Editor's note: Over the next few months, we'll be taking a virtual tour of U.S. cities to see how the financial crisis has changed the entrepreneurial landscape, for better or worse. Our first stop is New York.
In many ways, New York was ground zero for the 2008 financial crisis. Historic firms like Lehman Brothers collapsed, thousands lost jobs on Wall Street, and the city's storied stock exchange suffered a lasting downturn.
Now, five years later, the Big Apple has blossomed into a startup magnet. No longer just the financial capital of America, New York has seen the rise of new ventures spanning many different industries and such success stories as Foursquare, Etsy, Tumblr and ZocDoc.
New York's transformation into an entrepreneurial hotbed, some say, is a natural fit for the city that never sleeps. “New York is all about fast pace and moving quickly,” says Neil Blumenthal, a born-and-raised New Yorker who co-founded the ultra-trendy eyewear company Warby Parker in 2010. “That’s what building a startup is – how fast can you move.”
Investors have paid attention. According to a recent survey by the New York Venture Capital Association, $12 billion has been invested in nearly a thousand New York startups in the past five years, creating 21,000 jobs in the process and surpassing Boston as the leading venture capital investment destination outside of Silicon Valley.
“Fifteen accelerators and incubators have launched from scratch in the past 18 months alone,” says Robert Johnston, the association's executive director. Each has its own niche, be it food, fashion or financial tech.
Related: Why Venture Capitalists Heart NY
New York today is a far cry from when Jeanne Sullivan began working in venture capital in 1990. “There was nothing here,” says the co-founder and general partner of New York based StarVest Partners . “We were on planes every week to Boston and Silicon Valley.” Things picked up in the late 1990s, she says, but Silicon Alley never got the same traction as Silicon Valley. And when the dotcoms fizzled, the city lost some of its entrepreneurial mojo.
Ironically, the global financial meltdown in 2008 is what helped bring new life to New York’s startup scene. Many of the best and brightest began striking out on their own, either by choice or necessity. “It was a pretty sobering moment,” says Blumenthal. “Suddenly those Fortune 500 jobs, and in particular high-flying jobs on Wall Street, didn’t seem so appealing.”
Meanwhile, Mayor Michael Bloomberg and the New York Economic Development Corporation got serious about giving budding entrepreneurs the resources they needed. In 2009, Polytechnic Institute of NYU and the City of New York launched the Varick Street Incubator, the first of a network of public-private incubators throughout the city. And in January, school commenced for the first class of graduate students at the new Cornell NYC Tech. Classes are temporarily housed in Google’s whimsically designed New York offices until the 2017 completion of the state-of-the-art campus on Roosevelt Island.
Once founders are ready to raise capital, they needn’t go far to find it. Prominent firms, such as Greycroft, Thrive Capital and Union Square Ventures are headquartered in New York, while deep-pocketed firms from Boston and Silicon Valley have set up NYC outposts as well.
Lest it sound like New York startups are partying like it’s 1999, founders and investors say things are different this time around. “There’s not as much arrogance,” says Johnston, adding that startups aren’t just in it to make a quick buck on an IPO. “Most are in it for the long haul.” And in the past year, poor stock performances by Facebook, Groupon and Zynga have tempered investors' appetites, meaning only the most promising New York startups are winning rounds of funding.
Still, today's new ventures benefit from a deeper, more tech-savvy talent pool. Scott Kurnit, a veteran entrepreneur who started About.com in 1996, recalls how difficult it was to woo top players away from their cushy jobs to work long hours at a startup. “There was a lot of uncertainty and fear,” says Kurnit, who's had an easier time recruiting talent for his three-year-old e-commerce startup Keep Holdings.
And in New York City in particular, “there’s so much intellectual capital,” adds Adrien Fraise, a former consultant who founded online mentoring company Modern Guild in early 2012. “You have more and more folks with real-world experience and different backgrounds actively choosing to go the startup route.”
Within the city, entrepreneurial hubs are as diverse as their ventures and founders. Although the Flatiron District and area around Union Square is still the epicenter of New York’s startup world, SoHo has more than its share of fledgling companies. Brooklyn, meanwhile, is no longer a last resort but a destination.
Uptown or Downtown, East Side or West Side, there is ample opportunity to network, learn something new and get inspired. The monthly NY Tech Meetup is a must-attend event – if you can get tickets, which sell quickly. General Assembly NYC offers workshops, events and ongoing classes in business, design and technology. New York Internet Week in May is packed with events, as is Social Media Week.
So what’s not to love? No doubt, the biggest strike against New York is the high rent. Manhattan is the most expensive spot in the country, with a cost of living that’s twice the national average, according to the Council for Community and Economic Research. Brooklyn, meanwhile, is the second most expensive place to live. (To be fair, San Francisco, San Jose and Boston aren’t exactly cheap either.)
Yet, you get what you pay for, says Keep Holding’s Kurnit. “Manhattan is where everyone who is in business comes at some point or another,” he says. “It’s worth every penny.”
And after a long day toiling at a startup, the city waits. “This is where all the action is,” says Sullivan. “It’s Disneyland for adults.”