Silicon Alley is not just an empty phrase - part 1

By October 03, 2007

New York is the center of the financial, advertising and media worlds, a great incentive for start-ups to set up shop there. Add a great pool of local talent and you will never persuade some hardcore New Yorkers to leave the city

they love for Silicon Valley. On the downside, rents are stratospheric and most venture capitalists are still based on the West Coast. In a two-part series, we take a look at New-York’s high-tech ecosystem.   On a warm September evening, a group of young high-tech entrepreneurs are having a drink at an outdoor café on Union Square in Lower Manhattan. “I wanted to organize something with more inward-facing time than the NY Tech Meetup which has 300 or 400 people. I thought maybe 20 people would show up,” remembers Charlie O’Donnell (right photo), the force behind the informal group NextNY and founder of Path 101, a site designed to help students with their career choices. “But 75 people came the first time and now we have over 1,000 members.”   According to a report entitled “Buried Treasure: New York’s Hidden Technology Sector” recently quoted in The New York Times, “the New York Metropolitan Statistical Area, which covers southern New York and northern New Jersey, has nearly 620,000 technology workers, two and a half times as many as Silicon Valley and nearly twice as many as Boston.” Granted, not all of them are entrepreneurs, but the area is clearly a fertile breeding ground.   “There are so many companies here that rely on high-tech. Young entrepreneurs are leaving and starting their own companies,” explains Nate Westheimer, another NextNYer who works as a consultant while launching his own start-up BricaBox, tools that bridge the gap between blogs and wikis. To keep up with the high-tech entrepreneurial scene, a good source is Silicon Alley Insider whose tagline reads “Digital business, live from New York.”   “If you are doing anything with advertising, it helps to have the media buyers three blocks instead of 3,000 miles away,” says Andrew Parker, an analyst with Union Square Ventures. “Entrepreneurs are coming out of the woodwork here. Content-based companies recruit old-media execs based in New York. Lots of people are coming out of Goldman Sachs and others with a lot of knowledge about financial systems.” As an early-stage venture fund investing in consumer-facing high-tech companies, Union Square Ventures favors a hands-on approach and the companies in its portfolio are by and large based in New York.   Tacoda, the behavioral targeting ad network which was recently bought by AOL, is based in the “fur district” near Penn Station. “There is really such a thing as a New York minute. In California, you blow away a whole day one one meeting. Here, you can have an unlimited number of conversations by just calling somebody and having lunch within 20 minutes,” marvels Larry Allen, senior VP of marketing and business development at Tacoda. Other hot spots for start-ups include the area around Union Square, the Flatiron District and Williamsburg in Brooklyn.   55 Broad (right photo), within spitting distance of the New York Stock Exchange, is considered by some as the site that established the “Silicon Alley”. The address is home to the New York Technology Center which houses many technology companies. Another tenant is the New York Software Industry Association which counts Google (with its 500+ employees, Google’s office in New York is its second largest engineering center after Mountain View), Microsoft and many other smaller companies among its 500 members.   “Two and half years ago, we started an incubator to concretely help companies. Besides their capacity to grow, they have to create jobs here in New York,” explains Bruce Bernstein, the president of the NYSIA. One of the graduates is YellowJacket, a company developing trading software, which now employs 15 people.   For all the enthusiasm about New York, there are some drawbacks: rent is expensive and the competition for the best talent is tough. “The Silicon Valley is a better location to start your first start-up because everything you need to create a company is available there,” admits Fabrice Grinda, a French serial entrepreneur whose latest company is a Craigslist-like company called OLX. But now that he has experience and contacts, he feels New York is a great place to do business.   “There is no better city. I have everything I need here,” concludes Nate Westheimer of BricaBox.   Isabelle Boucq in Manhattan, NY - for Atelier FEEDBACK For comments on this article, email us at

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