average NYC Private Sector wages – Jay Bregman adds that, the presence of 'big winners' has its role to play.
'Once you get a couple of companies who have a valuation of 10 billion plus, you get a flood of talent into the city. These businesses increase the supply of capital for the next generation of entrepreneurs, so the value of success goes down, leading to massive head-starter thinking.
The more success stories accelerate, the more talent is drawn from universities. People move here as soon as they finish school to join not only established businesses but also early-stage start-ups. We're getting to a point when the people leaving the big Business Schools are joining tech companies instead of management consultancies.'
Josh Levine also credits this to the city's educational initiatives.
'All of the city universities are producing tech graduates who are confident, energetic and want a job. Meanwhile, the continued growth of Cornell, alongside other initiatives, will likely drive even more tech graduates to New York from outside the state. All the ingredients are there for a global tech hub – I don't see any dark clouds on the horizon.'
The elephant in the tech-scene
Kris only has optimism for the future of New York's trajectory.
'New York has emerged in real force in the technology ecosystem from a technology and company standpoint. This isn't just a case of creating an environment where the next Google could be founded, but the development of a fully mature ecosystem.
You can see the evolution on the street. Ten years ago, everyone was wearing a suit and tie – finance was the heart of the ecosystem. Now, the city has changed – the offices look different, the people are dressed differently and the conversations which you overhear are about funding and technology – ones you expect to hear in Silicon Valley.
It’s a special moment indeed when you can even think of comparing the East-Coast and West-Coast tech scenes – and having a bi-coastal technology system where you can build a $100billion tech company from either coast is certainly no bad thing.’
Johnnie Greenwood is Head of La Fosse New York. Whether you're preparing to scale, an investor ready to execute a bi-coastal or international expansion strategy, or are simply looking for exceptional candidate delivery across several offices globally, we are able to provide seamless support at every stage. Get in touch at firstname.lastname@example.org.