Tech and the City

New York was one of the top five global destinations for venture capital dollars in 2017. The number of venture capital deals in the city grew by 256 percent, and the amounts invested by 439 percent, since 2008. The analysis –released by Comptroller Stringer and based on data from Crunchbase – also detailed venture capital’s impact on the New York City economy, as venture capital flows to a wide range of businesses in and outside of the city’s legacy industries of finance, advertising, media, and culture that support roughly 355,000 jobs – building on the city’s existing economic foundations to modernize and reshape the way those industries will do business in the 21st century.

New York-based companies closed nearly 1,000 deals valued at a total of about $9.4 billion in 2017, up from $1.7 billion in 2008. That left New York behind only Silicon Valley and San Francisco in terms of total domestic capital raised.

Orin Herskowitz, executive director of Columbia Technology Ventures at Columbia University, said to the WSJ that the growth of accelerators, incubators and an increased focus on raw innovations by research institutions have helped the city develop a robust startup community.

“It’s completely true that the rise of venture capital availability in New York in the past couple years is truly breathtaking,” Mr. Herskowitz said. “I think it goes well beyond access to capital, though, in the sense that this is a much broader story about the way New York City has pivoted to become a truly world-class place to start and grow a company.”

<<“Last year, when I was raising my seed, this guy was like, ‘It must be really difficult for you to raise money, Shannon, because men dissociate intelligence from attractiveness,’” said Shannon McLay, 40, who has started a chain of financial coaching centers called Financial Gym. (…)

“I’ve heard, ‘I really love you, Chanel, I think you have an amazing company, but I think I might want to date you,’” said Chanel Melton, 31, the founder of a hair-extension company called RoseGold Pro. >>

These are just two examples of how difficult is raising money fo startup female founders, according to the New York Times article “When Women Control the Money, Female Founders Get Funded“.

Fortunately New York is the most friendly city to women entrepreneurs, as we wrote in “Tech and the City”: startups founded by women here are twice that in Silicon Valley or in London, as a percent of the total; out of 100 New York new high-tech companies, 20 are founded by women and 80 by men only, in Silicon Valley and London the ratio drops to 10-90.

Among other things, there is a women-only co-working club, The Wing, and there is Able Partners, a NYC venture capital firm that was started three years ago by Lisa Blau and Amanda Eilian as an early-stage investor in a number of female-founded companies. For example Able Partners has invested in The Wing and Goop.

According to the venture-tracking site Crunchbase, as of October 2017, women made up just 8 percent of investing partners at the top 100 VC firms. And last year, female founders received only 2.2 percent of the $130 billion in venture money invested in the United States, according to the analytics firm PitchBook and the advocacy organization All Raise.

One way to change this scenario, is for successful women to do what men do. “We need the old girl’s network,” said Linnea Conrad Roberts, the chief executive of Gingerbread Capital and a former partner at Goldman Sachs, as she waved to Ms. Blau. “If you think about the ecosystem that guys have, a Silicon Valley founder will make hundreds of millions of dollars and he doesn’t go home and retire; he starts putting it toward funding other companies.” Instead too often women like Ms Roberts, after retiring from Wall Street or similar powerful jobs, just do philanthropy.

On the other hand, I’m not sure NYC Mayor Bill de Blasio’s strategy is right: he has just announced that the City will invest $30 million in women-led start-ups through a program called WE Venture, in coordination with private venture capital firms that have a track record in the area. It is exactly what former Mayor Mike Bloomberg avoided, rightly so: Bloomberg didn’t bet public money on startups, because it means choosing winners/losers; he developed the environment, the infrastructures, the “mood” that are vital to a startup ecosystem where the entrepreneurs themselves – women & men – are the most important protagonist. Bloomberg’s recipe was very successful. We’ll see about de Blasio’s.

“With this single investment I’m done. As soon as I get my liquidity event I will party like there’s no tomorrow.” This is what Brian Cohen told us in 2012, when Alessandro and I interviewed him for “Tech and the City”. The investment was in Pinterest, the popular social network used to share photos, organized as collections of pictures on a pin board. Founded in Palo Alto, Silicon Valley, by three youngsters under 30, and launched in March 2010, Pinterest has become one of the most visited sites. “I helped them start and guided them as a mentor to become what they are,” said Cohen, who is Chairman of the New York Angels since October 2011. He was one of the very first investors in Pinterest.

    Now Pinterest is valued $12 billion or more and has just confidentially filed paperwork with the Securities and Exchange Commission for an initial public offering that should happen in the next few months.

   So, congrats to Brian Cohen! Can’t wait for a toast with you! 

   The New York Angels are the most active group of this kind of investors in the US. It’s very risky and tough job, Cohen explains: “I call it a contact sport. You have to be in contact with the business and the industry, so that you can really sense it. I used to say that I have a nose for news. I think the same way about angel investing: you develop a nose for it; you can smell it. There are many studies that say that there is a positive correlation between the amount of due diligence and the success of companies. Duh, you do more homework; you get better grades.” Cohen calls angel investing a “contact sport” also because those who practice it can get hurt and bleed, lose a lot of money due to the high rate of failure of startups and because it takes a long time, even ten years, before they can sell the shares. That’s why Cohen is against crowdfunding for startups.

“Cornell Tech Welcomes Amazon to NYC”: I totally agree with them! and totally disagree with criticism against Amazon’s decision to bring their new headquarters to Long Island City, Queens.

Some activists even proposed to boycott last Amazon’s Black Friday: it was ridiculous and failed, of course. 

Photo by Max Touhey www.metouhey.com

I think that the more the better. A great city like New York can and should make room for more and more people and companies, as Nobel laureate Paul Romer would say…

“The new headquarters is sure to boost the already growing tech ecosystem in New York City sparked by former Mayor Mike Bloomberg’s vision when in 2010 he launched the competition for an applied sciences campus that led to the creation of Cornell Tech,” reads a Cornell Tech press release. “By choosing Long Island City for HQ2, Amazon will join one of the world’s fastest-growing and most diverse tech communities – said Josh Hartmann, Cornell Tech’s chief practice officer -. Cornell Tech is spinning out hundreds of graduates each year as well as groundbreaking, impactful research, and through key partnerships with CUNY and K-12 public schools, we are expanding the city’s pipeline of skilled tech talent. New York City has emerged as a destination for tech and innovation, and Amazon’s arrival will accelerate growth and success for the city and for Cornell Tech.”

After Amazon, also Google plans to add more employers to its already large workforce in New York City: “Google is gearing up for an expansion of its New York City real estate that could add space for more than 12,000 new workers, an amount nearly double the search giant’s current staffing in the city,” writes the Wall Street Journal.

A rendering of St.John’s Terminal in New York City’s West Village neighborhood. PHOTO: COOKFOX ARCHITECTS

If rumors are confirmed. Eventually Alphabet/Google will occupy, besides its NYC HQ at 111 8th avenue: St. John’s Terminal, Chelsea Market, 85 10th avenue, and Pier 57, for a total of more than 20,000 staff. It will strengthen NYC status as a tech capital, and also require more and more engineers and software developers in the city.

Can you imagine that when Alessandro and I wrote “Tech and the City” in 2012 there were only 3,000 Googlers in NYC? This was the story:

<<For three weeks straight in April 1951, without sleeping and without eating, only kept awake by gallons of coffee and other not so legal stimulants, Jack Kerouac wrote the first draft of On the Road in one go. At least so says the legend of the Chelsea Hotel where the beat generation poet lived at the time, and where for decades, artists, musicians, actors and writers have enlivened the bohemian life of its namesake neighborhood.
Kerouac’s typewriter is one of the images in the mile-long mural of Chelsea’s history that wrapped the scaffolding on Google’s New York headquarters in the spring and summer of 2012. An artistic way—thanks to the work of Dark Igloo design studio of Williamsburg (Brooklyn)—to make something as monotonous as periodically checking the façade of high-rises, as required by municipal law, into something entertaining.

According to Google’s website, which boasts of the records and the beauty of its building, it takes nine minutes to walk around the building and see the whole mural. You start out at 111 8th Avenue, and walk north to 16^th street, then west to 9th Avenue where the main entrance is located at number 76. Then you continue south to West 15^th and you’re back at your starting point. It is an Art Deco building that dates from the 1930s, occupies a square block, and has 17 floors, many as big as two football fields, for a total of 2.9 million square feet. Until the 1970s, it housed the Port Authority of New York and New Jersey. Google moved into the building in 2006, at first only occupying a few offices and then, as it continued to grow, it decided to buy the whole building in December 2010 for $1.9 billion.

Today, just under 3,000 Googlers work in the building in a creative environment where the hip lifestyle of the twenty-to-thirty-somethings who come to work in shorts and flip-flops meet the rigor of the algorithms that are at the heart of the Internet giant’s business. Nothing is boring, everything is in motion, each detail scrutinized to stimulate the minds and the imaginations of the people who work there. Parked at the entrance to each floor, a fleet of scooters is available to move employees from one part of the immense office space to another. What is more, each floor reveals its own interior design theme linked to a particular idea. The fifth floor theme for example, is “old New York.” The large dining room is designed as if it were on the roof of a building, including the typical wooden water tower that is part of the New York skyline, and even fake pigeons. A puzzle that goes from one end of the room to the other has been incorporated into the flooring and only the engineers are up to solving it.

Two of the conference rooms have a theme. They are furnished as if they were typical New York studio apartments—one where a 20-year-old male lives complete with sofa, his bicycle leaning against the wall, and laundry strewn about; the other is meant to be that of a woman, with a kitchenette that is neat and tidy—probably because she always eats out. There is also a library with a virtual bookshelf with eBooks that can be purchased using a smartphone. And there is a wall of physical books too, but it hides a secret passage to a relaxation room.

There are normal office desks, but they are not the only places where Googlers work. In fact, hardly anyone has his or her own desk. The idea behind the design of the space is to encourage informal meetings and exchange of ideas. That is Google’s philosophy and it is the same in Silicon Valley, as well as in all Google offices worldwide. But here in New York, the second most important Google center, it has a special meaning. “It’s true, there are differences in being a Googler in New York,” states the website. “This is the capital of finance and fashion, of publishing and theater. And it makes a subtle difference in how we communicate and how fast we work. It’s difficult to put into words but you always know you are in New York.” And for many young people the idea of going to a bar on foot or walking to a gallery to enjoy an exhibit at the end of a tiring work day is much more attractive than commuting in the traffic of the San Francisco Bay area to get to and from the Googleplex, the Silicon Valley headquarters.

Google’s first outpost in the Big Apple was opened by Tim Armstrong, the current CEO of AOL, in 2000. He was selling advertising, working out of a Starbucks on the corner of 86th and Columbus Avenue. The first engineers were hired in 2003, and the first offices were in Times Square. Today half of the staff spends its time on advertising, working closely with ad agencies and the media. The other half works on creating new products and projects, from system software to applications. And the organization keeps growing: since 2008, some Googlers have had to work in the adjacent Chelsea Market (in a space of almost fifty five thousand square feet) waiting for space at 111 Eigth Avenue to free up when the current tenants’ leases expire.

New recruits are typically from East Coast universities. They are chosen through an extremely competitive process. In the summer of 2012 for example, Google held in New York the final phase of an annual contest for young programmers. Thirty-six thousand developers, aspiring Googlers, entered the contest. Eventually, the 25 surviving programmers had to challenge one another solving a variety of algorithmic problems for several hours. One of the tasks was to find the optimal way to destroy an army of zombies marching on their computer screens. The prize was ten thousand dollars, and the chance to interview with Google. A young Polish programmer, Jakub Pachocki, won. But nothing says he’ll become a Googler, given New York’s hunger for excellent coders and the stiff competition from other high-tech companies to get them. ^>>

Amazon’s second headquarters is coming to New York, according to rumors. If it’s true, “it’s the biggest success for New York in 10 years,” says Marcus & Millichap’s Eric Anton. The area where the new HQ2 would be settled is Long Island City in Queens, where “a forest of apartment towers sitting dark at night as a metaphor for the area’s challenge with new residential supply.” Or – like “The Real Deal – New York Real Estate News” puts it – “glut of new apartments and commercial space could have been a key selling point.”

A view of Manhattan – and of Roosevelt Island – from Long Island City

Just a five years ago – when Alessandro and I wrote “Tech and the City” – this part of Queens had a long way to go before becoming another center of New York high-tech. It didn’t have a ‘cool factor’. However Long Island City holds the record for playing host to the largest dot-com to have successfully survived the bursting of the bubble in 2000. This was none other than FreshDirect.com, a model of eCommerce in the food sector, studied and imitated by so many on both sides of the Atlantic (it has recently moved to the Bronx). Since 2012, Long Island City has also become one of the world centers for a new way to mass produce goods using 3D printers. Shapeways, the startup that wants to “make things possible, easy and inexpensive, and manufacture any object created by anyone for whomever” has a large factory here, and recently announced it got $30M in new funding led by Lux Capital, which will accelerate its expansion.

Another boost to Long Island City’s becoming a new tech area is the CornellTech campus on Roosevelt Island that is located directly opposite this bank of the river.

Savills Studley’s Jeff Peck noted that Amazon could help transform Long Island City from a neighborhood seen as a satellite to Manhattan’s office market into a destination all of its own. “The same thing happened in Midtown South and the Meatpacking District,” he said. “Tech behemoths like Facebook and Twitter made those submarkets their homes. And then the mid-tier and smaller tech companies followed suit.”

“I am moving to #NewYork” said Apple CEO Tim Cook after a standing ovation at BAM, Brooklyn where he launched new #MacBookAir and #iPadPro.

Apple’s coming to New York, for the first time, to launch its new products is another sign of how much cool and sexy the city is becoming for the tech industry!

Tim Cook, CEO of Apple, at BAM, Brooklyn, October 30, 2018

Dr. Sam Natapoff, the President of Empire Global Ventures LLC, has just written a very interesting article about “Why New York City is giving Silicon Valley a serious run for its money“. He says: “Fifteen years ago, New York City was a tech afterthought. Today, it is ranked the second highest performing startup ecosystem in the world after Silicon Valley. More significantly, in certain tech sub-sectors it beats Silicon Valley at its own game, a trend that may continue.”

Some interesting numbers: NYC now has over 7,000 startups, valued at $71 billion, and it received over $11.5 billion in venture capital funding in 2017. It is the home to the most “unicorns” in the U.S. after Silicon Valley, including WeWork (valued at $20 billion), Infor ($10 billion) and AppNexus ($2.2 billion). The city employs over 326,000 people in its tech sector (over three times its East Coast rival, Boston), hosts over 100 incubators.

“Strikingly, NYC managed this feat without a strong engineering base by relying on the natural strengths of its existing economy, its diverse industry base, its human capital diversity, and its desirability as a place to live,” points out Dr. Natapoff. In fact: “89 percent of tech talent cite diversity as a key attraction to move to NYC, 74 percent say a diversity of industries, and 80 percent say the access to cultural institutions, entertainment, restaurants, and sport. NYC ranks first overall among 50 global cities (ahead of even San Francisco) for its ability to attract and support women-owned businesses.”

NYC model is very difficult to replicate, but it must be studied by other cities to understand how a tech startup community can thrive.

Congrats to Josh Hartmann, just appointed Chief Practice Officer by Cornell Tech!

Josh Hartmann

“Hartmann – said Cornell Tech – will serve as the primary practitioner faculty member at Cornell Tech dedicated to implementing and designing pragmatic courses and programs that will combine traditional graduate education and digital-age practice. Hartmann will also be leading and teaching in the Cornell Tech Studio—taking over for Greg Pass, former CTO of Twitter who has led the Studio as Chief Entrepreneurial Officer at Cornell Tech since its founding in 2012—an interdisciplinary curriculum which provides opportunities to develop, implement and build new product and business ideas, collaborate with classmates from across the Cornell Tech campus, and interact with innovators and thought leaders among New York City’s thriving technology and startup communities.”

Previously, Hartmann held interdisciplinary leadership positions serving as former Chief Technology Officer and Chief Operating Officer at several tech companies including Amplify and Travelocity. He will bring a broad range of industry knowledge in travel, education, and media, to Cornell Tech.

“Our goal is to become the leading digital manufacturing company in the world, to bring more manufacturing back to the US where these products are being used,” says to NYPost Jonathan Schwartz, co-founder and chief product officer of East Williamsburg-based Voodoo Manufacturing, where some 200 robotically operated printers churn out everything from cookie cutters to fully functional prosthetic hands.

Some 200 3-D printers at Voodoo Manufacturing in Brooklyn (by Ellis Kaplan)

Upper West Side native Schwartz, 27, and two college buddies founded Voodoo Manufacturing three years ago after leaving 3-D printer creator MakerBot, also based in Brooklyn.
It’s a new wave of 3-D printing business that can be the key to resuscitating New York’s long-dormant manufacturing industry.
It started with MakerBot, founded by Bre Pettis: in “Tech and the City” we described him as “an evangelist of <the maker movement,> that is people who create, invent, repair, transform or improve things as a way of stimulating innovation and entrepreneurship. The common thread is the criticism of the model of capitalism that took us into the Great Recession and the search for a way out, using the ingenuity of the individual. And having fun doing it!”
In 2013 MakerBot was acquired by Stratasys (NASDAQ: SSYS).