Editor’s note: Tyler Perry is partner and general manager at Bateman Group, a PR and social media communications firm with offices in New York and San Francisco.
Silicon Alley’s digerati is poised to celebrate what’s been years in the making as the locus for tech public offerings expands beyond Silicon Valley.
Further evidence is mounting that New York’s scene is building momentum thanks to marquee public offerings anticipated from Etsy, Gilt Groupe, AppNexus, Outbrain and more. This is more than just a toast for New York — it’s a turning point validating a new tech center in the U.S.
New York has stamped out a workforce exodus that has sent many to the West Coast since now New York boasts its own tech attractions.
Call it necessity in the wake of the finance industry’s devastation or call it savvy political engineering.
Consider that former Mayor Michael Bloomberg, whose net worth sits at $36 billion, was uniquely suited to pivot New York City from finance to tech.
The namesake founder of the financial data and media juggernaut Bloomberg LP came from Wall Street but was certainly an innovator in financial tech. As mayor, he made city services more easily accessible to middle-class entrepreneurs with access to the Internet via websites and apps and courted tech companies with tax incentives.
What a difference a decade makes in the city’s makeover. In addition to the high-profile advertising technologies and Internet retail public offerings on the horizon, there’s a pipeline of other technology-based hopefuls waiting in the wings.
It’s expected that dozens of New York-based startups are potentially on tap to go public. Before we get into an East Coast-West Coast debate, I should point out that Silicon Valley still has the pole position — CB Insights counts 523 exits (IPOs, M&A) for the Bay Area last year compared with New York’s 158.
To lend some global perspective, the good folks at PricewaterhouseCoopers remind us that China is winning the tech IPO game, not surprisingly with Alibaba’s historic $21.8 billion debut — its 45 deals and proceeds $29 billion in 2014 trounced the U.S.’s 37 deals and $7.9 billion. Europe got back on the map, raising $6.8 billion from 14 offerings, with the UK contributing $3.3 billion of that from their seven deals in 2014.
But as is typical of New Yorkers, we like to think of the Big Apple as the epicenter of the world, so let’s focus on what is driving the growth in New York, specifically looking at the infrastructure of the city.
Politics of tech
While the groundwork had been laid for tech, New York Mayor Bill de Blasio continues to carry the torch for attracting and supporting new businesses.
Under de Blasio, the city has launched Digital.NYC — a public-private partnership to support tech development across the boroughs — and continues to offer resources to bring in tech companies. The current mayor’s office has continued aggressive tax breaks to make the city a tech company destination, as well.
In another sign of NYC’s growing clout, a senior official in the Obama administration, U.S. Deputy Chief Technology Officer Nick Sinai, left his position at the White House for a tech investing role in the Empire State. He’s now with midtown Manhattan-based Insight Venture Partners, a private equity and venture capital firm.
Tech now permeates New York. When Jack Dorsey’s mobile payments company Square snagged a $5 million tax break to expand its presence there last year, Gov. Andrew Cuomo said, “Square’s decision to create a new East Coast headquarters in SoHo is the latest in a growing trend of startup, innovative tech industry firms that have chosen New York State as the place to expand their business.”
Tech land grab
The tech boom in NYC has reshaped the face of the city and its culture. Manhattan’s Midtown South district and Brooklyn’s DUMBO neighborhood, in particular, have enjoyed elevated status as digital media attractions and tech hipster havens, respectively.
Sony signed a lease for 525,000 square feet located in the Midtown South area this year and Samsung has been rumored to be eyeing 1 million square feet in the district. The land-grab is pushing prices up into the $100-plus per square foot stratosphere for a bid to be in the heart of the tech and media metropolis.
“Some companies have flocked to New York’s technology centric Midtown South market to drive recruitment and get back to the innovative culture that originally made them great,” says Michael Higgins, a senior vice president with real estate brokerage giant JLL.
The old Jehovah’s Witnesses headquarters, known as the Watchtower, this year sold for $375 million for the 1.4 million square foot complex that serves tech companies. Located in what’s been crowned Dumbo Heights, the Watchtower attracted Etsy as an anchor tenant, planning to occupy 200,000 square feet in 2016. Etsy picked up a $5 million tax break for staying in Brooklyn, too.
Meanwhile, Vice Media got a $6.5 million tax break for opting to move into new South Williamsburg digs. The Vice move has stirred up controversy over displacing the music clubs Death by Audio and Grasslands — by the very hipsters who feature and frequent such venues.
Obviously commercial real estate is on fire, but so are the startups looking to disrupt that very industry. Shared workspace company WeWork closed a $355 million series A round in December. And New York City-based Thrive Capital pumped $40 million into Manhattan-based Urban Compass, a marketplace to buy, sell and rent apartments. All of this highlights a scramble of people trying to live and work in the area exploding with innovation.
New York City now boasts more than 6,300 startups, according to Digital.NYC. And venture capital firms are boosting their fund sizes and stakes. We are seeing the likes of Union Square Ventures, Greycroft, Primary Venture Partners, Interplay Venture Partners, Red Swan Ventures and Silicon Valley-based Bessemer Venture Partners increasing their presence and funds.
New York startups such as Bonobos, Birchbox, Warby Parker and Thrillist point to a wave of investments in this new era of fashion retail that’s converging with tech.
But the city is no longer home to just fashion and finance a la Venmo or Learnvest. There’s a whole range of food startups like Kitchensurfing and Blue Apron; and there are even innovative educators, like Codeacademy. Then, of course, there’s online retail heavyweight Jet.com, which has attracted $220 million in funding and remains in stealth with plans to rattle Amazon.com.
All told, the wide range of companies and growing size of investments speak to a maturing New York City tech sphere. In 2015, it’s expected that hundreds of U.S. companies are poised to go public, coming after last year logging the highest level since the dot-com peak of 2000. One open question remains: Which will be the next unicorn to storm the IPO gates.