Silicon Alley 2.0: Its Emerging Shape, Impact and Future Directions

2.26.07

*Here is outline of what happen at the event early this week hosted by PolyTech University. If you want to read a 5 bullet summary, look to the bottom.
*

EDC (NYC’s Economic Development Corporation) Introductory Comments:

* Urges the audience to keep talented people from our educational system in NYC
* Suggest that the city is doing a lot of attract and retain talent within in NYC and is working with university to make that happen.
* The economy in NYC has never been better and the unemployment rate is very low.
* NYC is still one of the top choices for graduates to want to look to enter the workplace.
* They are here to help make the process or straiting, locating, or expanding businesses within NYC easier. (for Tech. Contact Saul Shaporo).
* tech stats
    o Leading Hub for domestic and broadband networks
    o Twice the Internet capacity v. next city on the list (balitmore/D.C.)
    o More Fiber Optic infrastructure than anywhere else in the U.S.
    o Financial Services spent over 80 Billion Dollars last year on Technology services.

There was a speech given by Jerry Huiltin, President of Polytechnic University emphasizing that we are back. That Silicon Alley is alive and well in NYC. A funny quote in the middle of the rant that everything is well is that he would get phone calls everyday where people would say things like “Jerry, I got a 100 Million Dollars, tell me what you got that I could invest in. Jerry, I got 3 Billion Dollars, Find something I could buy.” I don’t know if this is true or not but I seem a bit skeptical that there is that much money going around here in NYC, ready to be taken by the Web 2.0 startups.

Nina D. Ziv, Academic Director for PolyTech was the moderator for the panel. She did an ok job in asking poignant questions and left the rest to the crowd. She spent a few minutes talking about the history of Silicon Alley and how the money was flowing and everything was great in the Alley until the bust occurred. She says through her discussions with various entrepreneurs, that most of the people who were active in the Hay day’s of the late 90’s just went underground for a few years and reemerged with new companies within the last 2-3 years. A lot of the questions being asked by the crowd on a variety of topics which I will go through next:

Panel:

Steven Spencer CEO, Upoc Networks
Alejandro Crawford CEO, Nolej Studios
Charlie Federman Managing Partner, Crossbar Capital
Kenneth Bronfin President, Hearst Interactive Media
Jason Rapp Senior VP, Mergers and Acquisitons InterActiveCorp

Nina pointed the first question at Charlie about the VC viewpoint if anything is different now than in the 90’s in NYC, and are VC investing more in NYC now v. West Coast.

Charlie

* He started right off the bat by saying New York is still unproven. It hasn’t generated a consistent success of forming software companies like other parts of the country.
* He wonders if a Youtube could have happen in NY with no revenue model, and if the NY VC’s and management would have let it grow its “audience” when bandwidth costs alone would have been 2 million a year.
* He says that California VCs will take the risk at growing equity value while East Coast VCs will seek to grow businesses.

Nina talked to Ken about why is a big company like Hearst in this space?

Ken

* talked about how Hearst invested in 50 ventures in the last 12 years.
* He suggest that corporations have a lot of benefit from investing in the space and that Hearst tries to act like other VC firms when offering hands on help in their ventures.

Nina then opened up the floor to the crowd and the first question asked by Donold Swurtz from ImageLink was about the commitment of investors/corporations to investing in unproven technology ventures. Specifically Donold cited NYU’s attempt to create an interactive media program that tried to commercialize the projects. The funding by the corporation/investors of that program was cut after a short while.

Ken

* Hearst since it is a corporation is risk averse, and the mentality isn’t the same as the west coast. They want to see the plan and the revenue model.

Charlie

* pointed out that in 1999 there were 2 dozen venture firms in NYC. Now there are only a hand full at best in the region.
* There are more angel investors but it still not as much as needed even though there are at least 3000 Internet companies in NYC.

Alejandro

* talked about the scrapiness of NYC entrepreneurs and the ability of us to be fiscally responsibly and creative to find a way to keep the company going.

Jason from IAC talked about the tension of shareholders of a public company wanting results v. the long term commitment to new innovative companies. He suggest they are doing that at IAC.

Question from the crowd: One Person said he has raised millions of dollars over the last 10 years for companies in this space and relates a story that he has never taken money from a NY VC since other VC’s have outbid them every time. He questions the aggressiveness of NY VC’s.
*

Steve

* doubts youtube would have happen in NYC either. Companies like Youtube and Skype took time to grow their user base which would not have happen if they were put through a filter of fiscal responsibility.
* Steve’s companies also have worked in the same way.
* Steve says that he sees a lot of companies within Silicon Valley that will make great complimentary partners with bigger companies that will take the vision of the startup and push it to its next objective.
* NY is so diversified that everything is under the covers (Many startups work in lofts or apartments and its more decentralized V. Silicon Valley).

Alejandro

* throws in his theory on how this is the age of creativity and long tail markets. There may not be another blockbuster company like Google because of the environment.

Question from the Floor: Bill Sobo from NY media information Exchange Group says by running his group that there is a difference between East and West Coast mentalities. He wanted to propose creating a game plan on how we can use what makes NY unique and start having meeting with people in Silicon Valley, LA, Seattle, Atlanta.

No response from the panel.

Howard G. from Social Media Club says that getting everyone together is hard. There are at least 5 organizations in this space in NY and they all don’t communicate with each other. How do get all the great entrepreneurs and investors together then?

Ken

* responses by saying he is optimistic about NY’s future. In the bubble days, there was only 1 metric used: CPM (Cost per Million). A lot of startups were capital intensive and the U.S. had a majority of connected Users on the Internet. All those things have now changed.
* There are niche companies in every space in NY. He believes that successful companies will attract capital.

Nina then starts a new topic. She asked Steve about his challenges in attracting talent, and running his business in NY?

Steve

* Its hard attracting the right type of talent. It is hard to find financial capital but even more is the amount of time and money it takes to find new talent in NYC.
* He wants Universities and the city to step up in helping lower the cost of acquiring the human capital necessary to run great companies.
* Space also is really expensive. Everyone wants to be in the city even though logistically you could move to NJ or elsewhere, no one wants to go there.
* His company has moved their offices many times due to the feel of committing to long term leases.
* There is a challenge to losing talent to the big corporations.

Alejandro

* thinks the biggest challenge is getting people from bigger companies to go to his type of company because it is cool. He suggest that there needs to be an atmosphere to be creative and to be connected together throughout the company.

Question from the Floor: There is an incredible population established corporations in NYC and there are not enough big companies having conversations with entrepreneurs to find synergies between the two communities.

Jason:

* There are big corporations at the meetups. All the big media companies are trying to find their way into the web.

Ken

* There are bridges in place but they need to be stronger.

Question from the Floor: There hasn’t been any mention of media or Madison avenue from the panel. At what point does Media/Advertising companies enter the question in this space?

Jason:

* Madison avenue will pay apart of that. The indicator for the potential of media in this space is the time spent in media v. the advertising spent on this medium.
* There is a lot of competition for talent in these big media companies to find people who can lead them into this space.

Alejandro

* This is just the beginning of a sea change. Media properties will be collapsing and becoming more integrated.
* NY is great because the entrepreneurs are scrappy. You might be able to do what some of the West Coast but there is still great stuff happening here.

Steve

* My companies work with media companies in the mobile space. We’d like to sell/buy adverting but traditional media companies don’t know what to do with it on the web.

Charlie

* There are programs in place in Big media companies to buy and invest in startups.

Ken

* Its hard to innovate in a space you don’t know. thats why the bigs will buy new properties to help them innovate. We grow different types of companies, so we can’t do exactly what is done in the west coast.

Question from the Floor: I believe that the Ad agency/Media companies are the biggest obstacle to the flourishing of small startups since they are not organized to take advantage of the collaboration that the should have with startups. Everyone is in Silos. How do the Media companies need to change?

Steve

* In my company, Screaming media, when it got acquired by CBS (2003), we asked a bunch of people in Viacom if they were aware that we were a new property in their corporation, they didn’t know… They were all in Silos.
* But now they have an executive who is in charge to fixing that type of problem.

Ken

* We are silo-ed. Just approach me and I’ll try to help bring the introduction to the right type of company that might need your services.

In Conclusion.

NY has

* A lot of money in Corporations, Media/Ad companies, Finance, publishing that all need technology/innovation from the NY tech. community.
* The Tech community is decentralized and doesn’t communicate well with the government, universities and this also creates a barrier for Corporations to find talented startups to work for.
* There is a lot less VC/Angel money here V. West Coast.
* A lot of complaining about how hard things are and only fragmented leadership in different areas to fix it.
* There is a need to attract/keep the talent within NY and let them know that there is a startup community here.

Personal Comments: I think NY needs to stop having this delusion of trying to be like Silicon Alley. There is a different infrastructure here which makes it challenging to do the same things in the west coast. There also isn’t communication among all the small startup communities and its a pain for people outside of the space to know what is happening and what events are happening. I hope in the future that there will be more transparency of the community, so there is more awareness in the general public on what is happening.