Why European startups are choosing New York over Silicon Valley

Editor’s note: This is a guest post by Carlos Eduardo Espinal and Scott Sage. Carlos is a Partner at Seedcamp, an early stage mentoring and investment program based in Europe. Scott is an Associate at DFJ Esprit, a leading cross-stage venture capital firm that invests from seed to late stage in European technology and media companies. 

Historically, when deciding where to base their first US office, a European startup’s decision basically came down to the Bay Area or Boston – depending upon which customer segment they were serving. Up until recently, New York was nothing more than a fly over state or, at the very best, a satellite office with a small sales team.

So why are some of Europe’s hottest startups now opening up their first US office just on the other side of the pond in NYC? Why are investors increasingly coming to NYC to find the newest and most innovative start-ups? These are the questions that we’d like to address in this post.

To begin with, let’s look at the main reasons why start-ups are finding establishing a presence in NYC increasingly attractive:

• New York is closer than Silicon Valley for European investment and start-up hubs such as London, Berlin, and Paris. Naturally, this proximity leads to reduced time zone pressures for distributed teams working on projects together via VoIP
• New York has its own strong and vibrant start-up ecosystem which helps new companies feel right at home as well as find support from those that have tackled similar problems already
• New York’s large immigrant pool allows newly arrived companies to readily find cultural similarities between their home countries and groups within NYC.
• There are great academic resources in and near New York, which helps for both training as well as for hiring talented staff
• New York is also close enough to Boston’s start-up ecosystem and top-tier academic institutions that it is not unheard of to have people take short flights or trips for both investment discussions and hiring decisions.
• New York has some of the world’s leading VC firms and angel investors
• New York is a very important media, fashion, finance, and advertising hub for the world. This allows companies to be close to key partnerships
• New York has a mature set of key start-up service providers such as legal firms, which the ecosystem needs for transacting investments.

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Due to these compelling reasons, we believe investors are increasingly taking notice of start-ups that are based in NYC or moving to NYC from Europe.

However, it’s best to hear why NYC is so important from Entrepreneurs directly. In the words of some founders, NYC represents a key hub because:

“New York and London are deeply connected as financial centers, most of our partners operate in both locations from our perspective. The predominance of financial technology companies in the region maintains a pool of resources with deep understanding of finance.  Also this maintains an ecosystem of financially oriented Angel Groups and VCs.

“There is an extremely fast-growing start-up culture that is increasingly attracting more talent from the top schools in the country located in the NY to Boston region and away from other industries.  It has been much easier to attract talented interns from Ivy League schools like Princeton for us. The start-up scene is also very diverse and seems to be in perpetual party mode. :)”

– Cenk Ipeker from Bilbus

“If your clients are media and advertising agencies or publishers then it’s the only place you need to be. I mean, pretty much everyone in these industry, who is not based in NY (or doesn’t have an office there) is a niche player; NY is trying hard to beat SV in attracting start-ups, so newcomers from Europe that chose NYC over Silicon Valley are praised (which can give you easy PR).

“Everything works 24/7 (food, Fedex’es, subway), which is in sync with how startups operate, and time difference (especially to London) is bearable especially for the early birds. I would say that if someone has figured out their business model, has the product, engineering team somewhere outside of NYC and targets agencies, publishers or finance companies then NYC is a great place to come to scale the business.”

– Jay Kazanins from Campalyst

“NY City is like Tallinn, Estonia – fast, lean and very aggressive. SF was too slow for us. Key points for us are: great labour law, low tax, easy to hire, and cheaper tickets between Europe and NY.”

-Kris Hiiemaa from Erply 

“New York has recently become the centre of advertising technology and has some of the world’s leading mobile companies such as PlaceIQ, Mojiva and of course Foursquare.”

– Alex Raham from StrikeAd

 “To really have successful sales, they need to be American. I.e. your customers really want you to have an office with US sales staff who speaks their language”.

– Josh March from Conversocial

“In terms of the latest developments in electronic trading, NYC is the largest target market for us so setting up an office here was always on the cards.”

– Justin Amos from Redkite

In conclusion, we believe NYC has become a key hub for European start-ups looking to maintain a link back to their mother country and wishing to manage distributed teams while having great access to the resources that the North-eastern corridor of the USA has to offer. Additionally, we expect to see an increasing number of cross-Atlantic investments occurring over the next years which will bode well for the European start-up ecosystem overall.

[Disclosure: Bilbus, Campalyst and Erply are Seedcamp portfolio companies, StrikeAd, Conversocial and Redkite are DFJ Esprit portfolio companies]

Image credit: Rainy City