In the USA, New York’s ‘Silicon Alley’ often gets compared to Silicon Valley in California, so it was interesting to see a different comparison being made as part of a panel debate held in London and New York simultaneously this month (December 2012). The discussion between panellists from New York and London, through video conference in a Google hangout, attempted to tease out from government officials, VCs and company founders with experience of both cities what they thought were similarities and differences between these two tech clusters: ‘Silicon Alley’ (New York) vs ‘Tech City’ (London).
Through the course of the debate, some key themes emerged:
– Negative effect of poor immigration policy in both countries
– Advantage of proximity of talent capital and ideas, especially in New York
– Ability to celebrate success being a key factor in the USA
– Poor perception of failure in the UK (partly due to bankruptcy laws and the stigma of failure)
– Flexibility of at-will employment law being helpful to startups in the USA
– Customers attitude to awarding contracts to startups being better in the USA
Most of these themes will come as no surprise to anyone who’s studied Silicon Valley in California and why it is so successful at creating innovation-based economic wealth.
In this debate, it turned out that the New York advantages over London are similar to those that Silicon Valley has, and hence this gives the Silicon Alley significant advantage over Tech City just because of the cultural gap between the US and the UK. So New York wins by default because of the fact that it shares cultural and attitudinal behaviour with Silicon Valley.
Both the Tech City area and Silicon Alley share some factors in common – such as the closeness of people, ideas and money, and that they are major global metro cities (making it easier to attract talent), and that both have real issues because of poor immigration policies. One area we have argued and many others have commented about the success of Silicon Valley in California is the proximity of people, ideas and money (and customers) – see my article, ‘Learning from Silicon Valley’.
Immigration was the hot issue of contention on both sides of the ‘pond’ – with the panellists in New York and London saying this was a key challenge that both shared and that government policy and rhetoric didn’t help in getting the right talent. Thatcher Bell of DFJ Gotham Ventures quoted the New York Mayor’s infamous quote about the US committing national suicide as a result of not being able to hire skilled immigrants. Azeem Azhar, founder and CEO of PeerIndex, echoed this view about the UK’s immigration system, saying, “A transparent labour market is needed.”
Ben Southworth of the Tech City Investment Organization said the key issue in the UK is around attitude and the inability in the British culture to celebrate success. He added that transparency and openness was needed, and an element of honesty and trust; class mentality in the UK didn’t help the entrepreneur either.
New York on the other hand has a lack of sufficient engineering talent, according to Euan Robertson of the NYC Economic Development Corporation. He commented, “Entrepreneurs and VCs can’t hire engineering talent fast enough.” Partly to address this, the city’s university, NYU, has established a Center for Urban Science and Progress, which Robertson said would double the number of full time engineering graduates.
This shortage of talent combined with the USA’s appreciation of engineering talent raise the engineers salary significantly – one panellist commented that an engineer with seven years Ruby experience in New York could earn US$200k – significantly more than in London.
Faster pace of business in New York
The pace of business was suggested as being a key factor that favoured New York over London. Azhar said that although London is a great place at this moment in time, with more talent and capital than ever before, the pace of business can be incredibly slow in London compared to New York. “It can take one week to do a deal in New York – and in London it can take three and a half months just to get into someone’s diary!” Neal Capel, founder of Saithru in New York added, “It’s easy in New York to get connected into people’s networks,” comparing it to London.
Access to capital was also quoted as being easier in New York than London – Nic Brisbourne of DFJ Esprit said that New York’s proximity to Silicon Valley and its money helps New York’s startups accelerate faster than in London.
Getting the right talent can also be a key factor in a startup’s success, and if you make a ‘poor hire’ then you need the flexibility to make changes. Capel said the at-will employment law in New York gives startups that flexibility – in contrast to London, where it would be difficult to change your mind easily if you found someone wasn’t right for your business.
The other key discussion point was about large companies’ attitudes to awarding contracts to young startups. Azhar said that in London, customers don’t have the right appetite or language to work with early stage firms, whereas ‘that’s deeply baked in to the system in the USA’.
The debate was organized by VentureOutNY, a non-profit supporting the technology community in New York. Contributing to the debate were government agency representatives Ben Southworth, (Tech City) and Euan Robertson (New York’s economic development corporation) and venture capitalists Nic Brisbourne (DFJ Esprit) and Thatcher Bell (DFJ Gotham Ventures), as well as Azeem Azhar (PeerIndex), Neil Capel (Saithru), and David Hochman (representing the business incubator association from New York State).
The main area that both the New York and London panellists found in common was that the key industry sectors driving the economy of both cities: the banking and finance sector, advertising and marketing
It’s not really about New York vs London: it was more like USA vs UK
What is clear from the issues raised by the panellists is that while the intention was to debate New York versus London, the issues were broader and really focused on attitudes in the USA versus the UK and how the UK isn’t helped by its deeply ingrained cultural attitudes to startups and entrepreneurs – especially in the high-growth digital technology sectors that New York and London represent. But what was also clear from the debate is that London is changing, and it is a good time to be a startup in London, or for that matter in the UK.
From a global perspective, the focus by governments on creating and nurturing their start-up ecosystems is becoming common – especially as many governments see technology-based innovation as the way to create greater economic wealth in otherwise troubled economies.
Circling back to the debate on New York versus London, one can’t escape from the fact that American entrepreneurs tend to have greater ambition for their startups and therefore have a slight edge in their startup ecosystems compared to the UK. But one thing is for sure: there are now more opportunities for London to plug into New York’s opportunities in terms of both investors and customers who are more favourable to startups than in their own home market. The ability to collaborate across borders using cloud based tools also makes this much easier for London.