The Economist on NYC TechThe Economist Jan 05, 2012 Back to press
"THAT city will, in the course of time, become the granary of the world, the emporium of commerce, the seat of manufactures, the focus of great monied operations,” predicted DeWitt Clinton, governor of New York in 1824. He was speaking about the effects of the Erie Canal, which connected the Great Lakes to the Hudson River. Originally derided as “Clinton’s folly”, the canal helped to open up the west, allowing New York to benefit enormously from an explosion of trade. Within 15 years of the opening, New York was the busiest port in America, moving more than Boston, Baltimore and New Orleans combined. The plan to open an applied sciences university campus in New York City, reckons Seth Pinsky, who heads New York’s Economic Development Corporation, is an “Erie Canal moment”.
The city’s embrace of high-tech has already begun. Tech clusters have emerged in Manhattan’s Flatiron District and Brooklyn’s Dumbo, home to firms like STELLAService and Etsy. Venture-capital firms and angel investors have been looking at New York more seriously than they once did. Henry Blodget, of Business Insider, notes “the financing ecosystem has also gotten very well developed, from late-stage private equity right down to angel investing.” Some $1.2 billion was invested by venture-capital firms in New York in 2010. The Big Apple even overtook Massachusetts in venture-capital funding for internet and tech start-ups, making it second only to Silicon Valley. And in the third quarter of last year, it surpassed it in venture capital in all categories. Between 2005 and 2010 employment in New York’s high-tech sector grew by nearly 30%. Google alone has about 1,200 engineers in the city.
Much of this growth has been organic, but there has been some help from City Hall. Since 2002 the city has set up more than 40 projects to help the biotech sector and helped create a network of incubators supporting start-ups in that area. It also established a $22m municipal entrepreneurial fund, the first of its kind outside Silicon Valley. A year ago Michael Bloomberg, a tech entrepreneur before he became New York’s mayor, called on universities to pitch plans to develop and operate a new tech campus in New York in exchange for access to city-owned land and up to $100m in public money.
New York received seven proposals from 17 top institutions, including Stanford University which did so much to create Silicon Valley. Almost 6,000 companies, including Google, Hewlett-Packard and LinkedIn, trace their beginnings to Stanford. But Stanford withdrew from the competition last month, days before the mayor announced the winning proposal, which came from Cornell, an Ivy League university, and its partner Technion, an Israeli technology institute. The latter is considered to be one of the driving forces in Israel’s tech industry. It helped turn Israel from a country of orchards to one of semiconductors. Some 4,000 start-up companies are located around its campus.
The two bodies have plans to build a $2 billion 2m square feet (610,000 square metres) campus on Roosevelt Island, one subway stop from mid-town. Cornell and Technion hope to have a temporary facility up and running as soon as this autumn and complete their permanent home by 2017. The bid had huge support from Cornell alumni, including a $350m gift from Charles Feeney, who made his fortune through the Duty Free Shopping Group. That is one of the largest donations in the history of American higher education.
According to the city’s analysis, over the next 30 years the campus will generate more than $7.5 billion in economic activity, with 600 companies spinning out of the new school directly; these are projected to create 30,000 jobs. Some 20,000 construction jobs will also be created, not to mention about $1.4 billion in extra tax revenue. And it should help quench the never-ending demand for qualified engineers. The mayor has not ruled out naming additional winners. And some of the losing plans will go forward regardless. So New York could soon have several applied sciences campuses. Look out, Silicon Valley.