New York's quest to become 'the digital city'

The New York City Economic Development Corporation's frenetic burst of projects in support of digital innovation have raised a few eyebrows--and made entrepreneurs excited that they can change the way the city runs.

Caroline McCarthy Former Staff writer, CNET News
Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.
Caroline McCarthy
8 min read

Even the basic driving directions from New York City to IBM Research's headquarters in Yorktown Heights, N.Y., make the whole thing sound like an arm-twisting inconvenience worthy of the difficulty that the city's metro region has had in fostering Silicon Valley-style innovation: "Take the Sprain."

That'd be the Sprain Brook Parkway, a squiggle of highway that reaches up from the northern end of the Bronx into the small towns of Westchester County, which turns into the Taconic Parkway a few minutes before the exit onto Kitchawan Road that leads to IBM's Thomas J. Watson Research Center. It's a broad structure of black glass fronted by a stone arch worthy of a midcentury ski resort. The surrounding environs: lawns, trees, rolling hills, more trees. What's inside: Probably the most impressive tech know-how that the New York region can boast. Most recently, researchers there built the computer capable of defeating the most successful "Jeopardy!" champions in a high-profile round of the answer-and-question game show. But that's a story for a different day.

IBM Research feels a world away from Manhattan, though it's only 40 miles from Wall Street--roughly the same distance from downtown San Francisco to Google's campus in Mountain View, Calif. Changing that perception of distance is just one of the many tasks on the to-do list of the New York City Economic Development Corporation (NYCEDC), an organization contracted by the office of Mayor Michael P. Bloomberg to promote growth in New York's various business sectors. As 2011 has set in, it's become clear that the NYCEDC's resolution was tech, tech, and more tech--and not simply ambitions for attracting more engineering talent or building a decently healthy culture of start-ups; they are sweeping moves in the construction of something that can only be called "the digital city."

But, as it wrangles far-flung and otherwise disparate individuals and groups--developers, financiers, academics, the denizens of Google's sprawling Manhattan outpost, and IBM researchers from all the way up the Sprain--into new partnerships, alliances, and business ventures in a cash-strapped city, is the NYCEDC biting off more than it can chew?

Just a few of the group's projects under the auspices of current Director Seth Pinsky: plans for an engineering campus somewhere within the city's five boroughs, run by an as-yet-undetermined major university, designed to produce steady crops of technical talent; developing the mayor's "Big Apps" competitions to encourage developers to build civic-oriented mobile software; partnering with the city government, IBM, and three local universities (Columbia, New York University, and the City University of New York) on an "Urban Technology Innovation Center" to develop and test sustainable building technologies; and most recently funding General Assembly, a new loft space in the Flatiron District that offers start-ups work space and the developer-designer crowd a host of mixers and seminars, with a $200,000 grant.

The young founding team of General Assembly, an 'urban campus' that has received a grant from the New York City Economic Development Corporation. General Assembly

Given that budget cuts have forced the cost of a monthly subway pass from less than $90 to more than $100 and that the city's belated response to cleaning up a late-December snowstorm left constituents in a wet, slushy anger over Mayor Bloomberg's priorities, perks for companies that make iPhone apps and Facebook games doesn't make perfect sense. That's not made any easier by the fact that past initiatives to build a thriving culture of tech companies in the city--like the "Silicon Alley" of the late '90s, home of flashy flops like Kozmo and Pseudo--have completely flamed out. With the exception of advertising technology companies, where New York tends to be strong (think DoubleClick), the idea of a start-up growing in New York's streets the way Google, Facebook, or Twitter did in the Bay Area just seems improbable.

But making New York a hub of technological innovation has been a top priority for Bloomberg, who as the founder of financial data giant Bloomberg LP has a natural affinity for outside-the-box business. His administration has treated the market recession, at least publicly, as an opportunity for transformation--and, yes, the perfect time for digital culture to finally take root in Gotham, letting the support of private-sector innovation pour out into how the city itself runs. Hence, Bloomberg's "digital city."

"I feel he's personally invested in the entrepreneurship movement," said Kristy Sundjaja, head of the NYCEDC's Center for Economic Transformation and a former consultant to companies like Microsoft, IBM, and AOL. Indeed, he seems to show it, announcing many of the NYCEDC's collaborations with the city himself and popping in (sometimes unexpectedly) at local tech-industry events like the TechCrunch Disrupt conference last year.

Since 1991, the NYCEDC has been in charge of promoting the future of the city's corporate world, but until the financial crisis hit the city in mid-2008, this typically meant attracting capital and boosting investments in corporate real estate. Then, banking stalwart Lehman Bros. collapsed in September, and the NYCEDC realized that private-sector investments in real estate had started a fast downhill slide. Its old role--and the city's tried-and-true business strengths--just didn't work anymore.

"I think Lehman was the fulcrum," said David Lombino, the NYCEDC's senior vice president of public affairs. "There was this wave of understanding that in the established New York business community, something fundamental was going to have to change." No longer would the city be able to comfortably rely on Wall Street, with the stock markets in a tailspin, and big media companies,

After brainstorming possible new strategies, the NYCEDC chose to take a do-or-die approach to promoting digital innovation and becoming more start-up-friendly. From this decision came the opening of seven tech incubators throughout the city, the amassing of a municipal angel investment fund, and partnerships with "co-working" spaces that provide office resources for start-ups and freelancers. In one of the NYCEDC's proudest moments, the winners of the inaugural Big Apps competition--two men and one woman, all immigrants--quit their jobs as developers at Wall Street firms and expanded their winning product into a start-up called My City Way.

Big Apps isn't the only project that the NYCEDC has supported in the Bloomberg administration's attempts to use digital media and other technologies to make the city run more smoothly and cost-effectively. The NYCEDC will be working closely with Rachel Sterne, the young digital entrepreneur whom Bloomberg's administration just hired as "chief digital officer"--a hire that was met with an outpouring of support from the start-up community and a strikingly vicious outrage from critics who took issue with her age, her relatively light resume, and the idea that a six-figure, taxpayer-funded salary would apparently be going to the management of city social-media accounts. (That's only one part of it, Sterne says.) It had never been more clear that New York's transformation into "the digital city" does not enjoy the support of all the city's constituents.

But from the perspective of those monitoring the health of business activity in New York, mindful that it could easily grow complacent and slip into obsolescence (as it nearly did in the 1970s), there's no doubt that much of this was needed--however scattershot the efforts may seem. The NYCEDC's extreme multitasking may be necessary in the fragmented climate of New York's technology industry, where communication within different pockets of the community just hasn't existed. An IBM researcher, for one, would likely never cross paths with a venture-backed start-up founder. With the absence of companies like Google or Facebook that grew from start-up to monstrous force seemingly overnight, there are few clear leaders and no single "hot" company to work for. The NYCEDC has to juggle a lot or risk leaving behind a promising cluster of local techies.

Then there's the fact that, unlike the relatively isolated "Silicon Alley" of the late '90s, the NYCEDC wants to see technology permeate the city's many historically strong industries. That explains the organization's insistence on being part of so many digital initiatives both big and small, enlisting the likes of IBM and Columbia University alongside the founders of start-ups that have yet to launch.

"The difference between New York and Silicon Valley, in my opinion," the NYCEDC's Sundjaja said, "is that we have innovation in fashion, we have innovation in health care and medicine, we have innovation in media...The technology in New York is not just about technology."

A consequence of this is that some start-ups claim the NYCEDC's efforts are passing them over. After the organization threw a cocktail party for a mix of start-ups and VCs in December, some malaise began to air on NextNY, an e-mail list for members of the technology community in New York that's been around since the days when nobody really thought there was a technology community in New York.

"I got there, did the rounds, and bounced out," one member of the NextNY list wrote. "Had no idea who was who...no relevant intros/networking were facilitated, nor was there any attempt to organize by industry to make it relevant. Not very useful."

Another member concurred. "This is why working with the city is so frustrating," the member wrote in a reply. "They're too busy building a relationship with (prominent venture capitalist) Fred Wilson and don't spend nearly enough time meeting the rest of us."

The NYCEDC is the first to acknowledge that it's got a lot on its plate and can't please everybody at once. The assembling of "the digital city" requires connecting groups that otherwise might have no business with one another, bringing that entrepreneurial thinking off the city's streets and into the government itself, and dealing with a notoriously well-established bureaucracy.

"It is extremely difficult to get something done in this town," David Lombino, executive vice president at NYCEDC, admits freely.

Brad Hargreaves, one of the founders of the General Assembly space, which launched earlier this week and currently houses a cluster of tiny start-ups as well as a forthcoming roster of seminars and classes funded by its NYCEDC grant, said the organization and the city it represents presented far fewer obstacles than he'd have expected.

"One of the criticisms that is often given of any kind of government-related program is inflexibility, and we didn't experience that at all," Hargreaves said. "We were able to really craft our own kind of relationship with the EDC, and they supplied us with, really, what we needed."

And so, with its newest occupant, the "digital city" continues to take shape. Skepticism abounds over whether grand plans like the NYCEDC-backed engineering campus will ever jump off the drawing board, whether hot local companies like Foursquare will thrive in the face of significantly bigger Valley-based competitors, or whether this support of digital entrepreneurs will peter out after the term-limited Bloomberg leaves office in 2013. But there's no doubt that the NYCEDC is part of the reason that cohesion in New York's tech community and its liaisons with City Hall are at an all-time high.

And by getting entrepreneurs involved, they've enlisted a crowd that--bureaucrats be forewarned--really, really, really likes to get things done.

Update: The name of a NextNY member providing a quotation was removed at that member's request; NextNY requires a moderator's approval to join and is technically not accessible to the public.