Photo: andrew mace– via flickr
New York City is experiencing a tech renaissance, but we keep hearing the same complaint: that the biggest drag on New York’s tech scene is Wall Street. A big proponent of this argument is Hunch co-founder and top angel investor Chris Dixon, but it’s a refrain that always comes back. The argument is basically that Wall Street draws top engineers away from startups by giving them salaries they can’t match.
But yesterday we ran a story that shows how Wall Street is a big source of seed funding for startups. Here’s how it goes: if you’re in Wall Street and you want to do a startup, you save your fabulous salary, and boom! You have enough runway to get started for a long time.
And this got your writer to think. We don’t like zero sum arguments, and many situations that are portrayed as zero sum aren’t.
The obvious way in which Wall Street benefits the New York tech scene is the abundance of rich people who might be inclined to invest in startups. To be sure, “rich bankers” aren’t the best kind of angel investors, but we’re pretty sure there are a few smart investors who are also rich bankers, and in any case there is never enough early stage money and this is a domain where the perfect can be the enemy of the good.
But even the “Wall Street steals the tech scene’s engineers” line isn’t convincing.
Sure, Wall Street hires thousands engineers and maths nerds to do algorithms to squeeze out more cash from the markets. But presumably many if not most of these engineers weren’t originally from New York. Presumably many if not most of these engineers wouldn’t be living in New York if they didn’t get that offer from Goldman Sachs. And presumably some of those engineers brought to New York by Wall Street could eventually join New York’s startup scene.
Why, it’s even possible to run R&D at a hedge fund and then go on to start a successful online security startup, like Chris Dixon himself did. Or get fired from an investment bank and start one of the world’s biggest technology and media companies, as New York’s current mayor did.
It would be interesting to get figures on this, but we’re pretty sure that Wall Street causes a net gain in engineers for New York’s startup scene. If Wall Street attracts 10 thousand engineers to New York and a thousand of these go to work for startups after a few years, that’s a net gain for the tech scene. Just like the advertising and media industries are a net gain of designers, etc.
From our anecdotal experience, it seems that for every example you can name of someone picking a job at a hedge fund over a startup, you can name someone who left Wall Street for a startup.
More generally, at its base level, Wall Street works as a giant magnet for ambitious, smart and hard-working people. It’s hard to think that this is a bad thing to have down the street.
Complaining that Wall Street “steals talent” from New York startups sounds sort of like complaining that Amazon causes neighbourhood bookstores to close down without realising the massively outweighing economic benefits of e-commerce.
So to sum up, Wall Street:
- Produces thousands of rich people who might put money into startups;
- Attracts thousands of engineers to New York;
- Attracts thousands of smart, hard-working people to New York;
- Pays these people so much that it’s much easier for them to start companies.
Yeah, sounds terrible.
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