Outlook for Startups in NYC

Last night I attended another great meeting put together by the folks at the NY Software Industry Association (NYSIA). I'm a total new media geek and software is what it's all about, so I've gone to a few of their events and I usually come out with good contacts and new ideas. It was held was the posh Park Avenue offices of JP Morgan/Chase, who generously donated the space and I believe were also responsible for the yummy sandwiches and soft drinks. After a bit of nibbling and networking we all sat down inside a comfy auditorium (left) and Howard Greenstein, the evening's host, gave the introduction. The four panelists participating in the discussion (below right) were all venture capitalists and angel investors, and the topic of the evening was "Running a Tech Business in NY: Challenges & Payoffs".

When Howard asked about the downsides of NYC, Jason Olim, founder of CDNow broke the ice and said that finding entrepreneurs to co-venture with is hard in the city. "New York doesn't have the startup optimism you see elsewhere. The "gold rush" mentality that allows people to walk away from great salaries to join startups isn't present here. There's an optimism deficit," he added.

He also pointed out that NY is all about media, advertising, and financial services, but there's no real tech culture. "There's no MIT or big name tech school here. Unless that happens you won't see it."

Roger Krakoff of Boston and California-based venture capital firm Sigma Partners thinks there is a lack of support networks here so lawyers end up taking a bigger piece of the pie.

Hank Williams, Founder and CEO, Kloudshare, remarked that if you're willing to go across the Hudson, the number of engineers expands substantially. For many tech startups the question is, is it worth it to set up a development office outside of NYC? Taking it a bit further, Jeffrey Stewart, Founder of Mimeo.com said that he has recruited people from Ohio and other places, including outside the US, like China and Argentina.

On the plus side, Roger added that there is a growing number of entrepreneurs supporting the community now and that ideas coming out of New York are amazing. "If you're going to be in the marketing business you need to be in New York."

The focus then moved to "hot" industries. For Roger it depends on the time frame. He likes green technology, though that may take longer than 6 - 12 months to take hold. Other areas he sees becoming popular are things having to do with re-inventing data centers, like virtualization and green data centers. Precision marketing and social media were also on his list. Hank thinks interdisciplinary stuff will start picking up steam, like taking software to non-digital spaces. Jeffery believes that there is an overcapacity of technology out there that hasn't been product-ized, so he's keen on companies that can do this.

Then came the question on everyone's mind: how will an economic slowdown affect new companies? The panel seemed very upbeat about the prospects. Jason indicated that if this environment creates job seekers it's great for startups. If you're in a high growth business, a bad economy will help you gather your resources, according to him. Hank explained that when you're a small company going from $0 to $500K, macro economic trends won't affect you, except if you're raising money. For Roger the question is, how do you create the highest demand for your product? He sees ad markets getting bumpy during these hard times. Jeffrey thinks a slowdown is the best time to start a business.

I guess that's good news for those of us starting out! Have you been affected by the economic downturn? How are you coping? Please send in your thoughts!