NYC Welcomes Tech, But Only If It Helps New Yorkers

Bennat Berger
Sep 24, 2019 · 4 min read

New York City is a leading hub for technology and innovation — but you wouldn’t guess it by its most-hyped headlines. Ironically, some of the most eye-catching recent news in the tech sector centers around how the city prevented one of the most influential tech titans from setting the foundation for a Big Tech colony in Long Island City.

For the short span of a few months, it seemed as though New York was teetering on the verge of supplanting Silicon Valley as a home base for major tech companies. The city had a plan — and a provisional agreement — to host Amazon’s much-courted HQ2 within its borders that many in the tech industry heralded as the start of a new era of innovation and prosperity. During a press conference shortly after the announcement of the agreement, Governor Andrew Cuomo celebrated, saying: “This is the largest economic development initiative that has ever been done by the city or the state or the city and the state, together.”

The agreement certainly had some startling numbers to back it; analysts projects that the deal would generate no less than $27.5 billion in state and city revenue over 25 years with a 9:1 ratio of revenue to subsidies. HQ2 was expected to create roughly 25,000 jobs in its first decade, in addition to the 1,300 construction jobs and 107,000 direct and indirect jobs the building initiative would require. Amazon further promised to launch a tech startup incubator and a new school on its campus, as well as allocate as much as $5 million to workforce development efforts.

On the surface, the partnership between New York and Amazon was a tech proponent’s dream come true; however, the proposed HQ2 deal faced vehement opposition almost immediately after its announcement. Several protests against the initiative were held in Long Island City in the fall of 2018. By February of 2019, the deal was off.

Now, New York’s highly-publicized divorce from Amazon’s HQ2 plans could be interpreted as a sign that the city wasn’t interested in supplanting Silicon Valley as a home for Big Tech. However, I would argue that the issue the city had with Amazon isn’t based in bias against Big Tech or tech as a whole, but in concern that Amazon’s presence would come at too high a cost to the people of New York. The city courted the tech giant, perhaps to the point of overreach; all told, the public funds and kickbacks given to Amazon would have totaled close to $3 billion, with the city and state paying the e-retailer as much as $48,000 per job. With that cost, opponents argued, were the “benefits” Amazon offered even worth their price?

Rejecting Amazon doesn’t mean that New York City is hostile to the tech sector — quite the opposite. The city wants a tech sector, but it wants it on terms that suit the people who call it home, rather than those who run Big Tech’s boardrooms. It seems to be relatively successful in its pursuit of that goal, too: Startup Genome reports that NYC ranks first globally in funding availability and quality in NYC, and the metro region alone received $13 billion in funding in 2018. In 2018, New York’s tech sector represented 333,000 jobs in 2018 and encompassed a full 10% of the nation’s developers.

Moreover, it seems probable that the city will continue to serve as fertile ground for tech-center development, given that it currently supports over 120 universities and is ranked first globally for the number of STEM-field graduates produced annually. Those students are likely to stay and contribute, too; tech firms in New York City have the fastest average hiring time for engineers across all U.S. tech ecosystems and offer wages that are, on average, 49% higher than private-sector rates elsewhere.

Amazon’s failed HQ2 deal notwithstanding, even Big Tech is expanding its presence in the city. This past spring, Netflix put down $100 million for a production hub in Williamsburg and promised to create over 100 new jobs in Manhattan. In late 2018 — around the same time that Amazon was fielding controversy over HQ2 — Google committed $1 billion to create a new Lower Manhattan campus and double its local workforce. Facebook wants to open up shop in Hudson Yard; Apple is reportedly looking for more office space in the city.

The signs are clear that, despite what the failed HQ2 deal might indicate, New York City wants tech, big and small alike. The city will continue to keep pace, if not ultimately overtake, the Silicon Valley tech scene. Provided, of course, that the tech investment it facilitates supports — and is in turn supported by — its people.

Originally published on BennatBerger.net

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Bennat Berger

Written by

Bennat Berger is Co-Founder of Novel Property Ventures and founder of Novel Private Equity. To read more about him, visit: www.BennatBerger.com

The Startup

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