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Report - May 2012

New Tech City

Riding a wave of start-ups, New York has emerged as a national leader in fields that leverage the Internet and mobile technologies—a development that has provided a key economic boost and left the city well positioned for future tech growth

by Jonathan Bowles and David Giles

Tags: economic growth tech entrepreneurship broadband

Key Findings

In the past few years, there has been an explosion of tech start-ups in New York City, most of which are companies that leverage the Internet and mobile technologies.

  • We identified 486 digital start-ups formed in the city since 2007 that have received angel, seed or VC funding.
  • Overall, there are well over 1,000 Web-based technology start-ups in the city, most of which have not secured investment capital. 
  • As one indication of the growth in early stage companies, roughly 1,600 start-ups applied to TechStars New York for its most recent program in March 2012—up from 600 applicants in the initial class, in January 2011.
  • We identified well over a dozen established tech start-ups that have moved to New York in recent years from the San Francisco Bay Area, Boston and other locations.
  • At least 28 New York-based tech start-ups were founded by students from Harvard Business School.

Although it is still well behind Silicon Valley as a tech hub, New York City has the nation’s fastest growing tech sector and has surpassed Boston as the number two tech center in the U.S.

  • Of the seven leading technology regions in the United States, New York City was the only one to see an increase in the number of VC deals between 2007 and 2011, according to data from the MoneyTree report published by PricewaterhouseCoopers and the National Venture Capital Association.
  • The number of deals shot up by 32 percent in New York during this period whereas venture activity was down significantly in every other region, including Silicon Valley (-10 percent), New England (-14 percent), LA/Orange County (-8 percent), Texas (-17 percent) and San Diego (-38 percent). Nationally, there was an 11 percent decline in VC deals.
  • New York is either the clear leader or one of the leading centers of activity in several tech subsectors that are growing today, including ad tech, fashion tech, fin tech, digital media, ed tech and health tech.

More and more New York-based tech start-ups are achieving significant growth.

  • Of the tech start-ups founded in New York since 2007, 15 have raised more than $50 million in investments, 27 have investments of at least $25 million and 81 have raised at least $10 million.
  • More of the city’s digital companies got acquired by other firms in 2011 (55) than in 2008 and 2009 combined (54).

The city’s tech sector has created thousands of jobs in the past few years, giving New York’s economy a much-needed boost at a time when few other industries have been growing.

  • In the last five years, information technology jobs in the city have increased by 28.7 percent, from 41,100 to 52,900.
  • During the same period, private sector jobs in the five boroughs grew by just 3.6 percent while employment was down considerably in several of the city’s traditionally-strong industries, including the securities industry (down 5.9 percent), publishing (down 15.8 percent), legal services (down 7.0 percent) and manufacturing (down 29.5 percent).
  • Nearly half (47 percent) of the 298 tech start-ups on New York Tech Meetup’s “Made in New York City” list indicated that they are currently hiring in April 2012.

Unlike the fleeting dot com boom in the 1990s, New York now appears to be building a sustainable tech sector that has significant potential for future growth

  • Today’s tech start-ups are less about building new technology than applying technology to traditional industries like advertising, media, fashion, finance and health care—all of which New York excel in.
  • Dramatic increases in people using the Internet and mobile devices have created huge demand for companies that create content, sell products and provide services online—all of which play to the city’s strengths.

The city lacked a strong tech ecosystem during Silicon Alley’s first wave of tech growth in the 1990s, but that couldn’t be more different today.

  • There are now more than 23,300 members of New York Tech Meetup, more than twice the number of members in December 2009 (11,500) and nearly triple the figure from October 2008 (7,500).
  • There are more than 12 incubators and coworking spaces that house digital start-ups today, up from only a few prior to 2009. By our count, these shared spaces have already housed nearly 500 tech start-ups.
  • Prior to 2009, there were no accelerator programs for tech start-ups in New York. Today, there are at least a dozen accelerator programs in the city.

Until four or five years ago, tech entrepreneurs in New York struggled mightily to access investment capital, but that has changed in a big way, particularly for early stage companies. 

  • There were almost as many tech-related VC deals in New York City in 2011 (165) as in 2006 and 2007 combined (172), according to data from SeedTable.

 


This is an excerpt. Click here to read the full report (PDF).

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