New York as a Start-up Hub for MBAs

Ask any MBA where the entrepreneurial capital of the world is and they will likely point west to California. If you’re setting up a technology business, there is arguably no better place than San Francisco’s Bay Area. It is home to the most successful internet start-ups — Uber, Facebook, YouTube and Airbnb — an abundance of capital, and the idea that anything is possible. Failure, in pursuit of lofty goals, is celebrated. 

But now New York City (NYC) is hoping to rival its Californian counterpart with successful start-ups of its own, such as social network Foursquare, blogging site Tumblr and e-commerce platform Gilt. NYC may lack a blockbuster tech IPO but many entrepreneurs believe that if you can make it in the Big Apple, you can make it anywhere. 

When Kobi Wu graduated from the EMBA program at NYU Stern School of Business in 2015, she considered launching in Los Angeles, another start-up hub that is home to the company behind Snapchat. But like a growing number of business school graduates, she decided to stay in NYC to build VisuWall, which helps brands such as Apple Music discover vacant storefront windows for advertising. 

“New York is arguably the toughest market to break into as companies — your customers — are so discerning. They can be cold-hearted with their feedback,” Wu says. But she adds that her company would not be where it is now without being based in the city, because of its “amazing collection of entrepreneurs, investors and potential customers”. 

Harvard Business School (HBS), for example, has more than 10,000 alumni in NYC, the second largest contingent after San Francisco. Although many work on Wall Street, thousands are running start-ups in NYC, estimates Avani Patel, director of the HBS Startup Studio in the city’s technology hub ‘Silicon Alley’.

“Many entrepreneurs who come out of HBS are building tech-enabled businesses, for example in fashion-tech or food-tech,” Patel says. “Many of these industries are based in New York. It makes perfect sense for them to move here.”

The abundance of entrepreneurs makes NYC a good place for collaborative efforts with other companies and industries. Around 300,000 people work in the city's US$125 billion tech ecosystem, and New York is renowned for its strengths in finance, media and medicine. 

Jennie Baik co-founded Orchard Mile, an online shopping business based in Startup Studio, after getting her MBA at HBS in 2008. Baik says her company “would not exist” outside NYC because she would not have direct access to the 130 fashion brands — such as Prada — which stock items on her site and are often based in the city.

“The location matters. There are so many multi-billion dollar companies here, which are ripe for disruption and open to collaborative innovation.”

She adds that another strength of NYC is access to accelerators such as Startup Studio, which helps foster connections among alumni by providing subsidised workspace, and mentorship from professors and industry leaders, such as executives from Google and YouTube. “We have a huge amount of support.” 

Also helping the city grow as a start-up hub is the abundance of venture capital. In the second quarter of this year, New York venture-backed companies raised nearly US$3 billion in around 150 deals. Comparatively, in San Francisco the figure is about US$4 billion, according to CB Insights. 

“The big New York investment firms are also financing early-stage start-ups, which will help entrepreneurs turn ideas into viable businesses,” says Deepak Hegde, director of Creative Destruction Lab-NYC, an accelerator program run by NYU Stern and Toronto’s Rotman School of Management.

Entrepreneurs also trumpet the abundance of human capital. Greater New York — which includes Connecticut and Pennsylvania — has the largest collection of top 50 research institutions in the world, says Hegde, including Cornell and Columbia universities. “In terms of access to talent, research and ideas, New York is right up there with Silicon Valley.”

Partly to help grow this entrepreneurial ecosystem NYU Stern, last year launched a 12-month technology MBA program for business candidates with strong technology backgrounds. In one core class, the students will build ideas for a new business venture and will be prepared to pitch it to investors.  

“Our vision is to build entrepreneurial product managers with a deep understanding of technologies such as data analytics and machine learning, but with strategic business expertise,” says JP Eggers, academic director of the program. 

“Many of the students want to launch companies that will be like Facebook or Amazon in five years’ time.”  

Despite these types of initiatives, there’s been valid criticism from those who point out NYC’s sometimes faltering record for tech start-ups. In recent years e-commerce marketplace Fab and online inventors’ network Quirky both collapsed, with their investors losing hundreds of millions of dollars. There is also a notable lack of out-sized exits. 

A study by Compass, a research firm, assessed the funding, market reach, talent pool and start-up experience of various locations to come up with a ranking of “global start-up ecosystems”. NYC ranked second overall but fell way behind Silicon Valley. For example, Compass estimated the value of all Bay Area start-ups at between US$264 billion and US$323 billion. The comparable estimate for New York start-ups was US$41-US$50 billion.

Other downsides to NYC include the high cost of living. “With high housing and tax costs, it’s very expensive to run a small company here,” says Orchard Mile’s Baik. But she believes the opportunities on offer in NYC are well worth it. “There are a huge number of really interesting brands that we can partner with. I run into them on the street every day.”