How is New York City different from other startup communities?
First, it’s an incredibly dense city, and its orders of magnitude are larger than other places, such as San Francisco. There are millions of people who live here, and we’re all right on top of each other. I think this makes it easier to connect and facilitate organic intersections, which creates a constant flow of knowledge and encourages innovation in a small space. It’s also a great boon when it comes to recruiting, particularly given the diversity of backgrounds in the city.
Second, New York has a lot of diverse vertical markets that are headquartered here, and people are actively thinking about how they can apply technology to reinvent those industries — from education and advertising, to healthcare and media, and commerce and finance. It’s a privilege for a startup to be able to build a company so close to such a large number of potential customers, partners and potential acquirers.
What do you believe is driving the growth of New York City’s tech and startup ecosystem?
In 2008, New York’s tech industry was probably a tenth the size of Silicon Valley. Now it’s over 30 percent of the size, and in the next five years it will probably be half. I think there are a few reinforcing elements that have spurred this growth.
Most tech ecosystems start with a few great companies that both train people in how to build successful startups and create enough wealth that can support the next generation of companies. NYC is no different. Some early examples include DoubleClick, Right Media, Shutterstock, Medidata, Gilt, Tumblr, Etsy and, more recently, WeWork, Vice, Blue Apron and MongoDB, among many others. As these companies grow in success, they spin out experienced employees looking for their next adventure, providing talent for the next wave of startups.
The next ingredient is capital. When we started FirstMark in 2008, there were very, very few early stage investors in NYC. Since then, we’ve seen an explosion of angels, micro-VCs and new venture funds, which have grown in size and scale to support nearly every phase of a company’s growth. In addition, we’ve seen the number of accelerators go from none in 2010, when we supported the birth of TechStars NYC as the city’s first, to well over 60 at last count. NYC’s growth has also attracted the attention of many California firms, which have now built out portfolios in the NYC ecosystem.
Over the last five-plus years, we’ve also seen companies like Google, Facebook, Yahoo, eBay, and newer ones like Slack build out their second largest sales and engineering offices here in NYC. This creates a deepening tech talent pool. On the government side, Mayor Bloomberg moved quickly in the last recession to establish programs that supported and encouraged entrepreneurship, acting as a bit of a lightning rod. And new education institutions like Cornell Tech have added to the strong academic leadership here.
I think the final spark for all of this was the 2009 recession, which transformed young people’s views about where they wanted to spend their careers. We’ve now entered a world where the majority of Harvard Business School graduates work at startups, instead of going into finance. Changing young people’s fundamental ambitions and where they apply their time and energy has to be one of the most profound shifts. All of these factors have cumulatively built upon one another to create the thriving tech landscape we see in New York today.
How has FirstMark differentiated itself as an investor within this ecosystem?
We wanted to change the way VC firms operate. We saw an opportunity to build a FirstMark family and impact our entrepreneurs by leveraging the power of that strong community. We wanted to operate as a data-driven firm that would “add value” in a way you could quantify — and on any given day, I can tell you exactly and specifically what we’ve done for any one of our entrepreneurs across talent, customers, expertise, business development, etc. To do this, we run ourselves like a best-in-class startup in terms of the systems and software we use. We run over 100 events a year designed to make our companies better, faster and more efficient. We’ve systematically built relationships with the largest consumers of technology software and found ways to efficiently connect them to our portfolio. We have launched and now operate some of the largest meetups in the country across themes like Big Data, Internet of Things (IoT), code, and design, which are nearly 30,000 active members strong and growing at 50 percent a year. This provides an amazing look into the talent available, which we love to stream into our companies. We tie all of this together with our own full-tech platform for the portfolio, offering a wide array of tools to help our entrepreneurs at all levels of their organizations.
FirstMark Capital has invested in startups across the spectrum, from software to hardware. What tech trends are you paying attention to at the moment?
One area in which we’re spending time is artificial intelligence. AI is really just a successor to the Big Data wave. It began with the creation of massive data sets a few years back. With such immense amounts of data available, all of a sudden, ideas that had been around for a long time, such as AI, became practical. We also are very excited about the coming worlds of 3D and VR. We think of these as a pretty profound re-platforming. It might start with something simple like ecommerce, where you might view a product in 3D or a virtual space before you decide to purchase, but there are so many other industries these technologies will transform. There’s also the continuing trend of connected devices. For example, we’ve made a number of IoT investments and continue to actively track the space, particularly technologies that emphasize the software and data layer on top of hardware. In addition, there are still many “legacy” industries that have been slower to adapt to technology, such as healthcare and education, which are now catching up. There are lots of different and really exciting areas for innovation on the horizon.
Lastly, you encounter companies and founders looking for investments all the time. What advice do you have for startup founders pitching firms like FirstMark?
There is no “silver bullet,” but there are some little things that I often tweet about. One obvious thing is to find a warm relationship to make an introduction. Venture firms have extensive social graphs and the best way to start momentum is to get someone we already know and respect to make an introduction. On the flip side, we occasionally see entrepreneurs “gamifying” the investment process and trying to shortcut the process. It’s hard to build trust and a long-term relationship in that kind of environment. I’ve been with some of our entrepreneurs longer than I’ve been married! So, focus on the long-term relationship and building an authentic relationship.