There’s been a lot of focus recently on the macro economy, sub-prime debt exposure and a recessionary or even depressive economic outlook. A quiet, but growing sub-plot though on a micro level, is what this means for the technology industry in New York City. So far this year, the city comptroller estimates 40,000 jobs have been shed on Wall Street and it’s expected that this number may rise to 50-60,000 before it’s all over. Large Wall Street firms have dominated the New York economy for much longer than I’ve been relevant. There’s been plentiful discussion in tech circles, over the past few years, that one of the pitfalls of growing the tech industry in NYC is the difficulty in luring IT professionals away from deep-pocketed Wall Street firms. Now that there are two fewer Wall Street firms though and far fewer jobs, the local economy is poised for a transformational repositioning. An obvious sector to absorb some of that vacuum is technology. Crain’s NY reported a few weeks ago that New York added 1,100 technology jobs in the first half of the year to bring the overall number to 42,700. While the broader economy purges jobs by the minute, we’re adding them in droves. This is super exciting.
The WSJ reported that, in the first six months of this year, there were 67 NYC-based startups who received VC investment totaling $828 million compared to $480 million in the same period last year. I believe that growth rate will accelerate. With the flood of newly unemployed financial markets-focused professionals, there are more smart, hungry and creative people looking for opportunity than ever before. As the few i-banks remaining recast themselves as bank holding companies and accept federal funds and the compensation limits that come with those funds, high pay-grades that once lured many of the best and brightest IT professionals and managers may no longer be as significant of a factor. Compensation reform, generally on the verge of sweeping through all facets of our economy anyway, is only one more factor encouraging the aspiring business owner to finally go for it. The alignment of incentives that once made the leap difficult are severely diminished and in some cases (for employees of Lehman or Bear as examples), eliminated. Also, as other areas of the local economy decline - real estate prices fall, office space becomes more affordable, etc – other historical barriers to starting a company here also diminish. With the city’s history around financial services and the experience of the recently unemployed, I think financial services technologies is one area, in particular, that will likely see a lot of innovation in the coming years. When you combine this new reality with recent trends, NYC becomes an increasingly attractive market for VC investors. We’ve been ranked third behind the Bay Area and Boston for several years and while our growth has been accelerating versus Boston for a little while, I think these recent local developments lend reason to believe that we will inch even closer to them in the coming years.
As recently as August, I had continued to consider a professionally-motivated move back to the Bay Area. I’m convinced it’s something that every young aspiring technology professional occasionally thinks about. At the moment though, those thoughts are diminished as I see enormous opportunity for NYC early-stage technology. Boston should be on high alert because New York is biting at its heels.