LinkedIn Report Says New York City Is the World’s Tech Capital. Here’s Why That’s Totally Wrong
New York City lags in publicly traded technology companies, top tech universities, and venture capital.
PHOTO CREDIT: Getty Images
These days, technology companies like Alphabet, Amazon, Facebook, Microsoft, and Netflix top the list of the world's largest, most valuable and fastest-growing businesses.
So it stands to reason that the regions that host these tech companies would be at the top of the list of startup cities -- especially if such tech giants help to spur new startups by providing them with capital and talent. As I wrote in my book Startup Cities, these are pillar companies and they constitute an essential element -- among five others -- in a region's startup ecosystem. I call those five elements the "Startup Common."
The Big Apple Lacks Technology Pillar Companies
Can you think of any technology pillar companies headquartered in New York City? I can't.
A Newsday report on the top 100 Manhattan-based public companies reveals that Altaba (an investment company containing the Alibaba holdings of what used to be Yahoo) is the most valuable tech company on the list -- ranked 10th.
That's why a report on LinkedIn claiming that New York City is the globe's top startup region struck me as ridiculous. As LinkedIn wrote, "New York City is ranked the No. 1 tech city in the world in a survey by a UK-based real estate firm Savills, beating out San Francisco. The survey measured things like VC investment, talent pools and being a target for tech hiring." Savills grouped its index into six categories: business environment, tech environment, city buzz and wellness, talent pool, real estate costs, and mobility.
Not only does New York City lack pillar companies -- it's weaker than regions like Silicon Valley and Boston when it comes to other elements of the Startup Common, which include universities, investment capital, human capital, mentor networks, and startup-friendly values.
Two of the more measurable Startup Common elements -- universities and venture capital investment -- indicate that New York City is far from the top tech city.
The Big Apple Does Not Have The Top Technology Universities
When it comes to technology universities, Palo Alto and Cambridge are way ahead of Manhattan.
For example, a study by Stanford associate professor Chuck Eesley found that Stanford alumni create nearly $3 trillion in economic impact each year and alumni-founded companies have created 5.4 million jobs. 105,000 MIT alumni surveyed by Eesley produced 25,800 companies, that generated 3.3 million jobs over time and $2 trillion in annual revenue.
New York City's leading university, Columbia University, is far less impressive. A 2017 study by Columbia noted that "more than 145 startup companies have emerged from technology based on research at Columbia since 2006. Columbia startups in and around NYC include companies such as Schrodinger, Kallyope, Applied Therapeutics, Vidrovr, Epibone, Lumiode, and Sapience." One of these companies, Applied Therapeutics, is exploring a 2019 IPO. The rest remain privately held with unclear prospects for an IPO or acquisition.
New York University is somewhat more important for the city's entrepreneurial ecosystem. A study of the economic impact of NYU listed 27 companies founded by NYU alumni "which collectively employ 3,500 people in New York City." One of the companies on the list, Tap Commerce, was acquired by Twitter in 2014 for $100 million, according to the study.
New York Lags Way Behind Silicon Valley In Venture Capital
When it comes to venture capital, the San Francisco region dominates, receiving about $12 billion worth of the venture capital invested in the fourth quarter of 2018, according to PWC/MoneyTree. New England ($2.4 billion), and New York City (about $2 billion) lag far behind.
The Newsday lists reveals the obvious; New York City is a leading headquarters for financial services, pharmaceuticals, and media companies. But calling Manhattan the world's leading tech city doesn't stand up to scrutiny.