Silicon Valley vs. New York: Business

As part of a series about the advan­tages New York has over Sil­i­con Val­ley and why it may become dom­i­nant, let’s exam­ine the dif­fer­ence in deal­ing with busi­ness generation.

New York star­tups tend to be more focused on build­ing sta­ble busi­nesses. If they hap­pen to rev­o­lu­tion­ize the world, great, but it is not a pre-requisite. Val­ley startup want to cre­ate value by chang­ing the world.

Busi­ness first, party later

I was sit­ting on the board of advi­sor for a tech­nol­ogy con­fer­ence a few years ago. The con­fer­ence had been suc­cess­ful with val­ley peo­ple so they were con­sid­er­ing bring­ing it to New York. In the first advi­sory meet­ing, which cov­ered some of the dif­fer­ence between New York and the val­ley, some­one said “here in New York, we are more focused on rev­enue lines.”

A dis­cus­sion ensued as to why that was. What came out is that, to be cool in New York, hav­ing a startup isn’t enough. When the social met­ric in the city élite is largely based on com­mer­cial suc­cess (even going back to its found­ing days, New York has always been a largely cap­i­tal­is­tic city, look­ing at the almighty dol­lar as an indi­ca­tor of sta­tus), accep­tance arises out of busi­ness suc­cess. When your inter­net startup is set side by side with Wall Street busi­nesses or large cor­po­ra­tions, you bet­ter have your story straight about how you too will soon turn into a mem­ber of the big guys club.

So New York startup tend to be very focused from the get-go on rev­enue mod­els, client acqui­si­tions, return on invest­ment, and other things that many in the val­ley see as things to worry about in the future.

The con­cept of busi­ness via­bil­ity is so deeply engrained among mem­bers of the New York tech com­mu­nity thatbusi­ness ques­tions had to be banned at the NY Tech meetup, the monthly tech demo fest. Many have won­dered why such ques­tions were booed and the truth is that they used to dom­i­nate early meetup, turn­ing the focus away from the orig­i­nal con­cept of demo-ing inter­est­ing new tech.

It’s a prob­lem few have in Sil­i­con Val­ley. Out­side of dis­cus­sions when rais­ing fund­ing, a lot of val­ley star­tups can go through an evo­lu­tion­ary track that goes from found­ing a com­pany to launch­ing a prod­uct and being acquired with­out hav­ing to worry about build­ing a busi­ness (this can be reserved to the acquirer to fig­ure out). A typ­i­cal exam­ple is the response the founders of Quora, the cur­rent val­ley shiny object, recently gave to a ques­tion about busi­ness model (empha­sis is mine):

It’s hard to plan ahead too far on the inter­net because things change so quickly, but there’s a good chance that adver­tis­ing will end up as some com­po­nent of our business. There are a lot of other options, too, but our focus as a com­pany is on build­ing Quora as a prod­uct, and our costs are low enough now that we can afford to delay wor­ry­ing about mon­e­ti­za­tion until later.

While Quora may become a huge stand­alone busi­ness, such state­ments only increases its chances of being acquired rather than becom­ing a long terms con­cern. And that’s part of the chal­lenge for many sil­i­con val­ley star­tups: they are built to sell, not build to run.

Take­away: Busi­nesses are ulti­mately about money so to con­tinue fos­ter­ing suc­cess, val­ley startup might do well to act a lit­tle more like New York ones if they want to build sus­tain­able futures.

Update: This post is part of a series of why New York may gain the top posi­tion in the tech world, dis­plac­ing Sil­i­con Val­ley. The whole series is now online: Intro, Cul­ture Part 1, Cul­ture Part 2, Tal­ent, Adver­sity, Busi­ness