New York City Should Be the Fast Rising Destination of Choice for International Startups

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Move over Silicon Valley and make a little more room at the table. New York is the world’s fastest rising startup hub and Silicon Alley is the logical home for thousands of international startups looking to set up shop in the United States and access the US market.

INNOVATION WAVE IN NYC

In 2013 alone, New York saw some of the largest IPOs and acquisitions of its history.  Tumblr, which Yahoo! acquired for over $1BN, Tremor Video, MakerBot Industries, and Liason combined for more than $2BN in exits for investors.Such startups, and their more early-stage admirees, represent a new wave of real innovation in New York.  MakerBot, for example, is the world’s leader in its space and Tumblr, before ending its independence, was at the vanguard of the intersection between new online media, content engagement, and social media enrichment tools.New York is also home to a growing cadre of hundreds of international startups, whose founders have logically, and correctly, recognized its unique position as an entry to the US and global marketplace.  To provide one particular example, Israel’s four largest IPOs and acquisitions of 2013, Waze, Wix, Intucell, and Prime Systems, which combined to return nearly $2BN to their investors, all expanded into the New York market before exiting.For its part, Israel also has over 50 companies listed on the NASDAQ exchange and several hundred early stage startups have moved into the Tri-State area. My own investment fund, INE Ventures, was just formed this year to work very specifically with this niche group of startups: early-stage Israeli companies looking for institutional backing and a strong business development and mentor network in order to access, and gain traction in, the US market.

STRATEGIC ADVANTAGES GIVE NY A LEG UP

“The best solution is often to find a true value-added, institutional partner who will back the company financially and assist with the logistical and expansion-related challenges.”

New York has key strategic advantages that underlie these positive developments.  Located on the East Coast, its time zones line up much better than Silicon Valley’s for Israeli and European companies.  Specifically, Israeli founders in NY have only a seven hour difference from their colleagues in Tel Aviv, as opposed to a much more onerous ten in the Valley, and British founders have a paltry five hour difference, as opposed to a far less manageable eight to California.  For founders with multinational teams, particularly when the CEO and business development/marketing director have relocated to New York but critical backend development members of the team remain in their home country, the ability to communicate during regular business hours is a critical aspect of company efficiency while expanding into the US market.New York is also different from the Valley in that it represents not just a haven for startups and innovation, but also a mature, robust B2B and consumer market in several key sectors that newly relocated international startups can expand into with relatively low scaling expenses.  For example, financial technology startups relocating to New York can quickly engage with NYC angel investors and VCs, who will in turn rapidly connect them to their business development contacts on Wall Street.  It’s rapid business development, with no travel added!

“The ability to communicate during regular business hours is a critical aspect of company efficiency while expanding into the US market.”

With Madison Avenue, Tumblr, and others right in the backyard, media is another obvious sector where New York is the clear market leader – both in the emerging entrepreneurial space and the mature market.  Less obviously, the Tri-State and East Coast are also home to a surprising number of mobile headquarters, from AT&T to Nextel, making mobile technology an underrated but attractive sector where New York provides a viable, mature B2B market for its arriving startups.

RELOCATING – WORTH IT, DESPITE THE CHALLENGES

Nonetheless, international relocation poses clear challenges, whether to New York or elsewhere in the US.  Relocating founders must first secure visas; ideally a long-term version that will allow them to stay for at least six months.  They must also look for housing, which is generally a challenge in Manhattan but is much easier for founders who make good use of NYC’s strong commuter train and bus network and settle in Queens, Long Island, Westchester, or Near New Jersey.  In many cases, they must also secure seed or second-stage financing to fuel expansion; since NYC is much more difficult place to truly take advantage of if a company has no cash in the bank to fuel the marketing and business development expenditures required for real expansion.Although some founders relocate on their own, or temporarily through an acceleration or incubation program, the best solution is often to find a true value-added, institutional partner who will back the company financially and assist with the logistical and expansion-related challenges the company will face, particularly during its first year in the city.New York City is the new haven for international startups.  Challenges exist, and can be daunting, but for those international startups looking to penetrate the US and global market, there is no better place to be than the Big Apple.