New York City’s Tech Sector & How Startups Become a Reality

By: Serach Nissim

New York City’s tech sector continues to be a leading industry.

As reported by Crain’s NY, about 620 first-time founders for tech sector startups in New York City were able to raise some $2.9 billion in 2022.  Admittedly, this is slightly lower than the 643 first-time founders who raised a total of$3.3 billion in 2021.  Still, this number has jumped significantly, whereas from 2018 to 2020, there was an annual average of 431 first-time founders who raised funds for New York startups, per data by Pitchbook.

Kevin Ryan, the founder of AlleyCorp, a venture capitalist who has financed and built several NY startups, said the industry is growing. “Every year for the last 15 years, it’s been getting bigger,” he said.  Ryan explained that this is because from each successful company that trains a group of future leaders, “maybe 5%,” of these employees leave to start their own successful companies.  This pattern, known as a virtuous cycle, repeats itself, resulting in new founders and new companies each year, adding to and compounding the strength of the sector.

Leaders, founders and investors for startups can rise in the ranks at the company to fill a leadership position, or they can learn the ropes, being trained at another medium or large company and then make their move to create their own new entity.  “Google, Amazon—those are great training grounds for entrepreneurs,” said Julie Samuels, executive director of industry group Tech:NYC.

The big number of employees that these companies have in New York has done a lot to help the sector’s growth here.  Google and Meta haveroughly 15,000 total employees in NYC alone, as opposed to a small local startup which might employ hundreds.   It’s having these giants in NY which really adds to the sector, and attracts talent, by propelling the total number of tech employees and thereby decreasing the risk of entering the industry, Samuels told Crain’s.

“As the larger tech companies really doubled down on New York, that created a sense of security that you could come here and build a tech career that allowed you to work somewhere large, or small, or be a founder of your own startup,” Samuels added.  Also, big companies like Amazon have invaluable methodical training and mentorship systems, and to top it off, there are networks that enable the tech employees to stay in touch. One such example isXoogler,  which helps bring former Google members together.

Though the big or medium sized companies that do the training may lose out when employees cut loose to start their own journey, it’s become a standard practice, and leads to overall growth.  “There is a sense of pride in being one of those companies that churns out the next generation of incredible founders,” said Emma Balin, who runs a fellowship program for founders at Primary VC.  Balin said that newer companies usually work harder to keep their talent, but “we do see Primary portfolio companies valued in the billion-dollar-plus range tend to encourage a culture of entrepreneurialism and celebrate those who set out on the journey.”

As per Crain’s, NY’s tech sector is topped only by the Bay Area.  In NYC, there were some 348,000 tech employees working at about 25,000 traditional tech companies and tech teams as of 2020, per a report on tech talent by CBRE.  The San Francisco Bay Area boasts roughly 7 percent more employees, at 25 percent more companies, and more than double the amount of money poured in by investors.  To its credit, New York has more tech workers from minority backgrounds.