Tuesday, May 18, 2010

Talent Migration: Entrepreneurial New York City

Admittedly, I had no idea that New York City is struggling to make its mark in the world of start-ups. Over the last few years, I keep running into articles touting the meteoric rise of entrepreneurship in America's alpha metro. You might appreciate a more balanced review of the scene there, particularly the bit about talent:

Perhaps even more difficult for startups than finding helpful investors is attracting and retaining talented employees. New York has the largest consolidated workforce in the country, yet, like any other city, has challenges matching candidates with companies that can fully leverage employees’ skills. Also, Silicon Valley has long been a draw for the best engineering talent because that is where the startups were. However, as Fred Wilson of Union Square Ventures likes to half-joke, “nobody graduating in the top of his or her class from MIT, Carnegie Mellon, or Columbia actually wants to move into the California suburbs at age 22, buy a car, and commute every day to a nondescript office park. These kids would much rather enjoy the New York lifestyle of living in Williamsburg and hopping on the subway to code in an airy loft/office in SoHo.” As a result, the tide of this “westward migration” of technical talent is starting to turn due in large part to changing practices at New York’s schools as well as altered attitudes about the financial services sector.

Workforce challenges and New York City is a strange pairing to see in print. The implication is that Columbia graduates are heading to Silicon Valley (and other tech hot spots) instead of sticking around Manhattan. The drain of talent has discouraged venture capital. Premium investments opportunities are elsewhere.

That geography is changing. Instead of talent coming to the money, the money is starting to chase the talent. Richard Florida has been touting this phenomenon for quite some time. But we are just beginning to figure out what that might mean for the future.

Spinning all of this from a Pittsburgh perspective, I've noticed a strong connection between budding entrepreneurs from CMU and New York City. The two start-up markets are evolving in parallel. I think that locally produced talent will stay in the Northeast with increasing frequency as the opportunities become more apparent. The regional churn should be viewed as a win for all cities.

More importantly, amenities-rich Pittsburgh can compete with the gravity of Silicon Valley. Graduates from MIT and Columbia might prefer Rust Belt Chic to nondescript (and expensive) Californian suburb. Pittsburgh is the cheap alternative to New York City. Perhaps venture capital is already on the scent.

4 comments:

Burgher Jon said...

The NYC Startup scene is something I cover frequently over on my blog (probably most notably in this post. There's a lot we can learn from NYC's efforts and though we decidedly trail them, it's a more useful comparison than silicon valley. They face the same problem as we do, that is becoming a hot-bed of entrepreneurship AFTER another place (the valley) is already THE hot-bed of entrepreneurial activity.

nbguzna said...

Haven't you heard? SF is the new SV. The Union Square guys are just talking their book.

Steve said...

More importantly, amenities-rich Pittsburgh can compete with the gravity of Silicon Valley. Graduates from MIT and Columbia might prefer Rust Belt Chic to nondescript (and expensive) Californian suburb. Pittsburgh is the cheap alternative to New York City.

I agree with this. I'm not familiar with how NYC startups work but having worked in and been around Boston/MIT startups it doesn't lead to being in urban enviornments. The startups looking for cheap office space don't end up in Cambridge (where MIT is located) because it's hugely expensive. They go to places like the Route 128 corridor which is kind of the equivalent of Silicon Valley in Boston.

That isn't to say that the workers want to live in the suburbs communiting to a mid rise office park sprawl. Many of them, particularly those in their 20s don't. Many of them end up doing reverse commutes to live in a more urban area and work in the 128 corridor in the Boston case. Of course they wish their jobs weren't out in the suburban office parks.

There are many reasons why startups locate in a particular area. One of them is less expensive office space/real estate. This along with some other reasons is why they end up in suburbs/exurbs.

As we have seen with Silicon Valley, the Route 128 corridor, and other places, the influx has caused them to get more expensive. There are two ways to deal with this problem. One, exurbs farther out which the talent will not accept. Or two, locate in a more urban enviornment that is also less expensive. This is where the Rust Belt can come in because it where both parts of being less expensive and where the talent wants to live meet. Rust Belt chic and other elements such as universities like CMU can come together to create a more urban startup enviorment. Since the talent is looking for something that isn't a boring suburban office park and startups need a cheap place to be, this has to happen in the Rust Belt. Pittsburgh with CMU in the city is the leading place to be able to take advantage of this. Once the talent can get past the idea that Pittsburgh is steel mills and pollution the sky is the limit.

I have to say I hope this type of thing happens whether its in Pittsburgh or other places. As someone who has been around startups and the talent we're talking about, there is no great desire for boring suburban office parks. On top of that in looking at innovation centers like Silicon Valley, Route 128, etc., it's amazing how little innovation there is in some fundamental areas. I have been to Silicon Valley, Route 128, etc. It's looks all the same. It's the same suburban/exurban sprawl of office parks of mid-rise and low rise office buildings. This is not limited to North America either. When other countries created their own innovation centers they did a xerox copy of everything they could of US innovation centers. If you go to the innovation centers of India or China you will see the same suburban/exurban sprawl of office parks. From whatever perspective you want to look at, we need some innovation in our innovation centers. They shouldn't still be based on 20th century ideas of car dependency.

Jim Russell said...

Steve,

Good point about Boston. That's my experience as well. That's why I love the economic development model of incubator as downtown anchor like you can find in Youngstown. Of course, Pittsburgh is chock full of such development.

Google at Bakery Square in East Liberty is one example. I rather like the brownfield location of the Pittsburgh Tech Council and CMU's Entertainment Technology Center. A lot of the start-up jobs are located within the City of Pittsburgh.

Live in the city. Work in the city. Bike to work. It's a great value proposition for those engineering graduates from MIT.