Remarks

New York’s Silicon Alley Is (Still) No Match for Silicon Valley

Numbers don't lie: West beats East, although New York is coming along nicely.

Wednesday, Sept. 13, is a sweet day for New York City’s tech community. It’s the official opening of Cornell Tech, a new graduate school for technology on New York’s Roosevelt Island. The ceremony will culminate a dream of former New York Mayor Michael Bloomberg, who in 2011 invited the world’s top universities to bid to build a new campus on city property. The winner was a consortium of Cornell University in Ithaca, N.Y., and Technion-Israel Institute of Technology in Haifa, Israel.

To get the disclaimers out of the way, I’m a graduate of Cornell, I have friends at the Technion, and I work for Michael Bloomberg. But even if none of that were true, I would still be impressed by the spanking new, environmentally friendly campus, which sits on the former site of a city hospital on the southern end of Roosevelt Island, a skinny piece of land in the East River separating Manhattan from Queens. The school will offer master’s degrees and some doctorates in fields such as computer science and electrical engineering. Backers are hoping it will be a springboard for hundreds of tech startups that will change the world and, not incidentally, generate jobs and tax revenue for New York. (Cornell and Technion beat Stanford University for the opportunity to build the new school.)

It would be easy to get carried away and assert that New York’s Silicon Alley is going to kick Silicon Valley’s butt. Some people kind of did that when the winning bid was announced. “New York City’s goal of becoming the global leader in technological innovation is now within sight," then-Mayor Bloomberg said in a press release at the time. "No other city is poised to lead in the high-tech economy of the future like New York City," Senator Kirsten Gillibrand, the New York Democrat, chimed in.

It could happen some day. But not soon. I looked up how metro New York is faring vs. a combination of metro San Francisco and metro San Jose in seven industries that the Federal Reserve Bank of New York has identified as constituting “tech.” They are computer manufacturing; electronic shopping; software publishing; data processing, hosting, and related services; internet publishing, broadcasting, and web search; computer systems design and related services; and scientific research and development services. I downloaded the data from the Quarterly Census of Employment and Wages, here.

The two California metro areas had around 365,000 jobs in those seven sectors as of late last year, vs. 280,000 for metro New York. The Californians were way ahead in computer manufacturing and software publishing, more than offsetting the New Yorkers’ edge in computer systems design and related services and scientific R&D services. And that’s in spite of New York having a much bigger population.

In the second quarter of 2017, San Francisco venture-backed companies raised $4.1 billion  and Silicon Valley companies raised $3.6 billion in a combined 342 deals, while New York venture-backed companies raised $2.8 billion in 153 deals, according to the MoneyTree Report by PricewaterhouseCoopers and New York-based CB Insights, a tech data analytics company.

A big deficit for New York is the lack of a hugely successful homegrown company that has gone public, minting millionaires and billionaires who use their wealth to develop more tech startups. New York’s successful startups are on the scale of Etsy, Trello, and Tumblr. “The PayPal, Google, Facebook mafias of the Valley—there is not a similar thing here,” says Anand Sanwal, chief executive officer and co-founder of New York-based CB Insights.

In the latest issue of Bloomberg Businessweek, a huge diagram (sorry, print edition only) compares about 300 metro areas to San Jose and San Francisco in terms of both positive characteristics, such as having lots of tech-company headquarters and a technically trained workforce, and negative ones, like high home prices and long commutes. New York is right up there with San Francisco on the negative traits but only good, not great, on the positive ones—roughly tied with Boston and Seattle. 

That said, New York has come up. It’s now a solid, if distant, No. 2 in the amount of venture capital raised by local companies, surpassing longtime No. 2, Boston, says Sanwal. As tech permeates every corner of the economy, New York’s strengths in finance, media, and medicine will make it a magnet for more sectoral tech investments. And now that Cornell Tech is up and running on Roosevelt Island, New York is really living up to its moniker, Silicon Alley. 

    Peter Coy
    Bloomberg Businessweek Columnist
    Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues. He also holds the position of senior writer. Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff. He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.
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