VC Explains The Advantages Of New York City Over San Francisco

GGV Capital venture capital associate Andy Manoske laid out the advantages in a post on Quora, reprinted below with permission:

With regards to venture capital/startup economics and not nightlife, quality of restaurants, and the existence of an actually-functional public transportation system (even though these are all important):

• Direct access to Madison Avenue ad agencies and brands. This is one of the big comparative advantage points for east coast brand management and ad-tech companies like Buddy Media.
• An arguably closer affinity with consumer products and traditional retail. You have a much larger labor market in NYC for executives and strong individual contributors with experience in luxury goods, retail, and in some cases physical supply chain management for these industries.
• A potentially less-competitive recruiting environment for young technical talent. Both NYC and San Francisco / Silicon Valley have access to regional schools with strong computer science and engineering programs. But the startup demand for these graduates in California is much higher due to a much larger startup ecosystem - nearly 3x New York City's by some accounts. The smaller size of NYC's ecosystem means a lower demand for young engineers, which (holding the supply of said engineers constant) leads to a less-competitive recruiting environment and a lower cost per engineer.
• Wall Street. It's arguably easier to find a personal connection to someone at a major bank or east coast hedge fund in NYC than it is in San Francisco. Fintech startups focused on B2B in these areas might thus benefit from more high-quality leads. Also, finding and closing candidates with high finance experience is probably going to be easier in NYC given the abundance of young high-churn banking and PE workers.

All of these points apply just as much for investors as they do for startups. There are a lot of VCs on the east coast with a strong background in consumer products, fintech, and adtech that are based in NYC. Similarly, the strategic investment arms for major east coast financials and east coast brands are also heavily represented in NYC.

We asked Manoske in an email whether he thought New York was ultimately better for entrepreneurship. He said he wouldn't go that far:

I think there isn't an absolute "better" or "worse" for VCs when it comes to geography. San Francisco and Silicon Valley certainly have many regional benefits due to the sheer size of their entrepreneurial community. But many other areas of the country - NYC being one of them - benefit from having unique characteristics conducive to building certain kinds of businesses there.

I covered this a bit in my question, but it's arguably easier to build some kinds of ad tech, consumer internet, and fin tech companies in NYC. The price economics of other critical resource markets (i.e.: hiring engineers) is also potentially better in NYC due to the smaller and less culturally/economically-dominant tech sector in places like Manhattan and Queens.

Where successful companies go, VCs will follow. If you're a VC focused on tech sectors that do very well in NYC for any of the above reasons, it makes a lot of sense to set up shop somewhere very far east of Sand Hill Road. And you can probably do pretty well there too.

You can find more commentary on the advantages of New York City for VCs at Quora.