For decades, high-technology start-ups followed the Silicon Valley nerdistan model of suburban industrial park development. But growing evidence suggests a more urban tilt may be emerging.
The New York Times over the weekend posted this great map showing the location of more than 400 New York City start-ups (you can get a sense of it below but click through to see the whole thing). As the Times notes, "The vast majority of these companies have landed in Midtown South, within blocks of venture capital investors and veteran start-ups. The area’s affordable rent and popular restaurants and bars are a big draw."
A related story focuses on the Bloomberg administration’s efforts to develop a world-class science and engineering campus on Roosevelt Island or another location, noting that the "city is offering up land and $100 million in capital" and is currently "reviewing seven proposals from 17 universities and research institutions," including Stanford, Cornell, NYU, University of Toronto, and Carnegie Mellon.
Still another Times article questions whether the city is up to the task. It notes Silicon Valley's hegemony in entrepreneurship and the many other places that have tried and failed in their efforts to become the "next Silicon Valley." It quotes Silicon Valley expert AnnaLee Saxenian of the University of California, Berkeley who states: "Regions around the world have tried for decades to replicate the Silicon Valley experience, without success. There are also world-class technical universities all over that don’t generate ongoing commercial innovation and economic growth." Ginia Bellafante, the reporter, concludes that “’New York just doesn’t feel like an engineering town,’ a friend, a native and astute observer of the city’s culture, remarked to me recently. I wanted to disagree, but in truth, I couldn’t.”
I don't mean to oversell it, but the timing may be right for New York City's tech move. The question is not just where great universities are located, but where entrepreneurial talent wants to be. Entrepreneurs are highly mobile, as is scientific and technical talent more generally. And there is growing evidence that an increasing share of such talent is growing tired of the nerdistan model and beginning to prefer bigger cities and more urban environments. San Francisco proper has become a growing node of start-up activity. Google has had considerable success in recruiting leading talent to its New York facility. And as the Times’ own map shows, New York is home to more than 400 tech start-ups—in fact, it has surpassed Boston as the nation’s second largest technology hub. As Crain's New York noted this past summer:
A cool $642.2 million in venture capital funding flooded the New York metro area during the second quarter, with more than $416 million going to 48 Internet-based companies, according to a report released by PricewaterhouseCoopers and the National Venture Capital Association. A total of 98 companies in the area received venture capital funding. This is compared to the New England area, where 22 Internet-based companies received $290 million.
Jane Jacobs long ago noted that the diversity, walkability and density of large cities, and particularly New York, were a source of innovation and new business formation. Whether Silicon Valley’s hegemony is in jeopardy or not, there can be little doubt that high-tech has taken on much more of an urban cast in the first decade of the 21st century. A Harvard Business Review article headlined “Back to the City” noted that for a growing number of companies “the suburbs have lost their sheen.” The article cautioned that “businesses that don’t understand and plan for it may suffer in the long run.”
In a 2006 speech, Paul Graham, the Silicon Valley venture capitalist and founder of YCombinator, noted that for all its advantages and power, Silicon Valley has a great weakness. The "paradise Shockley found in 1956 is now one giant parking lot," he noted. "San Francisco and Berkeley are great, but they're 40 miles away. Silicon Valley proper is soul-crushing suburban sprawl. It has fabulous weather, which makes it significantly better than the soul-crushing sprawl of most other American cities. But a competitor that managed to avoid sprawl would have real leverage.” New York City just might be that place.