Going Beyond Early Promises, NY Works On Its Follow-Through (Part 1)

After much clamor about becoming a sanctuary for startups, New York faces the “now what?” stage of its growth as a tech hub.

Plans have been laid down to fill the streets with engineers—in another decade or two. But that does not mean this community is waiting around for the Cornell NYC Tech campus to open. Companies in the city such as Tumblr are scaling up, as CEO and founder David Karp explained at Xconomy’s recent New York Venture Challenge forum.

Karp spoke at the event particularly about his founder-investor relationship with backer Bijan Sabet, managing partner at Spark Capital. Roger Ehrenberg, founder and managing partner of IA Ventures, served as their moderator. What helped Tumblr find its way, Karp said, was looking to experienced board members such as Sabet for support as the company grew.

“Tumblr is 170 people, will be 200 by the end of the year,” Karp said. “I never worked at a company that big and certainly never ran a company that big. Bijan has.”

While doting on Tumblr, Sabet said he is also careful about getting too hands-on with his advice for the company. “I find myself trying not to be the guy in the back of the plane telling the pilot how to fly,” he said. “Tumblr is David’s baby.”

Building Tumblr in New York, Karp said, has far from impeded its ability to attract tech talent from other parts of the country. “We’ve done a stellar job of building a world-class engineering effort here in New York,” he said. “About half of them are relocated, and a good chunk of those are from the West Coast.”

Tumblr is just one example of a tech company climbing up among the skyscrapers and big enterprises in this landscape. “We set out to build a company that was built to last,” said AppNexus President Michael Rubenstein, whose company hosted the forum. “In the New York tech scene, that is a tall order.”

Rubenstein said AppNexus, which developed a platform for real-time online advertising, as of late April had hired its 550th employee and planned to occupy two additional floors at its current address. “That will allow us to house over 1,000 employees in this building,” he said.

Brian Cohen did not hold back his concerns about New York's entrepreneurial community.

For all the promise heaped on the city, though, stark candor is also emerging in the New York community. Brian Cohen, chairman of New York Angels, demanded at the forum that distracted entrepreneurs in the audience put down their smartphones and pay attention. He spoke out strongly about investors coddling entrepreneurs of late and called for tougher love from those who call themselves mentors.

“What happened to our ability to argue and fight with each other and say, ‘That idea sucks’?” he asked. “Or ‘That idea is not where it needs to be.’” Cohen hit on issues founders need to address such as forming strategies to pursue after they have raised money. “I am seeing a lack of rigor in the entrepreneurial community in New York City,” he said. “That’s scary.”

He also talked bluntly about angel investors shouldering responsibility for carelessly tossing around funding. “The angels of America have invested so much stupid money into stupid ideas, they are going through angel exhaustion right now,” Cohen said.

In response to these issues, Cohen said he’s putting together what he called a devil’s advocate council in New York. “If you, as a startup, want to get your head handed to you and beaten up—intelligently, professionally, appropriately—we will put together a team to give you the best of what we’ve got to make you as smart as you possibly can be,” he said.

Will his plans silence doubters who keep waiting for the New York entrepreneurial scene to implode? Perhaps not, but many more efforts are underway to push this community to another phase of development.

On Friday, I will have a recap from a panel I am moderating on “What’s Next for the New York Ecosystem?” at the Worldwide Investor Network’s Funding the Best in Global Innovation event.

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