If someone could be so kind as to paste-bin this, I'd be grateful. The NYTimes paywall has been in full force lately (probably due to me being on uni IP?) considering that I rarely visit the site.
Opening in Chrome Incognito mode and stripping all URL params lets you read the article w/o the paywall modal.
It used to be if you simply stripped out the URL parameter you could read the article which does not work anymore. Did some noodling, deleted all my cookies for nytimes.com, stripped the params and it still brings up the modal. After some inspecting I discovered its Local Storage & Session Storage where they're saving your tracking info, not IP address.
Let's stop with the comparisons to the Valley. Let's stop trying to be like the Valley. NYC's edge is the fact that we're exposed to so many different industries and cultures, many of which have not yet been "modernized" with tech. Let's focus on that.
In my experience that makes it a better place to live -- but not necessarily a better place to try to build a (very large) technology company.
The difference between NYC and the Valley was unclear to me when I lived in New York, but after spending just a few months out west, it became very apparent to me that there is an order of magnitude difference between the two -- and I believe that will translate into an increased chance of success.
There are lots of reasons that New York just doesn't compete with SV, mostly to do with people and networking, but the difference that really struck me was the openness and positivity in the Valley. Yes there's an echo chamber, and yes you need to keep your BS detector on at all times, but when you are just 3 or 4 people trying to crack into a behemoth of an industry you need all the help you can get. I felt lots of people in New York were looking for weaknesses in what we were doing or trying to figure out who would acquire us, whereas people in the Valley were looking for ways to help us really succeed.
The combined operating experience is not only greater in the Valley, but much more accessible too. I felt like larger companies like Tumblr and Foursquare were silo'd off from everyone else, whereas you can barely shake a stick in Mountain View without hitting someone at Google.
Personally, I believe New York is the greatest city in the world and due to it's culture and array of experiences, a great place to start a company -- but if you want to build a big tech company, you should move out west. In fact, it's one of YC's indicators of success after going through the program.
As a side note, the closest thing I've seen on the east coast with a similar vibe to the valley is Waterloo, Ontario. Although very, very small, they've somehow captured that same feeling.
This is a great post, thanks for the insight. I notice you work with writers and the press, most of whom I imagine would be living in NYC if not the East Coast cities. Do you think there's an advantage to being closer to that? Or do you think that any advantage you get from being closer to those you work with is outweighed by the skepticism you get from other people around you?
I was watching an interview where the Airbnb guys said they were constantly flying to NYC because many of their early customers were there and I was wondering why they didn't simply relocate together, although perhaps the positivity and accessibility of expertise outweighs the burden of travelling.
Also - in your opinion, do you think New York could ever replicate the SV mentality, even just in its own tech scene silo (obviously Wall St bankers will never adopt it), or do you think this is bound to fail?
We've talked about this, and we decided it makes more sense for us to be removed from traditional media companies.
My co-founder Adrian asked the AirBnB founders that question believe it or not! They said they always planned on staying in SF and that's where the heart of the company was. New York was just where it took off first and they thought that if they could nail the model there, they could do it anywhere. Turns out they were right.
It felt far away from it when I was there, but I believe it could become more ingrained with time though. I think it's very clear that there are great investors (USV is world class) and companies/founders at various stages (eg. Kickstarter, RapGenius) in New York, but there's still a bunch of missing pieces in the ecosystem that SV has nailed down.
>there's still a bunch of missing pieces in the ecosystem that SV has nailed down
Can you expand on this point? Is there something that you can point to that is structurally different in SV that cannot be replicated elsewhere eg. infrastructure, legal environment etc...?
By nailed down, I meant "done right" and functioning smoothly -- not nailed down as in impossible to duplicate else where.
For example there is nothing very early stage in New York that wields the respect and track record of YCombinator or SV Angel. Both of those have become institutions in SV and are very important as connectors and seed stage investors.
The Stanford ecosystem is another example that is well oiled. The Cornell Tech campus in NYC has tons of potential, but it's still quite new.
It probably depends on what kind of a company you are trying to start. Groupthink or an approach that over-emphasizes engineering in place of value prop / understanding the market you are serving can hinder you, and that could be a competitive advantage for NYC.
One thing I will point out: most investors in NYC are looking for Series A or later. Or proven profitability. It's a more conventional community; the type of investors you'll see in New York made their money in PE/finance/investment banking and not tech. NYC as a market is very much a place to build a company where your primary metric is not MAU's or an innovative idea but rather something that moderately takes a linear approach in helping an established industry innovate. Or already profitable. I'd be surprised to see the next Amazon, Google, or Tesla ever come out of New York. The next DoubleClick or Travelocity? Sure.
> but if you want to build a big tech company, you should move out west. In fact, it's one of YC's indicators of success after going through the program.
Fascinating! Is this something the YC partners have mentioned recently? In my batch of 26 companies (that was 5 years ago), I can definitely see a huge correlation between leaving the bay area and failing. I just always assumed it was just randomness or that some left because no investors were forcing them to stay (in our case it was both lack of investors and NYC housing our entire customer base).
Yes, a partner said that. They also specifically noted that NYC might be an exception to the rule, but they still believe SV is an order of magnitude better for "all things" startups.
Also, pg has mentioned something similar in an essay before - not specifically re: NYC but with regards to bad location in general.
> I felt lots of people in New York were looking for weaknesses in what we were doing or trying to figure out who would acquire us, whereas people in the Valley were looking for ways to help us really succeed.
NYC is a weary, jaded and cynical metropolis, it's inhabitants perpetually cranky from six months of winter in their cramped, expensive, rented domiciles.
It's not your company, it's their depressed mood coupled with feelings of inferiority constantly triggered by the immense glittering wealth that surrounds them, always just out of their grasp.
Finance is a zero-sum game. That leads to a set of incentives where what you need to do is beat the next guy.
Tech is almost the opposite of a zero-sum games. That leads to a set of incentives where what you need to do is crack a complex problem. Cracking complex problems requires collaboration.
That sounds very correct, and is true for all the dominant industries in New York: Finance, Fashion, Law & Media.
It leads to a lot of savage energy channeling through the system, a lot of deep career dissatisfaction and a feeling that someone, somewhere is tightening the rack, with you on it.
I suspect the only real winners in the city are the landlords.
Whatever the cause, in all my time on the road I have never come across such a congregation of pessimists as I did in New York.
"Here's another hypothesis: It's the finance industry culture."
I have been on boards in the valley and in NYC, and I can see this very directly. The NY VCs were far more transactional, and more aggressively willing to drop a company and take the loss early.
Not that it's rainbows and unicorns in the valley! The VCs, after all, work for their customers (err, "LPs"). I've noticed that as the valley VCs are more and more frequently finance rather than former operating guys that they are more like this. I saw it in the dot-com boom, and guess which VCs got shellacked? Mostly the finance guys.
Nonsense. Bay Area rents are just as expensive and Chicago's winter is twenty times worse than New York, yet these area have their own unique personalities
and I wouldn't change it for the world. I far prefer living and working in an environment where I am surrounded by people from different industries and backgrounds that will question me and force me to reconsider my assumptions than a Silicon Valley world where everyone is "crushing it" until their funding suddenly dries up and everyone realises their idea was awful in the first place.
> "Being in the San Francisco area, he said, helps start-up founders know the right people to pick up on bits of gossip about new product releases or venture financing rounds."
I'm based in Dallas, so I am wondering from a Sillicon Valley/SF perspective, how beneficial is this data point?
Or is it one of those data points that keep the overall investor excitement of early stage startup investments going, but doesn't actually help early stage start ups with their own companies?
This does boil down to a point: do media and blogs write about startups that are interesting and/or important, or those who they can grab coffee, beers etc with. Quite often I've found being in the same city with someone covering helps you immensely, as many European startups can attest to. Hard to build those relationships from another city. Same goes for investors, biz dev partners etc.
'No New York startup has been a breakout hit with a multi-billion valuation'
'Tumblr, the blogging service based in downtown Manhattan, made headlines last May when Yahoo acquired it for $1.1 billion. '
I don't know where the writer hails from, but 1.1 billion isn't exactly chump change.
It's unlikely that any one city can overtake anotner for a specific industry. It's unlikely that San Francisco coudl ever supplant Wall St, despite San Francisco having a large financial centre.
The top people will want to go to Wall St for finance, and the Valley for tech companies. Very hard to reverse that, and I don't see a lot of reasons why anyone would want to.
It's unlikely that San Francisco could ever supplant
Wall St, despite San Francisco having a large financial centre.
Is this actually that unlikely?
Look at the tremendous wealth creation around the Bay Area over the last three decades. There's an unprecedented flood of capital to the area, including private individuals and international investment firms. If you look at the actual numbers, it's astounding and can't really be described as a "bubble."
In the 80s, companies would hold a public offering when the had <$25MM in revenue. Today, companies try to stay private for as long as they possibly can, which has resulted in massive private financings. See Square, Uber, Dropbox, Airbnb, Twitter, etc. These are nearly always being led by investment banks, like Goldman Sachs.
It's not outlandish to imagine a secondary financial market emerging in SF, designed specifically to fuel the sort of innovation the region has become famous for. The huge banks in America (JP Morgan, etc.) were essentially a result of the industrial revolution. If we're in the midst of another revolution, it's likely a new banking group will emerge.
The way of Silicon Valley is to innovate solutions. Nobody is going to try to appeal Sarbanes–Oxley. We'll just build a way around it. Even with it's warts, Bitcoin is one example. Full democratization of commerce and investment is inevitable.
Yes, it's very unlikely for the same reasons. New York 'Wall St' is a very established industry. The biggest of Tech IPOs are chicken feed compared to the money going through New York on a daily basis. If you want to be at the top of finance, you have to be in New York. Anybody who wants to work to the top, will end up in New York. The reverse applies to Tech, which is why both will stay top of their game for their respective current strengths.
It's completely wrong to think of New York in terms of just JP Morgan as it is wrong to think of Silicon Valley as just Apple.
New York doesn't care about the origin of the wealth. It's about raising the capital, repackaging it, and on-selling it, and trading it all the while. So any wealth generated in San Francisco that makes it as far as the public markets will end up going through NY anyway.
I don't know why this is getting downvoted. It cleverly points out that the odds of SF overtaking NY as a financial center is related to the success of technological alternatives to the established financial system.
How about 500 USD to be settled in bitcoin (or similar virtual currency)? The metric for winning will be where the top (by market cap) 10 finance companies are headquartered at midnight Apr 28, 2034. If more are in NYC, I win. If more are in San Francisco, you win. If it's a tie, the "next highest" will be added until it isn't a tie.
This comment thread and the article itself are like parodies of all of the detachment from reality that the tech industry faces. Only in this community do you increase in investment size by 200% over a 4 year period and still see people questioning whether your market is becoming more viable. New York's investment share is apparently more than 1/4 that of Silicon Valley and climbing. That's a big deal for a city that was once seen as tied exclusively to old money.
"The amount of venture, angel and private equity money invested in New York soared about 200 percent from 2009 to 2013, to $3 billion from $799 million, according to CB Insights, a data analysis firm that specializes in venture capital trends. Silicon Valley, by contrast, took in $11.4 billion in 2013."
Is it really fair to compare the exit of WhatsApp with Tumblr? Tumblr has been around much longer, is used regularly by a lot of people, and isn't too hard to monetise via advertising. WhatsApp was purchased by a giant with a lot of money simply to prevent it's competitors from getting it. Obviously WhatsApp provided a lot more value to it's investors but the comparison just doesn't seem fair to me.
Edit:
It's also important to realise that our idea of a huge exit has changed rapidly over the last few years largely because of Facebook. A couple of years ago Instagram's $1bn astonished people. And yet Tumblr's $1.1bn isn't considered huge?
I wasn't trying to compare WhatsApp to Tumblr, I was trying to compare one exit this year vs the top exists from an entire ecosystem over the past 5 years.
I think New York is great, and I think Tumblr is great, but I think if Tumblr were perhaps in SV, things could have went differently.
This isn't what people are concerned with - a pissing match of exits. They're concerned with "is this a viable place to raise money for a startup." The answer, based on the momentum (200% growth in investments over 5 years) and overall figures is undeniably "YES".
surely you're joking by including WhatsApp in this list.
we can't all be privy to Mark Zuckerberg's paroxysms. let's not confuse the astronomically weird actions of child with too much money for anything resembling reasonable investment behavior.
The problem isn't with investments (there's plenty of cheap money). It's that there are no huge exits.
The city needs a "super-unicorn" technology company with a multibillion-dollar valuation to mint a fresh crop of millionaires and enrich thousands of engineers. These engineers will go on to build the next big technology startups—without them, the city will remain indelibly tied to old money.
The reason why huge exits are so important is that they are what the venture capital industry relies on. It appears that New York(ers?) is/are attempting to develop a VC funded entrepreneurship sector, which requires the existence of big exits.
Is part of your point here that these engineers, having made a stack of money, will be more inclined to take a risk (to found/fund/build the next big thing)? i.e. that the reason the exit is important is less that it's a signal about what's possible, and more that it creates freedom for those who might otherwise take a 'safe' job?
I wonder how much employment laws play into this also? I moved from California (born and raised) to New York three years ago and currently work for a "Start up". I've been stunned to find the differences in employment laws, taxes, non-compete, cost of living etc.
I think some of us may really like to hear specifics regarding these stunning differences. I grew up in NY and as far as I can tell both NY and SV are high tax areas with extremely high costs of living.
According to Brad Feld's book "Startup Communities" you have to be committed to a place for 10 years to see any real change. He mentions politicians as being too short sighted for not being able to carry thru for that long. I'm not sure if it's been 10 years for the New York Startup scene, but maybe NY Times is being a little hasty. If the current political establishment keeps it's support up and so does the next batch, I think the NY has a very decent chance indeed.
However, it's the tough times that will tell whether NYC Startup Culture endures, especially when the hype has died down and the economy has had another mood swing. I remember after the 90's .com boom people in the city acted like tech was over (the boom and subsequent bust was surreal on the people's part too, I thought), but what it proved was when the party's over, all the riff raff falls away and only tech companies that were fairly strong not only made it thru, but thrived.
NYC, shouldn't be Silicon Valley, only Silicon Valley can be that! The city, despite it's many "issues" is one of the most amazing places on earth. I hope the tech that comes out of there is just as amazing and real. Cheers!
It's also a question of if you are looking in the right places. NY startups tend to be less pure technology plays that need lots of VC money, and tend to be tied to information intensive industries like advertising and finance. Fintech startups frequently are cash flow positive by the time they hit 20 employees. These aren't game breakers that will get multi-billion dollar valuations, but they build from strength and don't need to become monsters.
The biggest hold-up is actually the cost of living in NYC. It's worse than the Bay Area, and there is less pride in being a starving entrepreneur.
I loathe all the armchair sociologists here, trying to blame the status of NYC's tech scene on everything from NYC's finance culture, to the supposed unfriendliness of New Yorkers, to the colder weather. Get over yourselves. We don't know what makes for a good start up community. You might have some hunches, but you're just as clueless as the rest of us.
Besides, I for one am glad NYC is not the valley. Who says you folks in the valley are right about everything?
`Also glad NYC is not the valley. But there is reason for it. It's not random. I think SV was first to market. This is more or less in keeping with my sentiments about it: http://www.evanmiller.org/marketing-startup-hubs.html
Like everyone's been saying I think these kind of things take time. I think all in all the shift in startup culture has been dramatic over the last ten years in NYC. Its only a matter of time for an iconic tech company to come out of NYC, especially if investments keeps growing.
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[ 3.7 ms ] story [ 107 ms ] threadIt used to be if you simply stripped out the URL parameter you could read the article which does not work anymore. Did some noodling, deleted all my cookies for nytimes.com, stripped the params and it still brings up the modal. After some inspecting I discovered its Local Storage & Session Storage where they're saving your tracking info, not IP address.
The difference between NYC and the Valley was unclear to me when I lived in New York, but after spending just a few months out west, it became very apparent to me that there is an order of magnitude difference between the two -- and I believe that will translate into an increased chance of success.
There are lots of reasons that New York just doesn't compete with SV, mostly to do with people and networking, but the difference that really struck me was the openness and positivity in the Valley. Yes there's an echo chamber, and yes you need to keep your BS detector on at all times, but when you are just 3 or 4 people trying to crack into a behemoth of an industry you need all the help you can get. I felt lots of people in New York were looking for weaknesses in what we were doing or trying to figure out who would acquire us, whereas people in the Valley were looking for ways to help us really succeed.
The combined operating experience is not only greater in the Valley, but much more accessible too. I felt like larger companies like Tumblr and Foursquare were silo'd off from everyone else, whereas you can barely shake a stick in Mountain View without hitting someone at Google.
Personally, I believe New York is the greatest city in the world and due to it's culture and array of experiences, a great place to start a company -- but if you want to build a big tech company, you should move out west. In fact, it's one of YC's indicators of success after going through the program.
As a side note, the closest thing I've seen on the east coast with a similar vibe to the valley is Waterloo, Ontario. Although very, very small, they've somehow captured that same feeling.
I was watching an interview where the Airbnb guys said they were constantly flying to NYC because many of their early customers were there and I was wondering why they didn't simply relocate together, although perhaps the positivity and accessibility of expertise outweighs the burden of travelling.
Also - in your opinion, do you think New York could ever replicate the SV mentality, even just in its own tech scene silo (obviously Wall St bankers will never adopt it), or do you think this is bound to fail?
My co-founder Adrian asked the AirBnB founders that question believe it or not! They said they always planned on staying in SF and that's where the heart of the company was. New York was just where it took off first and they thought that if they could nail the model there, they could do it anywhere. Turns out they were right.
It felt far away from it when I was there, but I believe it could become more ingrained with time though. I think it's very clear that there are great investors (USV is world class) and companies/founders at various stages (eg. Kickstarter, RapGenius) in New York, but there's still a bunch of missing pieces in the ecosystem that SV has nailed down.
Can you expand on this point? Is there something that you can point to that is structurally different in SV that cannot be replicated elsewhere eg. infrastructure, legal environment etc...?
For example there is nothing very early stage in New York that wields the respect and track record of YCombinator or SV Angel. Both of those have become institutions in SV and are very important as connectors and seed stage investors.
The Stanford ecosystem is another example that is well oiled. The Cornell Tech campus in NYC has tons of potential, but it's still quite new.
One thing I will point out: most investors in NYC are looking for Series A or later. Or proven profitability. It's a more conventional community; the type of investors you'll see in New York made their money in PE/finance/investment banking and not tech. NYC as a market is very much a place to build a company where your primary metric is not MAU's or an innovative idea but rather something that moderately takes a linear approach in helping an established industry innovate. Or already profitable. I'd be surprised to see the next Amazon, Google, or Tesla ever come out of New York. The next DoubleClick or Travelocity? Sure.
Fascinating! Is this something the YC partners have mentioned recently? In my batch of 26 companies (that was 5 years ago), I can definitely see a huge correlation between leaving the bay area and failing. I just always assumed it was just randomness or that some left because no investors were forcing them to stay (in our case it was both lack of investors and NYC housing our entire customer base).
Also, pg has mentioned something similar in an essay before - not specifically re: NYC but with regards to bad location in general.
NYC is a weary, jaded and cynical metropolis, it's inhabitants perpetually cranky from six months of winter in their cramped, expensive, rented domiciles.
It's not your company, it's their depressed mood coupled with feelings of inferiority constantly triggered by the immense glittering wealth that surrounds them, always just out of their grasp.
It's the finance industry culture. Why?
Finance is a zero-sum game. That leads to a set of incentives where what you need to do is beat the next guy.
Tech is almost the opposite of a zero-sum games. That leads to a set of incentives where what you need to do is crack a complex problem. Cracking complex problems requires collaboration.
It leads to a lot of savage energy channeling through the system, a lot of deep career dissatisfaction and a feeling that someone, somewhere is tightening the rack, with you on it.
I suspect the only real winners in the city are the landlords.
Whatever the cause, in all my time on the road I have never come across such a congregation of pessimists as I did in New York.
I have been on boards in the valley and in NYC, and I can see this very directly. The NY VCs were far more transactional, and more aggressively willing to drop a company and take the loss early.
Not that it's rainbows and unicorns in the valley! The VCs, after all, work for their customers (err, "LPs"). I've noticed that as the valley VCs are more and more frequently finance rather than former operating guys that they are more like this. I saw it in the dot-com boom, and guess which VCs got shellacked? Mostly the finance guys.
and I wouldn't change it for the world. I far prefer living and working in an environment where I am surrounded by people from different industries and backgrounds that will question me and force me to reconsider my assumptions than a Silicon Valley world where everyone is "crushing it" until their funding suddenly dries up and everyone realises their idea was awful in the first place.
I'm based in Dallas, so I am wondering from a Sillicon Valley/SF perspective, how beneficial is this data point?
Or is it one of those data points that keep the overall investor excitement of early stage startup investments going, but doesn't actually help early stage start ups with their own companies?
'Tumblr, the blogging service based in downtown Manhattan, made headlines last May when Yahoo acquired it for $1.1 billion. '
I don't know where the writer hails from, but 1.1 billion isn't exactly chump change.
It's unlikely that any one city can overtake anotner for a specific industry. It's unlikely that San Francisco coudl ever supplant Wall St, despite San Francisco having a large financial centre.
The top people will want to go to Wall St for finance, and the Valley for tech companies. Very hard to reverse that, and I don't see a lot of reasons why anyone would want to.
Look at the tremendous wealth creation around the Bay Area over the last three decades. There's an unprecedented flood of capital to the area, including private individuals and international investment firms. If you look at the actual numbers, it's astounding and can't really be described as a "bubble."
In the 80s, companies would hold a public offering when the had <$25MM in revenue. Today, companies try to stay private for as long as they possibly can, which has resulted in massive private financings. See Square, Uber, Dropbox, Airbnb, Twitter, etc. These are nearly always being led by investment banks, like Goldman Sachs.
It's not outlandish to imagine a secondary financial market emerging in SF, designed specifically to fuel the sort of innovation the region has become famous for. The huge banks in America (JP Morgan, etc.) were essentially a result of the industrial revolution. If we're in the midst of another revolution, it's likely a new banking group will emerge.
The way of Silicon Valley is to innovate solutions. Nobody is going to try to appeal Sarbanes–Oxley. We'll just build a way around it. Even with it's warts, Bitcoin is one example. Full democratization of commerce and investment is inevitable.
It's completely wrong to think of New York in terms of just JP Morgan as it is wrong to think of Silicon Valley as just Apple.
New York doesn't care about the origin of the wealth. It's about raising the capital, repackaging it, and on-selling it, and trading it all the while. So any wealth generated in San Francisco that makes it as far as the public markets will end up going through NY anyway.
Deal?
"The amount of venture, angel and private equity money invested in New York soared about 200 percent from 2009 to 2013, to $3 billion from $799 million, according to CB Insights, a data analysis firm that specializes in venture capital trends. Silicon Valley, by contrast, took in $11.4 billion in 2013."
SV: Largest exit so far 2014: WhatsApp: 19B
NY: Top 5 exits since 2009: Tumblr: 1.1B Indeed: 1.0B Buddy Media: 745M Shutterstock: 570M Ascend Health: 500M
Not sure where the parody or detachment from reality factors in.
Edit:
It's also important to realise that our idea of a huge exit has changed rapidly over the last few years largely because of Facebook. A couple of years ago Instagram's $1bn astonished people. And yet Tumblr's $1.1bn isn't considered huge?
I think New York is great, and I think Tumblr is great, but I think if Tumblr were perhaps in SV, things could have went differently.
we can't all be privy to Mark Zuckerberg's paroxysms. let's not confuse the astronomically weird actions of child with too much money for anything resembling reasonable investment behavior.
The city needs a "super-unicorn" technology company with a multibillion-dollar valuation to mint a fresh crop of millionaires and enrich thousands of engineers. These engineers will go on to build the next big technology startups—without them, the city will remain indelibly tied to old money.
However, it's the tough times that will tell whether NYC Startup Culture endures, especially when the hype has died down and the economy has had another mood swing. I remember after the 90's .com boom people in the city acted like tech was over (the boom and subsequent bust was surreal on the people's part too, I thought), but what it proved was when the party's over, all the riff raff falls away and only tech companies that were fairly strong not only made it thru, but thrived.
NYC, shouldn't be Silicon Valley, only Silicon Valley can be that! The city, despite it's many "issues" is one of the most amazing places on earth. I hope the tech that comes out of there is just as amazing and real. Cheers!
The biggest hold-up is actually the cost of living in NYC. It's worse than the Bay Area, and there is less pride in being a starving entrepreneur.
Besides, I for one am glad NYC is not the valley. Who says you folks in the valley are right about everything?