How The NYC Innovation Community Can Still Lose (And What You Can Do About It)

There isn’t a single person in the NYC that is more excited than I am about how far we’ve come.  As a Brooklyn native who has never lived outside the five boroughs—and someone who left Big Finance—I feel a special kind of pride over what’s gone on here in the last six+ years. 

But I am also someone who is very coloured by my past experience of seeing the venture implosion after the first bubble and walking through the fundraising tumbleweed of late 2008.  I remember hearing that a New York City venture fund was raising money in 2004 and almost skipping the meeting, because New York wasn’t a viable place to deploy that much capital—it was a small blip in the past. 

From an infrastructure perspective, we’re a lot better off than we were before.  More industries are participating, you have a larger engineering base, and maybe most strategically important is that the money being put to work here is more stable.  Funds like RRE have been here and been successful for quite a while, and Union Square Ventures and First Round Capital are investing out of their second and third funds respectively.  Now that you’ve got out of town firms like SV Angel, Accel, Matrix and others investing in NYC in multiple companies on top of that, you’ve got a much more rooted base of capital to work from.

Still, things can change and there are a few behaviours that give me a little bit of pause—and I think it’s always good to go into any situation eyes wide open.  Cycles don’t last forever, and so the more we can do to make sure NYC doesn’t become a venture wasteland like it did after the dot-com crash, the better.

Here’s how you can prevent this NYC renaisannce from being a forest fire:

Fail fast

A lot has been written about whether or not we should be encouraging 1000 startups to bloom and the proliferation of incubators, as well as the growth of angel investing.  I’m all for people putting $25k to work to try something out–and if it works, having the momentum to raise more capital.  If it doesn’t, you pack up your marbles and go home to try something else.  What’s troubling is when you get $500k for a test–which means that a great entrepreneur and 2-3 developers are tied up on a project that just isn’t working for 9-12 months.  There’s a lot of that going on now and NYC can’t afford for its best people to be treading water.

Strengthen the VPs and Director-level

Hiring great people is hard–everywhere and at every time.  They’re just not that easy to come by, which is why they’re so impactful when going up against competition.  We definitely need more bench players–people who can lead successful marketing efforts, manage teams that execute well, strike the right partnerships and win the big customers.  Some of the shortage comes from the fact that we haven’t build the Amazons and the Googles here, so finding people with 8+ years of experience here is going to require some attracting people from outside.  It will also require some of the 4-5 year experience folks to step up, learn what they need to learn, get some mentoring, and take on the big challenges.  Startup success is a team effort and you can’t just have great entrepreneurs.

Angels: Focus and pace

I’ve heard that most new angels make 70% of their lifetime investments within the first year of starting to invest–i.e. they splurge, then they have trouble digesting all the deals.  Its great that a lot of experienced people are reinvesting back into the ecosystem, but if they’re doing 20 deals a year, how helpful can they really be to any of those individual companies?   I’d love to see some of our most experienced angels get more actively involved in the companies they work with, because they have great knowledge to pass on to new entrepreneurs.  There are too many angel/super angel fund rounds where everyone puts in 150k, no one really leads, and the company just kind of drifts along with no guidence, direction, or feet held to fire. 

Tell the stories no one knows about

Its cool that Mayor Bloomberg visted Foursquare, but Foursquare isn’t the only awesome company in NYC.  There are lots more stories to tell and the ecosystem is much deeper than people imagine.  Take Wireless Generation–$400 million plus exit out of DUMBO and how many people even knew the company existed?   I think the media needs to dig a little deeper and spend a little more time on the stories that should get told instead of always piling on the same bandwagons of companies that everyone knows about (Not that GroupMe minds the press, of course!!).    I would just hate for public perception of the health of the NYC ecosystem to be tied to the fortunes of 4 companies.

Include the kids

Programs like hackNY are doing an amazing job getting young student devs involved in the ecosystem, but the fact is that most NYC-area college students are still thinking about big companies when they graduate.  What’s worse is that they don’t have the skills to necessarily be instantly usable to startups.  We need more real world knowledge of growth stage companies to make its way into the classroom, more exposure to technology and how it is changing the industries these kids will work in.  I’m doing my part, giving at talk at NYU on how to get a great job at a startup.  You can sign up here.