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

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 (s 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 (s goog) 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 (s aapl), 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 . . .

19 Responses to “Startups pass on Silicon Valley to find their fortunes in New York”

  1. Reality check. Let’s not forget marketing and heavy fuel costs in this economy. Companies like Walmart have excelled by centrally locating on the continent. The shortest route between two points is a straight line. Consider the midwest especially the smaller towns. They need your business and are willing to waive almost all your costs. Guess I am with AndynSF.

  2. Being in tech, specifically infrastructure engineering for the past 11 years, when I moved to NY 5 yrs ago from Seattle, it was kind of odd how the tech scene was abysmal. I have to say, these are quite exciting times and am stoked to be in NY witnessing it.

    This article my be a tad exaggerated however, one shouldn’t aways see the forest for the trees. SF and SV are clearly what they are but NY has been boosting it’s startup scene like never before. And the co-working, incubator spaces, VC funding, knowledge sharing, collaboration among startups within and the city available now are all part of the excitement/ effervescence. This wasn’t the case 5yrs ago.

    I would say, what I noticed with the startups in NY are that they are mostly creatively driven around fashion, media and big data
    needs, perhaps those are the “startups pass on SV to stay in NY” to be closer to there distributors. And when you talk about end users that benefit from these types of startups, diversity, opinions, savvy consumers we’ve got them here, all over 8million of them!
    There is such global presence in the city which makes it more advantageous in it’s capacity to inspire, grow bigger and perhaps be a better tech hub in collaborating both locally and globally.

    @anon, yes, “testosterone heavy Silicon Valley”, I highly doubt in this sense, the writer meant only financially but main the ego driven/elitist type that not only toot there own horn but will either consciously or unconsciously exclude others during the creative and technical process of running startups, or any business for that matter.
    However NY isn’t free of that stereotype either. It is just as nuts with it’s velvet rope syndrome which I believe could have been the reason the finance, real estate, fashion and media industries have boomed and made the city what it is. Now the City is expanding it it’s economical development know how to encourage entrepreneurship including and focusing on technology to diversify job growth and bring in businesses to be more globally competitive. Quite frankly we all saw what happened to the finance and real estate sectors in the past 4yrs which shock the city quite a bit. Every business no matter what industry uses technology! The City has finally appreciated this (cough financial melt down) and in is working toward make NYC one of the tech hubs in the world just as SF, SV and Boston. After all, we are arguably one of the biggest Financial, Media and Advertising meccas of the world.

  3. David Ross

    Nice article. I’m a hybrid UI Designer / pixel-perfect front-end developer in NYC and work with startups around the country, including here, SV and many other places.

    There’s plenty of talent here in NYC if you know the right people.

  4. Odile Beniflah

    I work for a European startup and I am very glad to be in NY. I have worked in both SF and NY and while I love both places, I find NY much more inspiring when you want to solve complex, global issues. It is closer to the reality of the world and a better place to understand the diversity of user problems. In SF, it’s easy to live in your tech bubble. In NY, I love to go to the many events and co-working spaces where people exchange ideas and best business practices.

  5. majortom1981

    Also keep in mind you have access to other things in NY also .Like the NLSL II and the nanotech labs in brookhaven labs on long island. Google bought that huge building in manhattan also. NYC has direct fiber links to europe also. IF your in the tech field its a great area to have a business.

    It also helps that you can take the accella between NYC,Boston, and Washington DC

  6. IvyAnonymous

    With the promise of Cornell University and the Technion’s NYC Tech Campus on Roosevelt Island, I would venture that NYC is bolstering to become a formidable and promising alternative for entrepreneurship in the United States.

  7. “testosterone heavy Silicon Valley” , really. If there is so much testoserone in Silicon Valle, then I am missing something. I think the author is confusing the very long work hours in Silicon Valley with testosterone. Testosterone usually refers to high risk taking and hard partying. There are way more (way way more) of those in NYC in the Financial Industry – where $10M bonuses are the norms.

  8. Sudesh Sawant

    Put in Indian context, this argument will also apply to Mumbai. Startups should not forget the dot com days (where the tech companies did not have a brick-mortar base but were just based on ideas) and be more practical, business is as important as technology. Those 10% more business opportunities could make the difference. I feel, the only challenge with Mumbai is that bootstrapping could be costly, but with Bangalore, Pune and Hyderabad becoming equally costly, does this matter.

  9. Having worked in both SF and NY, this article’s very far from reality. I’d love to see the same effervescence of startups that I found in SF and SV transported to NY, but the tech scene is at least 10 years behind. From the enthusiasm point of view NY is definitely a tough competitor, but saying “startups pass on SV to stay in NY” is a gross exaggeration…at least for the time being.

    • Damion Hankejh

      Reality check: the companies mentioned are* passing on SV to be in New York. My own venture group, Ingk Labs, is building 12 New York-based companies this year. We even acquired one in SV and moved it here. Aside from the first comment posted, this article has nary a gross exaggeration.

      • Double reality check: the first comment is spot on. I too have spent multiple years in both locations and agree 100% with Cat. Damion – there are definitely startups in NYC and yes some are moving there, the article is slightly hyperbolic as I bet the overall flow of talent and companies is going east to west, not west to east.

      • Damion Hankejh

        @Dog — as a 12+ year New York resident/investor with more than a fair share of Valley residency/experience, it seems clear to me that NY’s talent draw is rising, not* falling — which I consider was the gist of Ryan’s article. And while I would agree that California has historically had an upper hand, the battle for scarce top talent has leveled the playing field — which is to say that I am willing to compensate as much if not more than anyone in the Valley — and have only failed to secure one key engineer in 15+ years over hundreds of hires. We’re all offering what it takes to lure. Google, Facebook and Twitter would not have otherwise opened offices here (damn them! ; ). While some will always* prefer California/West over The City, I’m not convinced Cali has an upper hand on top talent — and certain the balance of which is easier to obtain.