NEW YORK (MainStreet)—Internet Week New York 2013 has been abuzz with how New York City is the new hotspot for technology, but what impact does the burgeoning tech scene have on the New York City economy?
A panel discussion at Internet Week New York convened on Tuesday to discuss what makes the New York technology community different from that of Silicon Valley, which particular neighborhoods are being affected and how tech can impact other industries like retail and real estate. The panel was led by William Floyd of Google, and included Jessica Lawrence, Managing Director of the NY Tech Meetup; Tucker Reed, President of the Downtown Brooklyn Partnership; and Jonathan Bowles, Executive Director of the Center for an Urban Future.
Lawrence knew that the NYC tech scene was growing exponentially based on attendance to the New York Tech Meetup, which is the biggest in the world. When she joined the group in April 2011, there were about 15,000 members, she said. Now, just two years later, there are over 32,000. "Many more people are moving to the city and visiting from all over the country and the world," she said.
Some of the tech growth is homegrown. "Within NYC, we're seeing people transition from other industries, like coming to tech from finance or publishing," Lawrence said. Floyd has seen a similar trend. "Google's CIO used to be the CTO for Morgan Stanley and talks eloquently about how tech is hiding below the surface in this city," he said. "[New York's economy] has been so driven by industries like financial services, insurance and real estate that no one paid attention to tech before."
Brooklyn-based tech alone is responsible for $3 billion of the GDP, Reed said, and he expects the number to jump to $6 billion within the next few years. New York added 8,400 new tech jobs last year, and, according to the "Made in NY" campaign, there are more than 900 tech companies in New York hiring for over 3,000 jobs. According to Reed, 10,000 jobs are directly supported by the tech industry in Brooklyn, and that number is expected to grow. Floyd added that New York is among the top three cities in the country for fastest job growth in the tech sector.
Bowles said there has been a 24% increase in VC deals over the last five years in New York City. "And remember those years were tough for the economy," he said. "During the same years, Silicon Valley VC deals were down 21%, and Boston was down 31%. New York is growing while a lot of other major regions are stagnating a bit. Not that the Bay Area is having major problems, but New York is riding high."
The public's perception of New York's tech scene has changed in turn. "Five, six, seven years ago, NYC wasn't where it's at right now," Bowles said. "New York wasn't really taken seriously as a major tech hub, and right now it's very clearly number 2 in the country behind Silicon Valley. Boston may be stronger than New York in areas like bioscience and clean tech, but what's growing today are internet and mobile technologies, and New York has really overtaken Boston."
In Bowles's opinion, today's trends in technology play into New York City's strengths. Ten or 15 years ago, the major undertaking was to build the infrastructure of the internet, and that was space- and engineering-intensive. "That didn't really play to New York's strengths," he said. "Now it's about tech disrupting traditional industries, like advertising and financial services." New York has a long legacy of experience in those realms, which is why Bowles isn't surprised that New York has excelled in advertising and financial tech. "As mobile technologies have grown, there's demand for content to sell products and provide services. New York is good at that. We know how to sell things, provide services, create content."
Lawrence has seen a similar trend. "Many of these startups are combining the strengths of New York in other industries with tech, which gives us a leg up," Lawrence said. "For example, the 'maker' space is exploding, and NYC has amazing real estate with abandoned houses and factories, which can be used to accelerate that part of the tech space."
Bowles emphasized how startups beget yet more startups.
New York Tech's Geographic Impacts
Although the tech industry reaches its tendrils across the city, certain neighborhoods are more affected. The so-called Brooklyn Tech Triangle (comprised of Downtown Brooklyn, DUMBO and the Navy Yard) is a hotbed for tech startups. "More and more tech and creative firms are moving in, especially in digital media, and it's revitalizing the Brooklyn waterfront," Reed said.
"It's the 21st-century manufacturing industry, coming back to its home on the Brooklyn waterfront. It's just that we're not making boats anymore."
There's 20 million square feet of short term storage and warehouse space in Brooklyn, much of which was abandoned or an afterthought for generations. Now there's a whole industry that prefers that kind of space over Midtown. "That has major policy implications for otherwise-forgotten swaths of the city," Reed said.
Although one of the biggest hubs of activity is Brooklyn, Lawrence says the action isn't confined to that borough. "There's [a tech partnership] in Queens, one in the Bronx working on same thing," she said. "So many people are trying to help the tech renaissance reach every corner and borough in New York."
One of the reasons Brooklyn has bloomed more than others is that tech companies are already there. It's a chicken-and-egg situation, but tech feeds into peripheral industries, which feeds back into tech, Bowles said. If you're at a tech company, you would probably enjoy a 24/7 scene, he said. "So if you're working noon to midnight," he said, "You want a place where you can get coffee or a drink after work and where you have other buddies in other companies nearby who can, too. Not every neighborhood has that."
Another catalyst is affordable real estate. "If you're venture-backed or bootstrapping, you don't want to pay $50 per square foot," Bowles said. "Tech companies are looking for cheap space and amenities in a cluster. Those are the areas that will boom."
Reed agrees that tech and related industries (like nearby bars or coffee shops or lunch spots in formerly industrial areas) drive each other. "There's synergy between tech and the housing market, and potential labor forces from colleges and universities in the area," he said. "An interesting ecosystem has developed around the Brooklyn Tech Triangle."
Is Anything Standing in the Way of Tech Growth in New York?
One of the main hurdles tech entrepreneurs talk about is the difficulty in acquiring talent. "If you look at the companies on the 'Made in NY' with at least 50% of their staff as engineers in New York, at least 60% to 70% are hiring in engineering jobs," Lawrence said. "If there were enough people to fill all these jobs, they wouldn't all be hiring."
Floyd said that Google just celebrated the tenth anniversary of its New York engineering office and shared a story: When the first Google engineer started in New York in 2003, he told the founders he wanted to start an engineering branch in NYC. Supposedly, they challenged him to find 15 engineers. Ten years later, Google NYC has 3,000 employees. "But that illustrates the need for talent, too," Floyd said. "Can we provide that talent so tech can expand its impact?"
On the whole, Bowles said, the tech explosion is great for New York to expand beyond its dependence on Wall Street and develop a sustainable growth engine. Of course the proximity of Wall street doesn't hurt. "Those people are investing in other tech companies, becoming angel investors, starting subsequent startups," he said.
--Written by Allison Kade for MainStreet