Web2.0 Expo Says: “Start Up in Silicon Alley”

Article By: Joshua ‘The Red’ Russak (Red@aclion.com)

Web2.0 Expo took place at the Javits Center September 16th-19th and came off as a great success for many of the attendees – myself included! One of the most valuable sessions took place on Thursday: “Starting Up in Silcon Alley”. I only registered for the Expo Hall, but was lucky enough to find my way in using some of my usual event tactics (hint: involves a scanner and photoshop).
The topic covered an important question for VC’s and Tech Entrepenuer’s alike: Where to start up? For the vast majority of the online world, when you hear Silicon Valley you think the heart of everything tech in the US all located in Northern California. But lately entreprenuers, VC’s and tech-startups are beginning to find value in areas outside of NoCal. One Silcon in particalur, Silicon Alley, “is a nickname for an area with a concentration of Internet and new media companies in Manhattan, New York City. Originally, the term referred to the cluster of such companies extending from the Flatiron District down to SoHo and TriBeCa, but as the location of these companies spread out, it became a general term referring to the dot com industry in New York City as a whole” (Wikipedia). And many VC’s and entreprenuer’s alike are beginning to see a lot of value in New York City. This was the topic of discussion for the panel which consisted of….
–Nate Westheimer, BricaBox Founder (Panel Moderator)
-Kevin Ryan, CEO & Co-Founder of AlleyCorp
-Karin Klein, Vice President of Softbank Capital
–David S. Rose, Principal of Rose Tech Ventures

• Kevin: “Great management talent in NY, […] We still have an undeveloped VC infrastructure…a real lagger in terms of development. […] I’m extremely Bullish! 10 years from now we’ll stil be smaller than Silicon Valley, but the gap is closing in day by day!”
• Karin: “We are finding many compelling startups in NY. We have the building blocks key resources in NY – customers, partners and financiers. […] 3 examples of success: BuddyMedia, Thumbplay and Paltalk.”
• David: “This is a very good time to start a company in NYC. The world is changing…what we don’t understand is how rapidly it is changing! The cost of a startup keep decreasing – In 1988 $20million to $2million to $200,000 during Nuclear Winter to now $20,000! You now have the resources!”

Nate: Do you have an “only in New York” story?

• Kevin: “Being near the advertising community was an enormous advantage. So you have to be here!”

Nate: Do/would you ever request anyone that you invested in to come to New York?

• Karin: “Associated Content was based in Colorado, and they needed to be closer to advertisers. Also, retention of teams is easier.”
• David: “Angel investors offer more than just $$money$$. We offer our offices, incites, and much much more. So it’s a benefit for them to be here.”
• Kevin: “Staffing opportunity is definitely a plus. Also, to say Real Estate here is more expensive makes no sense. We determined our costs were $5,000 per person per year at DoubleClick and compared to other cities that cost only $1,000 less, that’s not so significant.”

Nate: Where do you see things going in Silicon Alley?

• Kevin: “Rate of growth is going to slow down. It doesn’t have to do with the economy. It’s just that the rate-of-change is slowing down”
• David: “I challenge that…the rate-of-change is accelerating. Anyone who says they know where the world is going is FULL OF SH*T!”
• Karin: “The entrepreneur’s now are really committed and have strong conviction. I’d much rather back someone in this environment.”
• Kevin: “Here’s some great advice for the future: Start when the wave starts! […] If you want to start video now, it might be a little late.”
• David: “248 Venture Backed IPOs in ’99…0 Venture-Backed IPOs in Q2 2008?.” <-[A statistic I heard just a week earlier at the E-Marketing Breakfast at the Harvard Club NYC, found in the article “The Future of Search” over a bagel ‘n cream cheese!]

…at this point Adeo Ressi, Founding Member and CEO for TheFunded.com challenged the panel. With a smile on his face, he walked up to the audience mic and, quoting him as accurately as possible, he said…

• Adeo Ressi: “Silicon Valley kicks New York’s BUTT! There is 10x everything in the Valley!”
  

Adeo was an early pioneer in the growth of the World Wide Web and has been a successful entrepenuer over and over (GameTrust Inc, Total New York, etc.) He started his company, TheFunded.com started in NYC, but he moved it to Silicon Valley and off of that he made many good points. To further support him, “despite the development of other high-tech economic centers throughout the United States, Silicon Valley continues to be the leading high-tech hub because of its large number of engineers and venture capitalists” (Wikipedia) It definitely stirred up the panel and it was all in good fun, but at the same a reality check. David obviously was the first to challenge him and the audience definitely enjoyed the panels overal reaction.
After the conference, I took my picture with the panel (as seen at the beginning of this blog-most), then everyone made their way upstairs for a Lunch Session headed up by David Rose. It was very personable and David really pumped up the audience in terms of all the stages of starting up (concepts, funding, etc). A lot of individuals there wanted to pitch David which is why he continuously made this point over and over: “Only 1.32% of all Companies that pitch VC’s get funding.” I’m not sure if he was referring to here in NYC, or in the US, but either way that is a statistic you should NOT ignore as an entrepreneur.
David instructed entrepreneurs to create a working product, get users/consumers, show some profitability and then come to the VC’s! He also made another great point saying that “The most important person in the management team is the entrepreneur. We’d rather bet on a jockey than the horse!”
Afterward, there was another chance for Q&A and I had the chance to pop out my question…
Red: Kevin, you mentioned a great tip: Start when the wave starts! What do you see as the next big wave?
The whole team responded, but it was hard to pinpoint a single response. Kevin said once again that things were slowing down and there’s no wave at this moment. He also mentioned “mobile” but he was a skeptic with the iPhone. David obviously challenged him saying this space was “accelerating, but at a granule level.” Karin jumped in to point out that for “Video & Social Media, there was still good money to be made. [People just need to start] innovating these areas.”
Either way, they spent a good 10 minutes covering that topic before moving on. It’s good to see David and Kevin go head to head. I don’t know about the rest of the audience, but I was really fired up to be in the same room as 4 successful entrepreneurs and to actually engage in a discussion with them.
Web2.0 Expo was a success ! Keep on top of my calendar because there are still a few good events ahead in Q4 of 2008. And remember…Keep an eye for the “Red-Hair” at future events!
To end off here is a fun fact for you: For a list of other places with the “Silicon” name: Click Here.