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As Om shared earlier this month, New York's tech scene is getting a flood of venture capital for Internet deals, rivaling San Francisco.It's validation for a city that has built a formidable base of companies and is now becoming a hotbed of startups, particularly Web-based and software-driven companies.
I sat down with Fred Wilson, venture capitalist with Union Square Ventures, to discuss the New York renaissance, how it came about, and where it's headed. Wilson said New York's tech scene, which emerged from the mid-90s, is in the equivalent of its late teens—just growing into itself as a major player. He said he doesn't expect to see any slowdown, just as Silicon Valley took off after two decades in the late 1970s. "New York is not only sustainable, but it will grow an order of magnitude from here," he said.
Wilson obviously has a stake in New York's stature as a tech center. More than half the companies in his New York-based fund hail from New York, though he wrote recently that's he's open to branching out. The local growth is real, however, including such startups as portfolio companies Etsy, Foursquare, and Tumblr, as well as such companies as Gilt GroupE and the Ladders.
The growth in the New York scene is built largely on the Internet, which, as it has developed and become more mature, increasingly taps into the expertise of New York, Wilson said. As Web startups incorporate more data and business logic and work to refine user experiences through design, he said, they're able to draw on talent from the local finance, media, fashion, and design industries. Companies such as Banksimple and My City Way were built by former Wall Street employees, while Gilt Groupe was formed by a trio that includes Alexandra Wilkis Wilson, a former executive at Bulgari, and Louis Vuitton. Several New York entrepreneurs have said something similar to me, saying the city provides an interesting intersection between technology and various industries that benefit from technology and also influence it.
New York's place in the tech startup world often gets short shrift, Wilson said, because the startups are largely of the capital-efficient variety. When figures on VC deals are compiled, they often don't reflect fully how many smaller companies are starting in New York, making do with less money. In essence, he said there are two VC industries. "New York doesn't participate in capital-intensive business. There's no biotech or hardware here. But if you look at New York's place in the software business, New York is a huge player."
What New York lacks at this point is a standout performer on the order of a Google, Apple, or eBay, Wilson said. Having a large tech success story would feed the pipeline of entrepreneurs, give some startups a chance at getting acquired, and serve as a role model.
"We haven't had that," said Wilson. "People look at Wall Street and figure they can sell, so they sell."
Plus, Wall Street is still an issue for startups, trying to persuade talented employees to leave better paying jobs in finance, media, or advertising to try out the startup life. But as some of those industries contract, the slowdown providing more incentive for talent to sign on with startups.
"Media, Wall Street, fashion—they're not growing very much," Wilson said. "Tech can pick up the slack."
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