The Blog of Burgher Jon

I follow a number of prominent NYC entrepreneurs and VCs (more then I follow in California).  The reason I do this, is that I believe NYC has done a remarkable job over the last 10 years building a unique, powerful startup scene.  I think they are several years ahead of Pittsburgh and they are obviously different cities, but there are lessons to be learned from the way that community has grown and the steps and missteps they have taken.  This is why I’ve taken a keen interest in the debate over the past few weeks over just how far NYC has come relative to silicon valley, and why I’d like to share a couple lessons learned from that debate.  Two things appear worth taking away from this debate.  First, what should the goal of a city trying to build a startup community be?  Second, how should the

First, both Fred Wilson and Chris Dixon made a case for how far the NYC scene has come (links here and here and here).   Both Chris and Fred Wilson refer to NYC’s access to quality angel investors, individual investors (sometimes operating in groups) who generally invest between 25k and 150k, as well as access to local and locally cooperative Venture Capital Firms, who generally manage funds that will invest between 250k and 10M in a company.  Chris and Fred point to the VCs in New York City, Chris even pulls in the fact that some Boston VCs are friendly with NYC.

Fred went in to some more interesting points outside of funding.  I think this is important, because funding is something that has to follow great ideas.  A lack of funding is something that can not be fixed directly.  That is to say that New York (and by extension Pittsburgh) can’t extend their funding environment by begging for VCs and Angels.   A list of characeteristics of a good startup ecosystem that are not related to funding is valuable then because it gives NYC (and by extension Pittsburgh)  some things they can improve on that will lead to funding.   This list is He had a list of items (outside of the investment money), I’d like to highlight several of these.:

• A relationship based economy made up of networks that include new innovators and experienced disruptors.
• Strategic leaders who share advice if not connections that extend beyond the local.
• Access to a community of startups that understand the problems and the solutions that are unique to early startups.
• Advertising and Marketing firms and individuals who understand how to work with startups.
• Since many startups are longer on ideas then office space, there must be locations where people can congregate.
• An outside organization focused around the startup scene.
• The city itself must be a great place to live in order to attract top talent.
• Lawyers, Accountants and other infrastructure personnel that understand the need of and cater to startups.  This is not only an expertise, but sometimes means doing things like deferring fees until funds have been raised.
• A strong, diverse University environment.

There was a response to all of this love for NYC.  One writer in particular, Matt Mireles of the Silicon Alley Insider (also Venture Hacks and Metamorphosis), published an article “Face It: NYC Is Not The Best Place for a Startup”.  Matt didn’t dispute that there are Angel Investors in NYC, but argued that the quantity of Angel Investors was too low.  He argued that leads to some companies not being funded and that those that are receive low valuations and slow deal cycles.  The rest of his argument (which I find very weak) centers around recruitable talent.  On the one hand he argues that the great talent in NYC gets sucked up by high-paying Wall Street jobs.  On the other hand he argues that there isn’t any specialized talent.  To my mind, you can’t have it both ways.  Almost every city will have either heavy competition for talent or a lack of talent.

To this point, the argument of the last week over the strength of the startup ecosystem in NYC was conventional.  There is some great content from some real experts, but it’s the same old stuff funding, talent and the things that make them tick.  The responses to Matt’s argument brought in some more interesting debate.

Caterina Fink (Co-Founder of Flickr and actually born and raised in Pittsburgh!) positioned three arguments in the defense of NYC.  First, she claimed that startups and Wall Street recruit from entirely different talent pools (she actually believes that hiring away from Wall Street is a bad idea).  Second, she engaged in the typical funding debate (pointing out another Angel Group).  Lastly, and most interestingly, she positioned that there is an advantage to being away from Silicon Valley (clearly there are disadvantages).  She attributed this advantage to the avoidance of a “sort of groupthink” that pervades The Valley.  Pointing out that Flickr was established in the startup hot bed of Vancouver (that’s a joke btw).  I’m going to call her last point an environment that inspires individual thought.

Chris Dixon (remember that he was one of the original NYC supporters) also responded to Matt’s article.  In his article, he restated that he doesn’t believe that NYC is better then Silicon Valley for a startup.  In fact, he says that his aspiration for NYC is to produce another ecosystem like the Valley, not to compete with it.  I really like this point.  I believe that if the nation as a whole is going to become more innovative through startups it will be by building “silicon valley like” communities in many cities (like Pittsburgh maybe?).  Chris acknowledged that Matt may be better off moving to California to start his company and that’s ok.  I would hope that once NYC is mature, some companies originally conceived in the Valley would be better off moving to NYC to startup (and once Pittsburgh’s mature…)

So there’s the summary.  I think the takeaways are two-fold.  First, there’s the list of bolded characteristics of a good startup ecosystem.  Second, we can take away from Chis Dixon’s post a realistic goal; producing an ecosystem like silicon valley, not one to compete with it.  Look back here tomorrow, I’m going to take a cursory look at how Pittsburgh stacks up next to this list of bolded characteristics.  Check back tomorrow same Bat Time, same Bat Channel.  I’ll be taking a cursory look at what Pittsburgh’s strengths are in some of the “characteristics of a good startup ecosystem.”

***Note: One additional link is Roger Ehrenberg’s response to Chris’s last post.  It’s an interesting read about the East Coast’s practical tendency and the West Coast’s “change the world” tendency.  It’s worth a read, but not a big part of this particular discussion.