Technology Industry Seen Growing Fastest in New York

New York City’s budding technology industry is growing rapidly by attracting investors and engineering talent despite spotty access to a reliable broadband network, according to a study released on Wednesday.
The study, “New Tech City,” conducted by the Center for an Urban Future, concluded that the technology industry is growing faster in New York City than anywhere else in America and that the city now trails only Silicon Valley as a hub for the development of new technology companies. The study’s authors, Jonathan Bowles and David Giles, identified 486 technology companies that had been founded in the city since 2007 and determined that the financial crisis and the recession that followed did not slow the industry’s growth.

Mr. Bowles said the technology investors he interviewed agreed that in the last few years, New York had eclipsed the Boston area as the second-leading breeding ground for tech companies in the country. Silicon Valley, around San Jose, Calif., is still by far the dominant center of the industry, but New York was the only place where the number of deals to finance tech start-ups rose between 2007 and 2011, Mr. Bowles said.


The number of venture capital deals in New York rose by 32 percent in that period, while it fell by more than 10 percent across the nation, the report said.

The report attributes some of the growth to the efforts of the administration of Mayor Michael R. Bloomberg to reduce the city’s dependence on Wall Street as an economic engine. The push to build up the industry has been much more successful than previous efforts to establish the city as a hub for biotechnology or environmental technology, which Mr. Bowles calls clean tech.

“It’s important to understand that New York has not passed Boston in biotech or in clean tech,” he said.

One reason that the development of digital technology seems to be taking root in the city is that the current wave of innovation is not about designing computers or chips or building infrastructure for the Internet, but about devising creative applications of mobile technology for various industries. New York’s dominant positions in industries like finance and advertising have made it a natural place for those seeking to invent digital services in those fields.

One company the city has spawned is Tumblr, an online platform for sharing photos and other media. Founded in 2007 and based in the Flatiron district of Manhattan, Tumblr now has more than 100 employees.

Tumblr is one of 10 start-ups in the city that each have attracted more than $50 million from investors, according to the report. The others, mostly digital media and e-commerce companies, include Gilt Groupe, Foursquare and Fab.

Mr. Bowles said it was difficult to tally just how many people work in the city’s tech areas, but he said it was clear that the number had been growing at a “phenomenal clip.” In the last five years, the number of information technology jobs in the city increased by almost 29 percent, or about eight times as fast as the city’s total employment grew.

The study found that the tech start-ups were concentrated in about 10 ZIP codes in Lower Manhattan and Midtown, in part because attractive locations in Brooklyn and other boroughs lacked adequate broadband access. A significant problem is that many of these technology companies need a backup source of Internet access but usually cannot arrange affordable redundancy, Mr. Bowles said.

New York’s broadband infrastructure deserved a grade of “B or B-minus,” he said. “For a city that’s trying to be a tech powerhouse, we need to have an A.”

He recounted a previous effort by the city to address the problem by creating a telecommunications task force and hiring consultants. But in the end, he said, “it went nowhere; they really didn’t do anything.”

The study was financed by AT&T and the Association for a Better New York, a group of business and labor leaders.