Could New York be a better US base for European startups than the Valley?

For many technology startups today, Silicon Valley remains the quintessential place to look towards for inspiration, trends and – for some – a place to set up shop at some point in their startup’s life cycle. That remains true of some European entrepreneurs as well. But with the Valley “mindset” of fast-paced innovation and the global Internet explosion, some eco-systems are looking to vie to become at least as significant. For a long time New York was the poor relation to the Valley in this respect, but with tech startups back in vogue the city is building its own community. As a European looking at the city with fresh eyes, I’ve ben rattling around New York this week, tagging along with a number of European entrepreneurs. ‘World to NYC‘ is a programme organised by the New York City Economic Development Corporation and, from the London side, put together by TheGlasshouse/TakeOut, the networks founded by the uber-connected, and now New York resident, Judith Clegg.

The group has been treated to tours of co-working spaces like General Assembly and HiveAt55, and trips to InterActive Corporation, TheLadders and Gilt Groupe among other tech companies.

Throughout the tour I’ve been asking the question: if they had the choice, why would a European tech entrepreneur set up their first US office in New York over Silicon Valley?

The answers have actually surprised me, as it gradually became clear to me that New York’s ecosystem is not quite the “also-ran” to the Valley than I’d first thought – at least to a complete outsider like myself who is normally chewing over the tech scenes in the likes of London, Paris, Stockholm or Berlin.

On a panel discussion opening the event, David Tisch of accelerator TechStars, pointed out that New York’s established industries, such as finance and media, can actually work to the tech community’s advantage.

Whereas tech is a default career choice in the Valley, in New York, because you can ‘get rich’ easily enough in finance etc, the people who choose to be in tech are by default passionate and don’t take the scene for granted.

“Becoming rich in NYC is easier via other routes. People in New York are in tech because they want to be. That’s created a very collaborative culture. May are rebelling from other industries” Tisch says. Suddenly I was reminded of media and finance-obsessed London, where similar things have happened to the tech community in the last few years.

The list of successful New York startups is also growing: Kickstarter, Tumblr and Foursquare have all thrived in New York, in part, Tisch says, because of the highly social and networked nature of the city (18 million people). It may well be the case that Foursquare would not have enjoyed the same success had it started in a less densely populated place like San Francisco (7.5 million people). Imagine a SXSW festival every day and perhaps you have a glimpse of how New York’s population has the potential to power new social apps like Foursquare – though to balance that, it’s clear many of those in SF are early adopters.

In theory may even be easier for European companies to get visibility in New York than in the Valley. After a couple of days of asking around it’s become clear to me that although smaller, New York’s tech scene is growing at a furious pace, and any newcomer is welcomed with open arms and brought into the fold of tech companies that “believe’ in the city’s future.

In particular New York makes sense for startups in traditional industry niches like fashion, media, music, sports and retail. I was reminded of London’s own startups trends which seem to ‘map’ to these themes, such as Songkick, Editd, Lyst, MyDeco and others.

Steve Rosenbaum, NYC “Entrepreneur at large” and member number 12 of the New York Tech Meetup which now numbers 21,000 members, pointed out that “10 years ago the Valley was the right place to do the web. But the new phase is what I call ‘hyphen tech’ – as in tech-media, tech-fashion, tech-social, etc.”

He says there is a simple path to joining the tech community in New York, which – at least to me – contrasts the often byzantine nature of Silicon Valley which can be daunting to an outsider. “You join by arriving,” he says.

Raising funding in New York has also improved. Anything under $5m is “relatively easy” although “over $10-$15m” remains easier to do on the West Coast.

New York’s tech VCs such as First Round capital, FirstMark Capital, Founder Collective, Thrive Capital and Union Square Ventures have also done much to boost the city’s tech credentials, though I was told that Fred Wilson at Union Square still sees “98% of deal flow in NYC.” But the advice is simple: “Don’t go to Fred Wlison First. You don’t get to see him twice.”

I was told there were 20-40 active angels, plus a lot of “less experienced” money flowing into the system at the moment. That sounds true of any bubble where some boiler-room stock trader feels pumped up by the Facebook IPO enough to slap down some seed funds on a startup.

But isn’t NYC too expensive as a city? As with most cities, it depends. You can live as cheaply as in SF if you are prepared to compromise, of course. But New York is not a cheap city, let’s be clear.

As for talent, last year’s influx of large, engineer-led offices to New York from Google (1,000 engineers in one downtown building) new offices from Facebook and Twitter, plus the increasing scale of locals like Foursquare and Tumblr means engineering talent is becoming thicker on the ground. Of course, many of those will spin out and join or create new companies, thus adding to the ecosystem.

But is New York’s tech upswing sustainable, or will it fizzle out? I heard that although there may well be a “flush out” and “there are too many companies right now”, New Yorks’ closeness to traditional industries means there is plenty of disruption to feed off over the next few years. Then there is the huge project to create a new university campus on the East River.

I was also told some tips about New York scene: If you do join the tech community here, check you aren’t hanging out with “the guy everybody hates”. Aligning yourself with “advisors” who have a bad reputation is not a good idea. As always, it’s the founders that remain the core of the scene.

Below, you’ll find a series of interviews I did with some European founders, David Tisch, Chris Fralic of First Round Capital and Kevin Ryan of Gilt Group.

It’s never going to be Silicon Valley. In fact, nowhere is ever going to be quite like Silicon Valley, let’s be honest.

But as you can tell, with a much shorter flight over, a time-zone which is conducive to staying in touch with your European home team and a booming, self-sustaining tech eco-system, New York is starting to look a lot more attractive for European startups looking to break into the US market.

(Disclosure: Travel costs to NYC were covered by TakeOut).