Startups pass on Silicon Valley to find their fortunes in New York

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Though Silicon Valley has lured away plenty of startups, (cough, Facebook), New York is becoming a magnet of its own, attracting companies that want to build their businesses amid the bright lights of the big city. In the past couple of months, New York has drawn former San Francisco startup Qwiki, PlaceIQ from Colorado and recent 500 Startups graduate Snapette, which started in Boston before spending the past half of a year in Silicon Valley.

These are just a few recent transplants, but they show how New York increasingly makes sense as a headquarters for certain startups, especially those with ties to finance, fashion, media, retail, advertising and increasingly big data and location-based services. ConsumerBell relocated to New York from the Bay Area in May, and Take The Interview, which started in Boston, is moving as well. The relocations fuel the continuing momentum behind New York, which has eclipsed Boston in the number of VC deals and is now becoming a destination for big companies like Facebook, which announced an engineering campus in New York, and eBay, which bought Hunch and plans to build out a New York office.

Close to brands and retailers

I talked with Snapette founder Sarah Paiji about why she chose New York after building a lot of connections in Silicon Valley and Boston. She said despite the presence of Facebook and Google in the Bay Area, it made more sense to be near brands and retailers, which are mostly based in New York. Snapette, which recently moved into Dogpatch Labs, is a kind of Pinterest for the real world, with users’ supplying images of products that can be found in nearby shops.

Snapette co-founder Sarah Paiji

“We are about fashion and shopping. We want to drive foot traffic into local stores. We also take a lot of meetings with brands and retailers and we have over 30 boutique partners in New York. In Palo Alto, it just doesn’t make as much sense to stay,” Paiji said.

PlaceIQ, a Boulder, Colo., location startup, also announced a move to New York in December, saying it wanted to be closer to partners and customers and the general ecosystem. PlaceIQ has built a vast database of locations down to the block level that can be used by advertisers to better target consumers without tracking them individually.

New York has changed

Duncan McCall, the CEO and co-founder of PlaceIQ, said he had no interest in ever relocating to New York. But over the past year, after making a lot of visits to see customers, partners and company investor IA Ventures, he realized the city had changed and was now a logical home for his startup. And he was tired of traveling so much and saw the value of more face-to-face meetings. He just moved into a new temporary space in the past few days and is hunting for more-permanent digs.

“I previously spent some time in New York and I thought the technology business isn’t big enough, there’s not enough talent and there wasn’t a business around data. But that’s changed dramatically in New York,” McCall said. “Over the last year, it’s grown on me. The people and the investment scene are great and with the customers and ecosystem, it became obvious that if we want to maximize our chances, we have to be in New York.”

Qwiki's new SoHo headquarters

Qwiki, which helps produce multimedia information videos, announced its move in December and relocated into a hip SoHo space. CEO Doug Imbruce said in blog post that despite being known as a Silicon Valley company, the company saw New York as the place to become a medium for people to tell stories and share opinions. Qwiki needs to be close to where the most content was produced, and that’s New York, he said.

Local strengths

Not every company will be tempted to make the move. But these recent transplants show there is plenty of incentive to do so. With so much media and advertising here, a company like Qwiki can tap a lot of media partners as it pursues more publishing tools for users. Snapette is closely aligned with the fashion industry and revolves around location, something New York is becoming good at with Foursquare, Hyperpublic and LocalResponse. New York’s big data scene has also risen to the fore, building on the experience of the finance industry, which has long been involved in data. Now with venture funds like IA Ventures, which looks primarily at big data opportunities, there is more momentum in building data startups.

Paiji and McCall said the move to New York comes with trade-offs. Paiji said it is harder to find talent, and for a startup mostly made up of women, they get less attention from men now that they are away from testosterone-heavy Silicon Valley. And McCall said he doesn’t have ready access to skiing like he did in Colorado.

Not ready to topple Silicon Valley

SA 500 job fair

New York has also lost some startups, including Think Near, which moved to Los Angeles, and BankSimple, which moved to Portland. And many companies still flock to Silicon Valley to make their big break. The Valley still has an edge in investment dollars and talent and has a culture built around entrepreneurship that has flourished for decades, thanks to companies like Apple, Google, eBay, Facebook and others.

New York has to continue to build its startup culture and fix its talent crunch problems, which could be alleviated by a new applied sciences university and programs like the HackNY, the Turing Fellowship and SA500. But with more investors, incubators and startup infrastructure and companies moving in, New York is increasingly an appealing place. Will it topple Silicon Valley anytime soon? No, but it is showing that it is becoming a competitive tech destination for startups convinced that if they can make it there . . .

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