Where are we now, New York?
Bracing for a tech bubble bursting? Blooming into maturity as a tech hub? Too busy working on code in the lobby of the Ace Hotel to really care?
There are different views on where New York fits in the grander innovation landscape, from wannabe to the toast of the East Coast. One thing is clear: the activity in the city’s tech scene has drawn the attention of Wall Streeters.
On Monday evening at Viacom’s building in Times Square, folks from the Partnership for New York City and New York magazine brought together a panel of people who have grown tech companies in the city, alongside some prominent names from the financial scene.
On the panel were Kevin Ryan, chair of Gilt, Business Insider, MongoDB, and Zola; Jon Oringer, CEO and founder of Shutterstock; Chad Dickerson, CEO of Etsy; Robert Greifeld, CEO of the Nasdaq OMX Group; and Goldman Sachs COO and President Gary Cohn. New York contributing editor Annie Lowrey moderated.
Ryan, who was in the startup scene through the last boom and bust, said some of the epicenters for innovation have changed with New York as the top hub for online, e-commerce, and media companies. “Has New York surpassed San Francisco and the Bay Area? No, but it’s the unquestioned Number Two in this country and growing very quickly,” he said.
He pointed out that prominent online media companies such as the Huffington Post, Gawker, BuzzFeed, and his own Business Insider can all be found here. “We own that sector and will continue to own big sectors, or have dominance in [areas] such as fashion and commerce,” Ryan said.
There is a second generation of very technical companies in New York, he said, which are still behind San Francisco in enterprise but are growing. The momentum in the local tech scene, though, has led to a shortage of local skilled professionals, from product managers to engineers. Companies are hiring people abroad, Ryan said, because they cannot find the tech-talent staff they need here. “Fewer people graduated with a degree in computer science two years ago than 10 years ago in the United States,” he said. “That’s crazy.”
Many more undergrads are studying computer science these days, Oringer said, which eventually may deepen the talent pool here—but it will still take time. “Over the next 10 years, we’re going to see a lot more people that are participating in tech,” he said.
Time might not be on the tech scene’s side, if rumblings and concerns about a bubble bursting are to be believed.
Greifeld said there are differences between the current market and the dot-com bubble of the late 1990s, which saw tech companies sporting valuation multiples two to three times higher than what was available on the broader market. The valuation multiples tech companies see today, he said, have more parity with the rest of the overall market. So does that equal a bubble?
“By the numerical analysis, the answer is no,” Greifeld said. “Obviously there can be pockets in the market that can have bubble characteristics to them.”
Cohn echoed the differences between the last tech bubble, when it just took adding .com to a company name to create buzz, and the current innovation scene. “Today when you look at companies we’re talking about that are bubble-ish, they’re real companies,” he said. “We buy their products, and can’t imagine our lives without their products.”
In the case of Etsy, which went public in the spring, Dickerson said the company had solidified its footing before taking the plunge into deeper funding waters. “By the time we went public, we had a proven business model, very healthy business and ten years of track record,” he said.
Ryan went so far as to proclaim there is zero chance of there being a bubble, which he said is not the same thing as saying a market is overvalued. “A bubble is when 80 percent of the value of an entire sector goes away,” he said. “You look at the numbers today, and there is no chance of that happening.”
Some of the bubble fears may stem from worries that once-promising companies are not making good on their prospects. On Tuesday, New York-based Quirky filed for bankruptcy and planned to sell off all of its assets.
Depending on the industry, however, the cycle of development and scaling up may take longer. There is a renaissance happening in biotech, Greifeld said, with a couple hundred companies going public in the last three or four years. Many biotech companies are pre-revenue, and he said there tends to be a gestation period of 12 years from drug concept to regulatory approval.
Even then, a drug concept might not work, but he did not equate this resurgence of biotech as bubble activity. “It’s the natural evolution of things, and science is tricky,” Greifeld said.
Some innovative companies are not going public, though, or might do so later compared with prior years, which he said is a good thing. “To be public, you really want to have a fully baked business model,” Greifeld said. “If you’re not ready to stand up to the scrutiny, it will be a bumpy road.”
