Friday, November 7, 2014

New York Tech Scene Hype

New York City is considered by many business enthusiasts to be the new mecca of technology start-ups. Techies are even calling it the Silicon Valley of the East, much to the chagrin of people who see more successful Boston and Seattle-based companies as proof that the Big Apple could never compete. Yet progressively more business-minded hopefuls are relocating to New York City each year. Is the resounding hype on this city's tech market going to produce fruitful business? Or will everyone escape to a more profitable area after a thousand more failed start-ups?

Let us examine the evidence surrounding the techie hype. Thus far, New York City has produced only one start-up company that has gone public with a value exceeding $1 billion. That particular company is Tumblr, a blogging website purchased by Yahoo in 2013 for approximately $1.1 billion.

Besides Tumblr, New York City shows no signs of other legitimately profitable tech start-ups, at least, none that have been venture-backed. Of course, there are a few other companies in the city such as AppNexus and Buzzfeed valued at more than $1 billion on paper, lifted up by certain investors and venture capitalists. But paper value can drop in an instant; the companies Foursquare and Fab are just two examples of this unfortunate fact.

When you take a look at the most recent exits worth $1 billion, it becomes clear that New York may still have a long way to go in matching the hype. An e-commerce company based in Boston, Wayfair, is raking in the dough; it went public on October 2 at a whopping $2.4 billion, an amount that demolishes Tumblr's achievements. Wayfair closed the day with more than $3 billion, a true testament to the effectiveness of start-ups in competing cities.

Another example of more valuable companies in other cities includes TripAdvisor, a company based in Newton, Massachusetts. It is publicly worth $12 billion and represents just one of the many successful companies based in tech-savvy Newton. If you need even more evidence, take a glance at Austin's company roster with the company RetailMeNot.

Many believe that New York City should instead be compared to Chicago, a smaller city in terms of tech start-ups. But even Groupon, a Chicago-based company with dwindling profits, has a value that quadruples Tumblr's selling price. Let us not forget about Atlanta, Georgia, which is also more logically compared to New York City. Even Atlanta is home to more publicly valuable companies with VMWare at $1.5 billion as just one example.

We are all rooting for New York City to catch up, but with the evidence contradicting the claims, it looks like the Big Apple has a lot of work to do if it wants a shot at being the real Silicon Valley of the East. It is undeniable that New York City is home to publishing empires and hundreds of extremely profitable businesses. However, can it live up to the hype of its tech start-ups? Or is the hype already over in the face of more successful start-ups in other cities?

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