In the past
year, New York has reached a tipping point as consumer-facing startups
proliferate and, similarly, Los Angeles is getting noticed for the success of
Snap and Dollar Shave Club (among others).
Silicon
Valley’s absolute monopoly on tech talent is shifting as more college graduate
engineers opt to live in urban areas near their alma maters, and tech giants
from the San Francisco Bay Area are consequently expanding the size of their
offices in these cities. In urban centers such as New York and LA we observe
these “engineers without borders” are finding synergies with existing experts
that have long driven innovation in consumer brands, entertainment, and
traditional media empires.
For example,
by marrying Silicon Valley influenced engineering talent to New York’s branding
savvy, and its cumulative knowledge in media, finance, healthcare, trading and
manufacturing, we’re seeing – along with our friends and many long-time New York
investors like BoxGroup, First Round, General Catalyst, Greycroft, Lerer
Ventures, Max Ventures and Union Square — the emergence of web and mobile-first
vertical platforms and e-brands.
We believe
the opportunity to cater to the new mass market, i.e. millennials globally
(starting with 75 million in the US and 300 million in China), is enormous, and
that’s why GGV has made nine investments in the Big Apple in just the past
year.
Healthy
ecosystems thrive off a symbiotic relationship between big players and scrappy
newcomers: both tech juggernauts and startups benefit from the two-way flows of
talent, ideas and capital between them. In New York, that interplay is starting
to produce results. Google nearly doubled its number of New York-based
employees between 2008 and 2012, and Facebook, HP and many others staffed up
around the same time. Engineers who cut their teeth at these New York offices
have begun striking out on their own, and they’ve found excellent partners
among the brand-builders and media savants that New York cranks out.
That
cultural alchemy could prove lucrative. While Silicon Valley is one of the
world’s epicenters for building platforms, most of its tech capital hasn’t
shown as much interest in building consumer brands in non-tech categories.
The culture
in the Bay Area values bleeding edge innovation, or platforms that focus on
solving one or two market inefficiencies. But when it comes to every-day
branded consumer goods – like shampoo, canned beverages, or apparel, which make
up a huge chunk of real consumer spending – many Silicon Valley startups tend
to cater to “Atherton moms” (think $400 wi-fi connected juicer).
To be fair,
many NYC consumer start-ups have also historically focused around luxury
up-markets, instead of targeting the mass-market consumer. But by lowering price points to target mass
market millennials without sacrificing quality, we notice companies like Wish,
Ibotta, and Poshmark, have realized the untapped potential of this still
underserved customer.
This is
where New York comes in. The city is chock full of the designers and marketers,
many of whom are now leaving large legacy retailers to build e-commerce
companies.
Similiarly
Los Angeles has a budding ecosystem thanks in large part to Snap now valued at
approximately $26 billion, the acquisition of Dollar Shave Club by Unilever for
over $1 billion, and a number of upstarts such as Mobalytics, Musical.ly and
Mighty growing rapidly.
Also in the
wheelhouse for New York startups is the media space. The platforms and tools
built in Silicon Valley have upended traditional media models, but the Valley
has nurtured few great non-tech media brands. New York remains the beating
heart of American media, with places like Columbia Journalism School churning
out content creators the way Stanford does computer science majors.
The
Huffington Post and Buzzfeed flourished during the SEO and social media
revolutions, and we’re now seeing a second wave of New York startups carving
out new niches and exploring new verticals.
Companies
like Buzzfeed, Bustle (an online news and lifestyle website that caters to
women and seen huge user growth since its founding in 2013) and Refinery29 – are able to capitalize on their proximity
to a goldmine of big budget consumer ad agencies in New York.
And the
value proposition they offer is different – while Google or Facebook give
advertisers the tools and platforms to blast out their own ads, these
culturally relevant websites can work together with advertisers to produce
unique content that millennials will want to devour. Meanwhile, other New
York-based startups – like live-video news startup Cheddar, The Skimm, or VR
aspirant Littlstar – are exploring the boundaries of new-new media.
New York’s
status as a branding and media capital of the world makes it a prime breeding
ground for tech-enabled e-brands. But other cities around the country are also
taking advantage of the growing diaspora of Silicon Valley-trained engineers,
and pairing it with their own local strengths.
Los Angeles
is taking advantage of tech-enabled entertainment, Seattle on Saas
opportunities (thanks to Amazon, Microsoft, Expedia, Zillow, etc.), while the
metropolises of the Midwest are ripe for bringing tech tools to bear on food
tech opportunities.
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