Facebook Boosts New York's Startup Cred -- Here's Why NYC Is So Hot

[ Image courtesy of fotopedia.com via creative commons license. ]

When Facebook COO Sheryl Sandberg and New York Mayor Michael Bloomberg announced Facebook's New York engineering office earlier today, the Big Apple saw its startup cred go up more than a few notches.

Facebook's first East Coast office for engineering is set to open in early 2012 with long-time engineer Serkan Piantino heading it up. No word yet on how many engineers it will hire, but 15 positions are currently open. Facebook will join -- and compete with -- top New York born-and-raised startups like Tumblr, Etsy, Kickstarter, Gilt Groupe and foursquare.

New York-based Hunch co-founder Chris Dixon, whose company eBay just acquired, tweeted, "Congrats to Serkan & Facebook. Awesome guy & great for NYC.

Gilt Groupe retweeted Bloomberg's note, and Foursquare appears to have welcomed at least its name getting mentioned. ".@foursquare just got a shoutout from@MikeBloomberg at the @facebook event for having offices in NYC #nypride," foursquare co-founder and CEO Dennis Crowley retweeted.

Google is the only other Silicon Valley giant that has a significant engineering presence in New York with more than 1K engineers, or about half of its more than 2.5K New York-based employees.

A Google spokesperson confirmed to LAUNCH that its engineering team dates back to 2003, when engineer Craig Nevill-Manning moved to New York from Mountain View HQ (he is still in NYC). The entire Google Docs team is in New York; other projects Google's New York engineers work on include search, maps, apps, finance, ad products and infrastructure. The New York office is Google's largest after Mountain View.

Yahoo has an unknown number of software engineers in New York, having opened a research office (now called Yahoo Labs) in New York in December 2005.

So what makes the New York tech scene so attractive? Less (than Silicon Valley anyway) competition for tech talent is just one reason, here's what we found [ thanks largely to reporting from New York-based Business Insider ].

There are 500+ private digital companies in New York and about 120 investors who focus on digital companies, according to a September research report by investment banking firm Gridley & Company. In the last few years, 200 new tech companies have emerged in New York.

In the first half of 2011, NYC startups raised $604M in VC funding -- the second largest investment of the period. San Francisco startups raised the most money in 1H, with $757M in VC funding. But Bay Area tech startups as a whole raised $1.5B+.

NYC has come a long way since 1995, when there were only 37 VC deals in that year compared to where they were in 2010 with 172 VC deals, while in San Francisco, there were 385 deals.

In the last four years, five private companies -- Tremor Video, ZocDoc, Gilt Groupe, Tumblr and Everyday Health -- have raised over $100M and there have been eight $100M+ acquisitions of companies, including The Huffington Post, Mediamind and Answers.com, according to the report by Gridley & Company.
Fred Wilson, a principal at New York-based Union Square Ventures, is the city's top VC and one that entrepreneurs everywhere seek out. Two years ago, at Clickable's Interesting Cafe, he and Chris Dixon talked about why New York is and will continue to be a great place for startups. Wilson called the city more creative and more commercial than other places and said the city has an entrepreneurial energy more broadly.

"I don't know that anything New York has doesn't exist in pieces elsewhere," Wilson said. "It's got a huge influx of young creative people willing to work for not a lot of money. It's a real magnet for talented people, and that's what you need to do a startup."

Wilson noted that there's a perception that if you want to succeed, you need to go to Silicon Valley, citing Facebook as an example, but says, "You can get head-faked a little bit out there by sort of the inside crowd that says oh my god this is the next great thing and it may not be the next great thing."

A New York Times article in September noted that "Silicon Valley behemoths" have long had sales and marketing offices in the city, but to impress advertisers, those offices have gone from cubicles to fancy corporate suites. The article said Facebook, Google, Yahoo and Apple had expanded their New York City presence since 2010.

Although the first Google office was only for sales and was established in 2000, Google officially opened its Manhattan office at 111 8th Ave. in October 2006 -- a few months before announcing its acquisition of New York-based DoubleClick in 2007.

The opening of its Chelsea Markets office at 75 9th Ave. in 2008 was a splashier affair and included Sergey Brin and New York Senator Chuck Schumer. In December 2010, Google bought the building at 111 8th Ave, reported to be worth $1.9B.

Amazon does not appear to have engineers in New York. Its presence includes its publishing arm and subsidiaries shopbop and Adzinia, which sells online advertising.