I am spending the month of May working with Albert Wenger out of the Union Square Ventures offices and had the chance to dive deep into the New York Consumer Internet scene in the past few weeks. What I am seeing leads me to believe that this city is developing into a serious challenger of the Valley when it comes to Consumer Internet (and SaaS) activity, combining some of the best VCs and most interesting startups with the incredible energy New York always had. The city seems to have reached critical mass to a point that some entrepreneurs don’t even travel to the Valley anymore to raise capital or do bus dev deals.
So when I think that New York can beat the Valley in the next 5-10 years and become the place for Consumer Internet, it is mostly for 3 key reasons:
– New generation VCs: New York has very few large “legacy” funds but instead a high density of smaller “boutique” funds, micro VCs and angel funds that have been very successful in investing in the next generation of Consumer Internet companies. Union Square Ventures (Twitter, etsy, Zynga, Foursquare) is certainly leading the pack and the most prominent NYC VC firm by far but there are tons of other very successful investors in this market: Betaworks, FirstRound (with their new NYC office), Chris Dixon‘s Founders Collective, Metamorphic Ventures, Wider Wake or Greycroft. As the VC landscape is going through a transition to less and smaller VCs, NYC seems to have a clear head start compared to the Valley.
– Tons of engineering talent: for the past decade Wall Street sucked up most of the engineering talent out of Columbia and NYU but this is largely history. It is now cool to work for a start-up and not in finance and this transition has just started.
– Deep domain knowledge in some of the fastest growing Internet sectors: NYC is the place with the deepest domain knowledge in some of the hottest Internet verticals like advertising, fashion / apparel and big data and it is not a big surprise that most advertising start-ups reside here or a company like Gilt was founded and built in NYC.
So NYC really feels like the most exciting place to start an Internet company at this stage – and it seems that the West Coast crowd has figured this out as well and is increasingly investing here.