New York City: The Nation's Second Leading Tech Hub
New York City has emerged as the nation’s second leading high-tech hub, according to a new report by The Center for an Urban Future. "In 2006, I wouldn't have put New York anywhere on the map," Silicon Valley high-tech and venture capital expert, Vivek Wadhwa, told the authors of the report. "If there is any second to Silicon Valley, it’s now New York not Boston."
Since 2007, 486 of New York City's’s high tech start-ups have received venture capital investment, mainly in the fields of the Internet and mobile technology. Of these, 15 have raised more than $50 million in venture funds, 27 have attracted at least $25 million and 81 have raised $10 million or more, according to the report.
Of the seven leading technology regions in the United States, New York City was the only one to see an increase in the number of VC deals between 2007 and 2011, according to data from the MoneyTree report published by PricewaterhouseCoopers and the National Venture Capital Association. The number of deals shot up by 32 percent in New York during this period whereas venture activity was down significantly in every other region, including Silicon Valley (-10 percent), New England (-14 percent), LA/Orange County (-8 percent), Texas (-17 percent), and San Diego (-38 percent). Nationally, there was an 11 percent decline in VC deals.
A growing number of New York tech start-ups - Foursquare, Gilt Groupe, Kickstarter, Tumblr, ZocDoc, and Etsy, among them - have achieved real growth and become tech stars. If that’s not enough, more than a dozen well-established start-ups have moved to the city from the Bay Area, Boston, or other locations. Twitter opened a New York office and Microsoft announced its new New York City research lab just last week. All in all, the city has gained more than a thousand web technology start-ups, most of which have been boot-strapped without institutional venture capital investment, according to the report.
Part of the reason for the city’s emergence, the report says, is the maturity of the high tech sector, which no longer turns on the creation of "the infrastructure and plumbing for the Internet, but about applying technology to traditional industries like advertising, media, finance, fashion and health" - industries for which New York has an "unmatched concentration of talent." Though the report points out, immigration and visa restrictions at the national level are hurting the city’s ability to continue to attract top talent. "Even top start-ups like Gilt Groupe and Tumblr are having trouble competing with the deep pockets of financial companies, never mind the many more smaller companies that are still trying to get a foothold," the report says.
The map above (from the report) shows the dense clustering of New York tech companies in a tight band running from Lower Manhattan up to the southern border of Central Park, with a few across the river in Brooklyn. This is driven by tech talent's demand for more urban living.
New York’s rise as a tech center is part of an ongoing shift from the old nerdistan model of high-tech industrial organization to a new, denser more urban-based model. Jane Jacobs long ago noted the clustering of innovation and creativity that occur in large, diverse and dense cities like New York with walkable neighborhoods which create street-level serendipity, famously writing that: "New ideas must use old buildings."
As Jonah Lehrer told Cities recently, "Silicon Valley manages to replicate the essential function of a dense city, which is to foster a diversity of interactions and knowledge spillovers," albeit largely across industrial parks and based on the car. This isn't to say that New York will displace Silicon Valley any time soon. Still, its rapid rise represents the first significant urban alternative to the nerdistan model, offering real density and clustering that facilitates the constant combination and recombination of people and ideas, and acting as a draw on a new generation of tech talent who are drawn to urban living and eshew dependence on the car.