Idealism for New York tech, from VC Fred Wilson

NEW YORK--"We are not an alley."

So said venture capitalist Fred Wilson of at the Web 2.0 Expo here in his keynote entitled "New York's Web Industry From 1995 to 2008: From Nascent to Ascendent." A longtime leader in Gotham's culture of digital innovation, Wilson, of Union Square Ventures, gave a short "history lesson" to the hordes of conference attendees, many of whom had come from hundreds of miles away.

And the term "Silicon Alley," he said, is one that the city should shake off. "We are one of the largest cities in the world," Wilson said. "We are one of the largest Internet development communities in the world. Let's bury the name Silicon Alley."

New York's technology community is still considered an afterthought in comparison to the Bay Area, and Wilson, though he has invested in companies like Delicious and Twitter over the years and runs one of the Web's most influential venture capital blogs, isn't yet in the league of true Valley legends like John Doerr.

But the numbers, Wilson said, show a very different trend. In 1995, 230 early-stage companies in the Bay Area received venture backing, and only 30 did in New York. By the end of the year, 2008's numbers should be 360 in the Bay Area and nearly 120 in New York. "We have grown here in New York by four times in 14 to 15 years, and Silicon Valley has grown by 1.5 times," Wilson said. "We've gone from being one-eighth of the activity of Silicon Valley to one-third. In my mind that's very significant."

The keynote took the audience back, in fact, to 1979, when New York University's Interactive Telecommunications Program was first formed. "It started in an art school, the Tisch School of the Arts at NYU," Wilson said. "I think that still to this day defines a distinguishing characteristic of the New York Internet community."

The timeline went on: the rise of interactive ad agencies in 1995, along with the debut of The New York Times Web site, which first launched in conjunction with the visit of Pope John Paul II to New York; the debut in the mid-1990s of digital businesses like iVillage, The Knot, and Star Media; the sale of Total New York to AOL, and the IPO of DoubleClick in 1997--New York's first tech company to go public.

In 1996, Wilson started his first tech venture firm, Flatiron Partners. "We first were going to call ourselves Acme Ventures. We were going to use the Road Runner as our logo. That didn't work out," Wilson said with a laugh. "We started out with the Flatiron Building as our logo. We got sued. That's a long story."

He then went through the heights of the dot-com boom and subsequent bust, when "all hell broke loose." One of the companies he spotlighted was Kozmo, the delivery service that was arguably Gotham's most famous dot-bomb. "To me, Kozmo was kind of a definitive company. We invested in it, we lost a lot of money, but it was a great company," he said. "To this date, my kids ask me, 'Explain to me why Kozmo's not around?'"

Then, in 2000, the dot-com dream started to collapse. "The market broke in March and all these companies had huge burn rates, they could no longer finance themselves, and they went out of business one by one." Still, Google opened its first New York office in an Upper West Side Starbucks that year. In 2006, as Wilson noted, it took over the historic Port Authority building in Chelsea. With 750 engineers, he said, "it's the largest engineering operation they have outside of Silicon Valley."

Things started to turn around for New York in 2003. Nick Denton launched blog empire Gawker Media, and Delicious--which was sold to Yahoo after being funded by Wilson's Union Square Ventures--was founded in a Manhattan apartment. The rest, as they say, is history.

Wilson's address, overall, was an idealistic one--perhaps excessively so. No mention was made of the September 11th tragedy, which shook every industry in New York to its core, including technology, and no mention was made of the very recent Wall Street crisis that could result in a dramatic shift in fate for many tech start-ups. Judging by what Wilson said, the future is infinitely sunny.

On a less depressing note, what Wilson also didn't mention was that New York City has elected a tech mogul as its mayor: Michael Bloomberg's eponymous company revolutionized the world of finance, and Bloomberg has promised to foster digital culture further with an annual Internet Week New York festival and an official early-stage tech venture fund.

The Web 2.0 Expo traditionally keeps its keynote addresses very short, so Wilson had only a half hour to fit in a decade and a half of New York's digital history. Indeed, he admitted that his timeline would be incomplete. "There's certainly no way that I was able to include every important person, every important company, and every important event," he said.

Wilson gave us the history. But when it comes to the future of technology in New York, I hope the conversation goes on. Despite the fact that the tech economy has held up in the wake of serious economic troubles so far, many people aren't sure how much longer that will be the case. The health of the financial services industry has grown precipitously worse in a matter of days, and that's a dark cloud looming over all of New York, not just Wall Street.

Fred Wilson is right. Let's scrap the term "Silicon Alley." But in doing so, let's acknowledge that New York's digital industry is New York itself, not a sort of frosted-glass microcosm insulated from the rest of the metropolis. The beauty of New York's technology industry is that it's so connected, running through the same veins as the most influential names in some of the world's biggest industries; Wilson made a note of that at the end of his keynote, identifying New York's tech community as "more creative, more artistic, more connected to media, advertising, (and) business."

The road ahead for tech innovation in New York is indeed bright, but along with the other industries the city fosters, there are difficult times and plenty of uncertainties ahead as well. And at the very least, keeping the tough times in mind, as well as the good ones, is just another safeguard against making sure that those "rock bottom" days of 2002 don't return to the tech industry in full force.

Disclosure: Fred Wilson's Union Square Ventures is an investor in Tumblr, which employs my significant other.

Click here for full coverage of Web 2.0 Expo