How did New York City create one of the world's largest and most vibrant urban tech innovation ecosystems?

As part of our research of urban innovation ecosystems, our team has been working in New York City to identify successful policies to develop sustainable tech innovation ecosystems in cities. 

New York can seem a very far-away example to many cities  — after all, it is one on the largest cities of the world, has a high per-capita GDP and is very well-connected internationally, making it easier to attract talent. However, when New York began developing a tech startup ecosystem, it faced similar problems to any other city: there was not enough critical mass or community to form the ecosystem, talent was not adequate and, believe it or not, there was no financing (seed capital) for investment in tech entrepreneurs. The policies the city subsequently applied, which focused on creating bottom-up organic communities to sustain and grow the ecosystem, have succeeded. 

Today, New York hosts one of the largest and most vibrant tech startup ecosystems in the world. In this blog post, we summarize the case of New York and the lessons we have been finding, which is part of a paper I am working on. In our research for urban innovation ecosystems, we are doing a deeper analysis of the policies applied in different cities, and we will continue providing findings.  

Presentation: Tech Innovation Ecosystems, The Case of New York
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New York City: the creation of a sustainable and vibrant tech innovation ecosystem
New York City has experienced one of the world's largest-scale developments of a technology-based innovation ecosystem. From 2006 — when the technology-led ecosystem was almost anecdotic in the city — to 2013, the city has become the second-largest technology-based innovation ecosystem in the United States, with almost US$2.5 billion of venture capital (VC) investment. The New York ecosystem grew by 3.5 times in terms of VC investments in start-ups, and almost tripled the number of exits (cashing out investments) above US$0.5 billion. This also has significant implications for job creation: New York's technology ecosystem has generated more than half a million jobs, 250,000 of which are direct jobs.

The surge of New York City’s tech innovation ecosystem is not random; it has been the result of the active support of City Hall, with targeted strategy and policy actions. New York consciously followed this strategy to create new sources of income and competitiveness at the time the 2007-08 financial crisis occurred. Despite the size and global significance of New York, the challenges faced by the city to develop a technology-based innovation ecosystem were very similar to those facing many other cities, including:
 

• Lack of technology-specialized talent;
• Insufficient sources of seed capital for start-ups;
• Lack of physical space for entrepreneurs; and
• ​A limited and uncoordinated community of tech-led innovators and entrepreneurs.

New York addressed these challenges through a strategic program with targeted policies, including:

• Promotion of collaborator spaces linked to mentor networks and incubators;
• Fostering entrepreneurial fund to attract VCs into New York start-ups;
• Attracting engineering schools to develop programs in the city and providing basic skills training and access to open hardware tools in public spaces (for example, libraries); and
• Energizing the community through competitions and challenges (based on city problems).

​This last strategy is accomplished by opening data, developing mentorship networks for tech entrepreneurs and promotion of the tech community by the city, including awareness campaigns, support of high-ranking city officials and public awards. These actions were conducted in partnership with the community and private sector, which created incentives. The focus on community development, collaboration spaces and mentorship networks proved to be a success, attracting a community that is self-sustainable and continues to grow.

The success in developing a sustainable technology-led innovation ecosystem presents lessons for cities around the world, in both developed and developing countries. As its ecosystem grew, New York also actively engaged poor neighborhoods through training and integration into new employment opportunities generated by the ecosystem. Almost half of the jobs generated in the New York tech ecosystem do not require a bachelor’s degree. Pilot initiatives targeting poor and unskilled population from neighborhoods, such as Coalition for Queens, confirm that rapid skills training with mentorship results in direct employability. Furthermore, almost a quarter of New York tech start-up founders do not have any technical background, and most of these start-ups focus on non-tech sectors, introducing technology-driven innovation for existing industries and businesses.

New York has been able to develop one of the largest tech-innovation ecosystems with limited tech talent, which is a constraint many cities face.

New York is not the only city applying these policies and support. Other cities — including Amsterdam, Barcelona, Helsinki and London, to name a few — are also actively supporting the growth and sustainability of their innovation ecosystems with similar policies and areas of focus targeted to their local needs.

Part of this findings are based on our research through interviews.  We would like to thank Dmytro Pokhylko, Director, Vice President, New York City Economic Development Corporation and Rachel Haot, former Chief Digital Officer, New York City, for their insights during our interviews of the research on urban innovation ecosystems.