Will Silicon Alley Grow Out of the Valley’s Shadow? 5


Some folks I talk to still despise the “Silicon Alley” term to describe the New York technology scene. The connotation that New York City’s second fiddle, technology innovation only occurs in the “alleys” of the Flatiron District is outdated and inaccurate in their eyes. Others, obviously embrace what the Alley has become.

However, the question remains as we begin to come out of the downturn: Can New York City’s technology scene grow out from behind the “Valley’s” shadow? Could it even rival the the Valley’s leadership position as an innovation hub?

As others have mentioned – the Valley still appears to be shuttered, stuck in a cycle of hesitation, negativity and despair. There isn’t hard statistics to back this up, but everyone that has set foot in the Valley over the last several months seems to point out that the anecdotal evidence is overwhelming. The gloom, contagious.

The lone bright-spot over the last several months was Valley-based OpenTable executing on a successful public offering. However, the IPO-love has been less contagious.

The mood on the East Coast, although not overly bullish, seems to be better. The door appears to be open for New York City’s technology entrepreneurs to take a leadership position, along with some of the glow, from the Valley.

As Chris Dixon, a long-time personal investor and current co-founder of Hunch.com, notes – the New York City investor ecosystem is alive and well:

Union Square Ventures is one of the best VC’s in the country, with early stage investments in companies like Twitter and Etsy (that were followed on by top West Coast VCs at significant markups).   Bessemer is an old firm that has a managed to stay relevant with investments in Yelp, Skype, and LinkedIn among others.  There is also a new wave of scrappy Boston firms spending a lot of time in New York City – specifically Spark, General Catalyst, Flybridge, and Bain Ventures.  First Round Capital out of Philadelphia is extremely active in early stage investing in New York.

However, as Chris alludes to with Union Square’s investment in Twitter, these VC’s may spend a lot of time in New York, but that’s not necessarily where they are investing. In fact, according to ChubbyBrain (via SAI), which aggregates investor data, only 10% of the $2 billion invested by New York venture firms in the first half of 2009 went to New York City-based startups. Where did the majority of their money go to? You guessed it – The Valley.


Maybe they also believe, like Marc Andreessen, that startups outside the Valley are typically 3-9 months behind? Whatever the case may be, one could strongly argue that this will have to change if New York City is ever to challenge the Valley as the leading tech hub.

The other area to look at is the number of people working in tech within New York City, and the quality of hires the Alley can steal from the Valley and other sectors. Perhaps that is why Mayor Bloomberg is woo-ing Jack Dorsey of Twitter to move East (not actually Twitter, but his next, yet-to-be-named startup).

According to an industry report from a year ago the Alley currently surpasses the Valley in hi-tech jobs. This is pretty remarkable given the fall in these jobs after the Web bubble burst and 9/11. Now it’s time to attract the best talent in the business. As Chris also notes, and Fred Wilson of Union Square also references, the scaling back of hedge funds and Wall Street firms should make it easier for New York tech firms to attract the top talent.

With top talent streaming in and still-private startups like Etsy, Thumbplay, TheLadders, Vibrant Media and Meetup all growing within the Alley – there is some definite hope in NYC challenging the Valley as the hub for technology innovation. The VC’s and the $$$ will likely follow. They usually do.

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