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East vs. West: Which is best for small tech startups?

April 6, 2012

Small technology businesses are increasingly choosing New York City’s “Silicon Alley” over California’s Silicon Valley.

A fierce debate has raged over the blogosphere about which is the best place to set up a tech business: the Bay area or the Big Apple.

The likes of Tumblr, Foursquare and Fab chose to launch in the Big Apple, and dozens of other start-up small businesses are doing the same.

Why? Partly it seems because giants like Apple, Facebook and Google cast a very long shadow across the Bay Area from which ambitious tech entrepreneurs struggle to escape. But New York’s social and business diversity are also a major attraction.

Co-founder and CEO of SpeakerText, Matt Mireles, suggests there are  two major drawbacks cited by west coasters to starting up in NYC: 1)  it’s tough to raise capital and 2) it’s hard to find talent. It lacks angel investors, it’s argued. There are plenty of ex-Wall Street bankers who fancy themselves as VCs, but few who’ve actually set up and sold their own tech businesses and can appreciate startup tech entrepreneurs or pass on pearls of wisdom to ambitious would-be Zuckerbergs.

But the number of tech incubators in New York’s Silicon Alley – like General Assembly and Founders Collective – is increasing, while the rising number of homegrown success stories (from DoubleClick to Gilt Groupe) means there’s a growing pool of existing talent in New York and inspirational founders like Dennis Crowley or Chris Dixon to learn from.
As for talent, there’s never been a lack of sharp young brains in New York, just a lack of those willing to work for peanuts and share options for a tech start-up when they could walk into a bank or hedge fund and earn gazillions straight away. But since the financial crash, that’s all changed.

The recent announcement of an enormous new technology campus to be built on Roosevelt Island will also change the game. It will pump out computer science MA and PhD graduates as well as host entrepreneurs-in-residence and provide legal support for startups.  The school will also establish a $150 million fund devoted to financing New York City startups.

The overall buzz in New York is a big draw, too. The Bay area has become “socially dead,” says Kelly Sutton, a NY-based tech entrepreneur and blogger. The problem is that San Francisco has become a company town for the technology business, whereas, in New York, tech entrepreneurs rub shoulders with people in finance, retail and the media, he said. That has an impact on their start-up ideas. Products are much closer to the pavement from their start and are solutions to real-world problems – “not some social network plaything,” he claims.

But the fact that Valley titans, such as Facebook, Skype, and Twitter, have set up operations in New York is perhaps the biggest proof that Silicon Alley has come of age. It shows there’s more than big talk coming out of the Big Apple.

As a  leading insurer of tech startups, Hiscox has plenty of clients on both coasts. And with offices in both San Francisco and New York, you can rest assured that we’re ready to help you, no matter where you choose to locate your small business.