Nick Beim

Thoughts on the Economics of Innovation

A Debate about the Future of NY Tech

HotTopics recently hosted an interesting debate moderated by Jeff Glueck about the future of the NY tech scene that I participated in along with Kevin Ryan, Dennis Crowley, Jessica Lawrence, Alfred Lin and Bob Goodman.

Here are the highlights. Some of the big questions we hit were:

-How is the NY technology ecosystem different than Silicon Valley?
-What are NY’s key strengths and challenges?
-Where does NY tech go from here?
-Does NY favor startups that focus on making money over big-swing platforms that defer their focus on revenue?
-In this inning of information technology, what kinds of industries are disrupted by insiders vs. outsiders?

I wish we had had more time to discuss this last question, as it is a very interesting one worth a debate or series of blog posts in its own right.


A Discussion With Some of New York’s Most Successful Repeat Entrepreneurs

Some of the most helpful advice in building startups comes from entrepreneurs who have been there and done it successfully multiple times. To try to find and highlight the best advice of this kind, we recently hosted a panel discussion with a group of New York’s top repeat entrepreneurs, including:

-Kevin Ryan: cofounder and Chairman of the Gilt Groupe, MongoDB, Business Insider, Zola
-Brian O’Kelley: founder and CEO of AppNexus, CTO of Right Media
-Fabrice Grinda: founder/cofounder of OLX, Zingy and Aucland

Together these entrepreneurs founded or cofounded 14 companies that are worth over $6.3 billion and currently employ over 3,000 people, which is a pretty astonishing statistic. They have also made over 150 angel investments in 10 continents across almost every technology sector.

It was a great discussion with a lot of wisdom on the subject of what matters most in building a successful company and key mistakes to avoid. We also had a chance to share some thoughts on the future of the New York technology scene.


The Rise and Future of the New York Startup Ecosystem

made_in_ny2Like many who have been active in the New York startup ecosystem over the past decade, I am optimistic about its future. The last 10 years have seen an increasing number of startup successes in New York — Shutterstock, Tumblr, AppNexus, Gilt Groupe, MongoDB, Etsy, Buddy Media, Warby Parker, Kickstarter, Gerson Lehrman, and OnDeck Capital to name some, with many others on the rise. Venture and angel funding are increasing, large internet companies including Google and Facebook are growing their New York offices, and Cornell and Technion are collaborating to build a large engineering campus on Roosevelt Island.

As optimistic as I am, it’s always useful to check one’s optimism with data. The data takes some work to pull together, and not all of it is public, but when one does pull it together, it paints a very promising picture, one showing that New York has been the fastest-growing technology startup ecosystem in the country over the past 10 years and now ranks second behind Silicon Valley in all key metrics.

These trends suggest strong continued momentum for New York, but if one really wants to get a good sense of where the ecosystem is going, it’s important to take a close look at the primary factors driving its growth.  Other technology startup ecosystems have had periods of rapid growth only to slow down substantially when the macro factors driving their growth dissipated.

A close examination of the macro factors driving New York’s growth suggests that the ecosystem is still in the early stages of its development and that its rapid growth will likely last for many years to come.

The Growth in Venture Financing
So how big, exactly, is New York’s technology startup ecosystem, and how quickly is it growing?  The best proxy for the size of a startup ecosystem is the total amount of venture capital invested in it.  Judged this metric, New York has been the fastest-growing technology startup ecosystem in the U.S. over the past 10 years and currently ranks #2 in the country behind Silicon Valley:

amount_invested

With $2.6 billion in venture capital invested in 2013, New York’s technology startup ecosystem is currently 87% larger than that of Massachusetts and 28% the size of Silicon Valley.


The Big Data Revolution in News

Yesterday Dataminr, a big data startup based in New York, announced something pretty extraordinary: that it would become the news discovery platform for CNN. This seems like one of those watershed moments in the history of the news industry that could change the industry’s dynamics fundamentally, like the advent of news agencies or the launch of CNN itself.

How can a technology startup become the news discovery platform for the world’s leading news organization? Because today, breaking events typically leave discoverable digital signatures before they become news, and Dataminr discovers these signatures as soon as they become algorithmically recognizable.

Most of these signatures are on Twitter, since Twitter has become the natural place that hundreds of millions of people post things they deem interesting, important, surprising, funny, scary, scandalous, or otherwise worth sharing – anything, in short, they deem newsworthy. No matter how effective any company’s news-gathering organization, it simply can’t beat the scale of this discovery system.

Most interestingly, Dataminr algorithmically discovers, qualifies, categorizes and communicates breaking events in real time. As they happen. This is an extremely difficult technological feat to pull off. There are half a billion to a billion tweets per day, and Dataminr’s algorithms process this stream of data and associated metadata in real-time to discover even the smallest micro-events as they happen and determine their significance, relevance and actionability.

How Well Does It Work?
How well does this work? In short, very well, both because there is so much signal on Twitter and because Dataminr has developed and honed its algorithms with an outstanding team of data scientists over the past three years.

One particularly memorable example of the kind of event discovery Dataminr excels at is the assassination of Osama bin Laden. Dataminr’s algorithms discovered the news on the basis of 19 tweets in a 5-minute period on May 1, 2011. The algorithms used signal pattern recognition, linguistic analysis, sentiment classification and cross-referencing with third-party data sources to identify the news. Dataminr alerted its clients of the news at 10:20pm. At 10:24pm, Keith Urbahn, the former Chief of Staff to Defense Secretary Donald Rumsfeld (not the country music singer), provided partial confirmation in his own tweet: “So I’m told by a reputable person they have killed Osama bin Laden. Hot damn.” The first move in S&P Futures caused by the news occurred at 10:39pm, and Bloomberg and the New York Times began reporting the news at 10:43pm. Quickly the news spiraled into one of the most viral events in Twitter’s history, with messages increasing from 19 in a 5-minute period to 20,000 per minute 30 minutes later.

Through its use of very sophisticated event discovery technology, Dataminr beat major news sources to the punch by 23 minutes on the biggest story of the year, and one of the biggest of the decade. Pretty cool stuff.

Read More


Hats Off to Care.com

Care.com went public yesterday on the NYSE, a little over seven years after the company was founded, and ended up with a value of about $720 million. It was a great achievement for Sheila Marcelo, the founder and CEO, the management team and all the employees. I invested in the company when it was just Sheila and have worked closely with the team since the very early days. It was fun being with them on their big day, and I wish them a very big congratulations.

 

Read More