How New York Became A Tech Town

San Francisco and Boston were the original US tech centers. But New York emerged because it was the center of three industries in which tech would become a dominant component: finance, media and advertising.

Since all of those businesses became tech driven, NYC became a tech lodestar, especially given its additional cultural, lifestyle and economic attractions. JL


Steve Lohr reports in the New York Times:

The city is home to thousands of fledgling companies, and the New York region ranks second to the Bay Area in attracting venture capital. The city’s tech sector has become a wellspring of jobs paying more than $150,000, a major part of the local economy. Tech in New York took hold because entrepreneurs, technologists and corporations chose the city as the place to work and live, just as the city’s industries were undergoing digital transformations. Many of the city’s tech jobs are not in technology companies: they are (in) industries where the city has long been positioned as a world leader — like finance, advertising and media.

Euan Robertson started his job with New York City’s economic development team at an ominous moment. It was Monday, Sept. 15, 2008, the day Lehman Brothers filed for bankruptcy and ignited the financial crisis.

Mr. Robertson made his way through City Hall’s sprawling open office to a conference table, where he huddled with top advisers to Mayor Michael R. Bloomberg.

“No one knew what was going to happen or how bad it would be,” Mr. Robertson recalled. “But everyone agreed we’d better come up with a plan.”

The plan that emerged called for developing tech start-ups and tech workers in New York. The goal, Mr. Robertson said, was to “build a talent engine” that would help make the city a magnet for coders and companies.

A decade later, there is ample evidence that the city is well on its way to achieving that goal. Amazon’s sudden decision last week to abandon its plan to build a big campus in Queens, in the face of protests from some local politicians and community activists, is a setback — but not one that reverses tech’s climb in the city.

Amazon already employs 5,000 workers in New York, and the city’s talent pool was the main reason, the company said, that it selected New York in November. In December, Google announced a major expansion that could double its New York work force to 14,000 over the next decade, without the rich government incentives that proved a lightning rod for the Amazon deal.

Today, the city is home to thousands of fledgling companies, and the New York region regularly ranks second to the Bay Area in attracting venture capital, the lifeblood of the start-up economy. The city’s tech sector has become a wellspring of jobs paying more than $150,000 on average, a major part of the local economy.

The story of tech’s ascent in New York stretches back nearly two decades. It was a bumpy path, with progress both by design and serendipity. DoubleClick, a survivor of the dot-com crash and a digital advertising pioneer, and Google, which made an early bet on the city, played key roles. And the Bloomberg administration also made smart policy moves. But tech in New York took hold mainly because entrepreneurs, technologists and corporations chose the city as the place to work and live, just as the city’s industries were undergoing digital transformations, according to interviews with more than two dozen people who contributed to the city’s evolution into a tech center.

“The truth is, we caught a wave,” said Seth Pinsky, the president of the New York City Economic Development Corporation from 2008 to 2013.

Many of the city’s tech jobs are not in technology companies. Instead, they are tied to industries where the city has long been positioned as a world leader — like finance, advertising and media. Those businesses face threats from the rise of the digital age, and have adapted to compete, helping to revitalize the city’s economy in the process. There are twice as many technology jobs in non-tech industries in New York as there are in technology companies, according to Emsi, a labor market research firm.

New York’s confidential proposal to Amazon, code-named Project Clancy, which is filled with detailed data on the city work force and labor market, points to the change. Amazon asked, for example, which companies had the most job openings in machine learning, a fundamental artificial intelligence skill. The top four, according to the proposal, were JPMorgan Chase, Goldman Sachs, Citigroup and KPMG. Tied for fifth place were Amazon and Google.

[Read more: For the labor movement, tech giants present a quandary.]

Skilled tech workers now flock to New York from everywhere. But the homegrown talent engine that city officials sought to jump-start a decade ago is also revving up. The new Cornell Tech graduate school campus on Roosevelt Island, a product of the city’s development plan, has 300 students, with expansion plans for a student population of 2,000 over the next two decades. And new courses, buildings and research institutes are underway at Columbia, New York University and the City University of New York.

And they are being lured by urban amenities — museums, theater, opera, dance, jazz clubs, art galleries, bars and restaurants — that offer a clear alternative to life in suburban Silicon Valley.

“The main resource in technology is smart people,” said Kevin Ryan, a longtime tech entrepreneur. “The New York tech sector is succeeding largely because New York is succeeding.”

Tech’s Long New York Past

Anyone designing hardware, writing code, or using a computer or a smartphone today owes a debt to the innovations developed in metropolitan New York decades ago. The first widely adopted programming language, Fortran, was created in 1957 by young coders working for IBM in an office on East 56th Street. Their wintertime breaks were snowball fights in Central Park. Researchers at Bell Labs, located first in Manhattan and then suburban New Jersey, invented the transistor, the Unix operating system, and the C and C++ programming languages — building blocks of modern computing.

Technology innovation eventually migrated outside New York. Minicomputer makers sprang up in the Boston suburbs. But the larger move was westward, beginning in the late 1960s, when first the semiconductor business and later the personal computer industry took root in sunny Northern California.

The 1990s internet boom opened the door to New York entrepreneurs, especially in the field of new media, with ventures like Feed and Suck, popular web magazines. Start-ups clustered in the Flatiron district of Manhattan, an area known as Silicon Alley.

When theGlobe.com, an early social media website, went public in late 1998, its shares soared more than 600 percent, a record at the time. TheGlobe.com, like so many start-ups in Silicon Alley and Silicon Valley, collapsed when the dot-com bubble burst a couple of years later.

Amid the dot-com meltdown, though, there was a contrarian bet on the city, unnoticed at the time, by a fledgling start-up: Google.

In the late summer of 2000, Timothy Armstrong, at 29, qualified as an internet veteran. Mr. Armstrong helped create or became a senior manager at a string of ventures, and had a solid track record in internet sales and marketing when he met with Omid Kordestani, head of sales at Google.

The company was looking to expand, and Mr. Kordestani arranged a meeting between Mr. Armstrong and its founders, Larry Page and Sergey Brin, in Silicon Valley.

The thinking at Google, Mr. Armstrong recalled, was little more than that the company wanted a big advertising business, and New York was where the ad money was. He signed a one-page contract with no guarantees.

“The idea was, if it doesn’t work out, no harm, no foul,” Mr. Armstrong said.

He became Google’s first employee in New York, working from his apartment on West 86th Street. The company was not yet two years old, the internet boom had crested, and ad agencies and consumer product companies were skeptical about the start-up’s offering — text ads linked to search results.

Mr. Armstrong wanted to buy a fax machine to handle ad orders and billing. Mr. Page and Mr. Brin told him they wanted to see the orders before approving the purchase.

“That’s how unsure people were about internet advertising,” Mr. Armstrong recalled.

But the orders gradually picked up, becoming the cornerstone of the company’s booming business. An expansion of Google’s work force in New York followed.

In 2003, Craig Nevill-Manning, a Google computer scientist, wanted to set up an engineering and research outpost in New York. The company’s leaders didn’t have high hopes, assuming all the best software engineers were in Silicon Valley. But they told him he could go ahead if he could find “Google-worthy” talent in New York — and he did, hiring 25 people in the first year.

Corinna Cortes, a researcher at Bell Labs, was one of the early recruits. She joined Google to begin building a research arm in New York. Ms. Cortes lived in the West Village, had two young children and welcomed the opportunity to work on leading-edge computer science at Google and keep her city life. She enjoys theater and opera in Lincoln Center, restaurants in Greenwich Village and Soho and running trails along the Hudson River and in Central Park. She has completed the New York City Marathon 14 times and bikes to work.

“There was no chance I would go to Mountain View,” said Ms. Cortes, who now leads about 200 scientists for Google Research in New York. “I wasn’t going to live in the suburbs.”By 2006, Google, at that point a darling of Silicon Valley, was settling into the city in a big way, moving into a blocklong Art Deco building in Chelsea. It needed the space, as Google would steadily enlarge its New York work force, to 7,000 today, more than half of them technical staff. In December, the company announced it would spend $1 billion on more office space in downtown Manhattan.

Google’s relationship with the capital of the nation’s advertising business was cemented in 2007, when Google announced it would buy DoubleClick for $3.1 billion.

DoubleClick, an internet ad-serving, tracking and analysis company that started in New York in 1996, had good technology, but also close ties to brand advertisers, ad agencies and online publishers. At its peak in 2000, the company reached a stock market value of $12 billion, holding on after the dot-com crash.

In 2005, DoubleClick was taken over by a private equity firm for $1.1 billion, and two years later, with its fortunes improving, Google paid nearly three times as much.

“It was a true diamond in the ashes of the dot-com flameout,” said Mr. Armstrong, who left Google as a senior vice president in 2009 to become chief executive of AOL.

“When Google bought DoubleClick, it really took off,” said Randall Rothenberg, chief executive of the Interactive Advertising Bureau, a trade association. “That was an inflection point for the digital advertising business in New York.”

In early 2009, with the city economy reeling, a small team in the Bloomberg administration began an extensive analysis, code-named Game Changers. The team interviewed hundreds of executives, venture capitalists, urban experts and educators. It studied the technology-driven economic growth in Silicon Valley and in Israel’s start-up cluster in Haifa.

It concluded that New York needed more computer engineering expertise. The city was a world leader in finance, media, advertising, law and consulting. Why shouldn’t the technology for those industries be built here? The Bloomberg administration called its technology-promotion policy “applied sciences.”

“That was our mantra, what we thought of as the yeast for changing the economy,” said Robert Steel, the former deputy mayor for economic development. “And applied sciences would be the key to making the new digital world here instead of someplace else.”

The city pushed applied sciences experiments, including start-up incubators, networking events and training and internship programs, nearly all private-public partnerships. But the biggest single step in the city’s applied sciences campaign was the creation of a new graduate school focused on technology and entrepreneurial innovation.

Mr. Bloomberg and Mr. Steel ran a high-profile competition that included Columbia, New York University and Carnegie Mellon University. In the end, though, a combined bid by Cornell and the Technion-Israel Institute of Technology won out.

The Cornell Tech proposal fully embraced the Bloomberg administration’s priority of blending science and industry. Graduate students’ projects at local companies are a mainstay of the curriculum.

“In New York, people are driven by real-world problems that can be solved with technology,” said Daniel Huttenlocher, the dean of Cornell Tech, who has also worked in Silicon Valley and is an Amazon board member. “In Silicon Valley, the heritage is much more to build cool technology and then figure out how it can make money.”

In healthy tech hubs, start-ups spawn other start-ups. That has been the pattern in Silicon Valley since the early days of chip making — young entrepreneurial refugees from Shockley Semiconductor Laboratory would go on to found Fairchild Semiconductor and later Intel.

But in New York, the virtuous cycle of start-up reproduction has accelerated only in recent years. It took time, entrepreneurs and investors say, for the tech community in New York to build the success stories, human networks and self-confidence that inspire serial risk taking.

DoubleClick, once again, was a trailblazer as it became a training ground for New York entrepreneurs. The most prominent is Kevin Ryan, a former chief executive of DoubleClick. He became a founder of six companies, including two e-commerce companies, the Gilt Groupe and Zola; an online business news site, Business Insider; and a database company, MongoDB.

Mr. Ryan, the son of a manager at Caterpillar, was raised in the Midwest and in Europe, when his father was posted abroad. He majored in economics at Yale, got his M.B.A. at Insead in France, worked on Wall Street and helped develop the Dilbert website in 1995, as a manager at E. W. Scripps, a media company.

The next year, Mr. Ryan jumped into the emerging internet industry, joining DoubleClick as one of the company’s first dozen or so employees, initially as chief financial officer and later rising to chief executive. He left DoubleClick in 2005, two years before Google bought it.

“I came to New York because it was an international city,” Mr. Ryan said. “I stayed because I thought it was going to be a tech city as well.”

The latter took a while. Tech investors often suggested he would be better off starting businesses in Silicon Valley, especially when he and two other DoubleClick alumni, Dwight Merriman and Eliot Horowitz, founded MongoDB in 2008. MongoDB, a database maker, grew slowly at first, but it has proved to be a commercial and financial success. Its stock is trading around $100 a share, up from its initial price of $24 when it went public in October 2017. It is now worth more than $5 billion.

Embracing failure as a learning laboratory is another feature of dynamic start-up economies. Mr. Ryan saw that up close with the Gilt Groupe.

Gilt, an e-commerce site that offered luxury goods in online flash sales, raised a lot of money, grew quickly and then fell. In 2016, Gilt was sold to Hudson’s Bay, parent company of Saks Fifth Avenue, for $250 million, less than the venture funding Gilt raised.

We never figured out how to make a profitable business out of flash sales — no one has,” said Mr. Ryan, a founder of Gilt. Last year, Gilt was sold to Rue La La, an e-commerce site, for a fraction of the price Hudson’s Bay paid.

But in 2013, a group of Gilt alumni, including Mr. Ryan, took what they had learned and started Zola, a wedding-planning site. Its online gift registry and other services have been used by more than half a million couples, and the start-up raised $100 million last May.

Zola’s payroll has tripled in the last two years, to 155 people, and two-thirds of them are women. There are teams in operations, finance, marketing, merchandising and logistics at its offices in Lower Manhattan. Yet the largest single group, about a quarter of the total, is the engineering staff.

For Zola, New York offers access to the talent and expertise in the city’s large fashion, design and retail industries. Its co-founder and chief executive, Shan-Lyn Ma, a Stanford M.B.A. and former product manager at Yahoo, marvels at how much the tech scene has changed since she moved to the city a decade ago.

“The biggest thing is the sheer number of people and the amount of experience people have in tech now,” Ms. Ma said. “Now, you just step out onto the street and you hear tech product discussions all the time.”

When Maria Samuel graduated from Georgia Institute of Technology with a degree in industrial and systems engineering, she was recruited by Apple and Google. She had been coding since the ninth grade and had worked in seven programming languages. As an intern at NASA in Houston, she worked with a team planning Mars missions.

But Ms. Samuel accepted an offer from Goldman Sachs, joining the investment bank in 2015.

A product manager, she works with a team to develop software for market analysis, client communication and trading. She views financial markets as a window into industries, markets and behavior. “Every day, I’m constantly learning,” she said.

After the financial crisis, graduates with computing skills shunned Wall Street for Silicon Valley. But that is no longer the case, as the finance industry is attracting young talent and seasoned technologists. Last year, for example, JPMorgan Chase lured Apoorv Saxena, a senior A.I. product manager at Google, to lead the bank’s A.I. product development, and Manuela Veloso from Carnegie Mellon University to head an A.I. research team.

For Ms. Samuel, 25, the job was appealing, but so was the locale. New York is where many of her friends have come to start their careers. And Ms. Samuel, who sang in a choir and an a cappella group in college, describes herself as a “big Broadway geek.”

For most recent graduates, the financial meltdown a decade ago is a distant memory. Today, it is not Wall Street but the big tech companies, like Facebook and Google, that are under fire. Their business models, based on gathering consumer data and targeted ads, have put them at the center of global concerns about privacy and false news.

That is a recruiting opportunity these days for R. Martin Chavez, a senior partner at Goldman Sachs, who is also a computer scientist with a Ph.D. from Stanford. At recruiting events, his pitch is to say Google and Facebook have done “amazing things” and quickly add: “If you want to work on advertising, that’s where you should go. If you want to use math and software to solve hard problems for governments, corporations and other institutions, you should come to Goldman Sachs.”

As the New York tech sector grows, policymakers and executives hope to broaden its reach beyond Manhattan and the affluent portions of Brooklyn. Fred Wilson, an investor and venture capitalist in New York for more than three decades, saw a warning sign in the protests in Long Island City, Queens, over the news that Amazon had planned to move in.

“That’s partly from a sense that it’s not going to help them, and only drive up their costs,” Mr. Wilson said of the community. “To really be a success in New York, the benefits of the tech sector have to extend to every borough and every neighborhood.”

Deborah Estrin was the first non-Cornell computer scientist to join the Cornell Tech faculty in 2012. Ms. Estrin was at the University of California, Los Angeles, and not looking to move. But she read the Cornell Tech proposal, and its emphasis on applied technology resonated.

Ms. Estrin says that New York’s advantage is its concentration of people in other industries working on problems that require technology to solve.

“If you’re doing pure tech — a superfast chip or advanced systems software — Silicon Valley is still the place to be,” she said. “But when it comes to everything else, New York really has a chance to be the place to be.”