Concentrated in a narrow band running through the heart of midtown and downtown Manhattan, a robust new industry has been developing in the wake of the financial crisis.
Colloquially dubbed the “Silicon Alley,” an ecosystem of about 1000 (mostly) tech startups has been gobbling up capital that, prior to 2007, was largely locked up in the financial industry, according to an article by angel investor and tech entrepreneur Paul Grossinger.
To illustrate the scale of this reallocation of resources, consider that the volume of venture capital investment in this city has grown an astonishing 160 percent in the past decade, vastly outpacing the Silicon Valley’s 30 percent growth and positioning New York as the second largest site of venture investment in the country. In 2011 alone, investors injected $3.1billion into the city’s economy.
While the Great Recession continues to leave most of the city’s economy reeling (the unemployment rate is around 8.4 percent), the startup scene has been a rapid generator of jobs. Between 2005 and 2010, this ecosystem has helped boost IT jobs by 30 percent, to around 90,000. For perspective, this rate is ten times that of the broader New York City labor market.
Another window into job growth in this field is the app economy. Nationwide, apps have created 450,000 jobs since 2007. About 10 percent of those jobs have been located here in New York City. Importantly, jobs in apps or IT pay well. An entry-level software programmer, for example, can make as much as $75,000 annually.
Luckily, New Yorkers need not be tech savvy to find roles in this new economy. The digital products of the startup industry are designed to serve a wide variety of industries, creating demand for staff with expertise in fields including social media, e-commerce, digital advertising, education, healthcare and finance.
Despite the industry’s success, New York startups are shackled by a number of fundamental problems, according to a report by the Office of the Manhattan Borough President. The first, and perhaps least unsurprising, is a general talent shortage among technical roles. Another problem common among major cities is an excess of bureaucratic red tape ill equipped to the needs of nimble startup firms.
A bit more unsettling is that Manhattan is hamstrung by “appallingly slow, spotty internet access,” according to the report. The fourth challenge is that the city’s infrastructure hasn’t adapted well to the gradual shifts in the city’s primary job centers (such as the growth of Brooklyn). Finally, as every New Yorker knows, “the rent is too damn high.”
The Bloomberg administration has already made moves to help alleviate some of these problems, including appointing the city’s first chief digital officer, providing financial support for tech incubators, creating the New York City Entrepreneurial Fund, and launching the Tech Apprenticeship Program at CUNY to train new talent, according to the report. Private institutions have also kicked in, with Cornell’s development a tech campus on Roosevelt Island and NYU’s creation of the Center for Urban Science and Progress.
While it’s unclear exactly how the industry will change and develop in the near future, one thing is relatively certain, said NYU entrepreneurship professor Luke Williams in a Q&A. “The ecosystem is going to continue to grow. We have barely scratched the surface.”
Startup Studio will be tracking this development every step of the way.