Innovation is the engine of economic growth, but some cities do better than others in cultivating it. New York City, the largest city in the U.S. and its financial capital, has a strong record in some areas of innovation and is running hard to build up others. This is due in part to a vibrant startup culture, with help from both private and city-government-backed programs and infrastructure.
Max recently completed the Fintech Innovation Lab, a selective 12-week accelerator program for financial technology startups run by the Partnership Fund for New York City and Accenture. We spoke with Maria Gotsch, the Partnership Fund’s president and CEO and a former investment banker, about innovation in New York City, what trends she’s seeing, and where the city’s tech scene will go next. (By virtue of its sponsorship of the FinTech Innovation Lab, the Partnership Fund holds warrants in Six Trees Capital LLC, the company that operates MaxMyInterest.)
Max: How is New York’s tech sector doing?
Maria Gotsch: The tech sector in New York City is in its 20th year. Before that there was not much tech as measured by venture dollars invested. You had the bubble of 1999-2000 and then a big dropoff in deals. In the last decade you’ve had a nice steady increase in venture dollars invested, a fivefold increase over last decade from $1 billion to $5 Billion in 2014. In number of deals, we went from 100 to 350 by 2014.
Silicon Valley is still three times the size of anywhere else in the country, but New York City in 2014 was even with Boston in venture dollars invested. If you take biotech out to make it more apples to apples, then New York is pretty significantly higher than Boston.
What’s new in innovation in New York City?
We are looking at digital manufacturing. That’s the combination of software and production processes like 3D printers, laser cutters, and CNC machines. It’s related to sensors, robots, and microchips. A couple of trends are making this a very interesting space. The cost of these physical machines has dropped significantly. These were big machines that were behind corporate walls; now they are less expensive so individual designers can use them. Cloud computing has also helped with faster iteration and collaboration.
And crowdfunding platforms like Kickstarter and Indiegogo. A company in New York called Canary raised money from Indiegogo to build its first prototype [of a home-security system]. That’s helped spur a lot of innovation because individuals or small companies can raise money. Some of the manufacturing that was done in China, it’s starting to make sense to bring that back to where the consumers are.
New York City has been a leading center of companies in this space, including Quirky, Makerbot (which was sold), Shapeway, and Kickstarter. Our fund has made some investments to support the underlying infrastructure in this area. We provided a loan to Shapeway for a production facility in Long Island City. There are also new labs in the Brooklyn Navy Yard which are still under construction and will open next year with software, hardware, and equipment for people to use. We’re hoping it will make sense for some of them to do that first batch production here. We think that’s a very exciting area in New York because it plays to the strength of software and design here. We are in the process of figuring out what our next steps should be in supporting the growth of this sector.
What is the Partnership Fund up to in digital health, another of your focus areas?
At the federal level, there was the Bush initiative for digitizing health records, then Obamacare. Now, in New York, there is a big redesign of the Medicaid medical system. Some of the financial risks of patients’ heathcare is being shifted to providers. There are 5 million Medicaid patients in New York. These were all moved to a “health home.” The home has to help them manage their care for chronic diseases, make sure follow up happens, recommend diet, and keep track of medicine. Those diseases that can be managed are managed with early intervention. This has led the hospitals to look for new technologies that they can adopt.
We work with 20 providers. They are interested in patient engagement, workflow management, and care coordination. The hospitals select the companies [in the Partnership Fund’s startup accelerator] and do mentoring. Our first class included Curator, for secure messaging within a hospital that raised a series B [venture funding round] this year. They developed a product to track hospital readmissions across a region.
Our partner is the New York E-Heath Collaborative. They are working on a patient portal for all your records. They have all the hospital systems connected. The network is called the State Health Information Network for New York and known as SHIN-NY.
What is missing here in New York City?
Part of what [the new campus for] Cornell-Technion is addressing is deep and robust engineering expertise. Look at Silicon Valley: it’s anchored by deep, prominent engineering schools. Until Cornell-Technion, New York City did not have an engineering school with that depth. None of our programs were at the scale of MIT or CalTech. Bringing a world-class engineering school to NYC will be additive because it’s something we were lacking. A lot of what happened in New York was applied tech, not core tech. Columbia is also building a new engineering campus and NYU is making a big investment to expand their engineering program with a new building in Brooklyn for urban engineering.
As biology moves into other sectors like IT and sensors, there are very interesting possibilities for New York. We also have a new genome center here.
And what could other cities and regions learn from New York?
Endeavor did a report mapping the digital media sector in New York and how it grew. It focused on the relationships between entrepreneurs and how they supported the next generation. If you’re starting de novo, you want to get entrepreneurs involved. You can see the ripple effects. That’s really powerful.