Transforming a city into a tech innovation leader

As part of our research of urban innovation ecosystems, we have been working in New York City to identify successful policies to develop sustainable tech innovation ecosystems in cities.  New York can seem a very far away example to many cities (it is one on the largest cities of the world, the GDP per capita is high and it is very well connected internationally, making it easier to attract talent, etc.); however,  when New York turned into developing a tech startup ecosystem, it faced similar problems as any other city: there was not enough critical mass or community to form the ecosystem, talent was not adequate, believe it or not, there was no financing (seed capital) interested in invested in tech entrepreneurs in the city, etc… (see below).  The policies the city applied, which focused on creating bottom-up organic communities to sustain and growth the ecosystem have resulted in a success.  Today, the city hosts one of the largest and most vibrant tech startup ecosystems in the world.  In this blog post we summarized the case of New York and the lessons we have been finding, which is part of a paper I am working on.  In our research for urban innovation ecosystems we are doing a deeper analysis of the policies applied in different cities for our research and we will continue providing findings.

New York City: The creation of a sustainable and vibrant tech innovation ecosystem

New York City has experienced one of the largest growths in the development of a technology-based innovation ecosystem in the world. From 2006, when the technology-led ecosystem was almost anecdotic in the city, to 2013, the city has become the second-largest technology-based innovation ecosystem in the United States, with almost US$2.5 million of venture capital (VC) investment. The New York ecosystem grew by 3.5 times in VC investments in start-ups and almost tripled the number of exits above US$0.5 billion. This also has implications in job creation, where the city technology ecosystem is estimated to generate more than half a million jobs; 250,000 of which are direct jobs.

The surge of New York City’s tech innovation ecosystem is not random; it has been the result of the active support of city hall, with targeted strategy and policy actions. New York consciously followed this strategy to create new sources of income and competitiveness at the time the financial crisis occurred. Despite the size and significance of New York, the challenges faced by the city to develop a technology-based innovation ecosystem were very similar to those facing many other cities, including (i) lack of technology-specialized talent, (ii) insufficient sources of seed capital for start-ups, (iii) lack of physical space for entrepreneurs, and (iv) a limited and uncoordinated community of tech-led innovators and entrepreneurs.

New York addressed these challenges through a strategic program with targeted policies, including (i) promoting collaborator spaces linked to mentor networks and incubators, (ii) fostering entrepreneurial fund to attract VCs into New York start-ups, (iii) attracting engineering schools to develop programs in the city and providing basic skills training and access to open hardware tools in public spaces (for example, libraries), and (iv) energizing the community through competitions and challenges (based on city problems). This last strategy is accomplished by opening data, developing mentorship networks for tech entrepreneurs, and promotion of the tech community by the city, including promotion campaigns, support of high-ranking city officials, and public awards. These actions were conducted in partnership with the community and private sector, thereby providing incentives to the latter. The focus on community development, collaboration spaces and mentorship networks proved to be a success, attracting a community that is self-sustainable and continues to grow.

The success in developing a sustainable technology-led innovation ecosystem presents lessons for cities around the world, in both developed and developing countries. As its ecosystem grew, New York also actively engaged poor neighborhoods through training and integration into new employment opportunities generated by the ecosystem. Almost half of the jobs generated in the New York tech ecosystem do not require a bachelor’s degree. Pilot initiatives targeting poor and unskilled population from neighborhoods, such as Coalition for Queens, confirm that rapid skills training with mentorship results in direct employability. Further, almost a quarter of New York tech start-up founders do not have any technical background, and most of these start-ups focus on non-tech sectors, introducing technology-driven innovation to existing industries and businesses.

New York has been able to develop one of the largest tech-innovation ecosystems with limited tech talent, which is a constraint many cities face.

New York is not the only city applying these policies and support. Other cities—including Amsterdam, Barcelona, Helsinki, and London, to name a few—are also actively supporting the growth and sustainability of their innovation ecosystems with similar policies and areas of focus targeted to their local needs.

Presentation: Tech Innovation Ecosystems – The Case of New York City  presentationnew_york_ecosystem_nov2014.pdf

This post first appeared on The World Bank Blog

Author: Victor Mulas is an ICT Policy Specialist at World Bank. Hallie Applebaum is a Consultant, Innovation Labs at World Bank.

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