Is New York Really the World’s Second-Best Place for Startups?

Entrepreneurs and startup investors have been singing the praises of the Big Apple quite a bit lately.

At last week’s PartnerConnect conference, Jeff Bussgang of Flybridge Capital Partners, Eric Hippeau of Lerer Ventures, and George Arnold of Knightsbridge Advisors were among the VCs and limited partners who listed New York as a fast-growing hotspot for startup activity. Whereas aspiring entrepreneurs used to stick it out in New England, Bussgang, a Bostonian, says more founders are planning moves to Manhattan.  About a third of students surveyed in his Harvard Business School entrepreneurship class expect to relocate there.

Exits are happening, too. Lerer, an early-stage firm founded in 2010, has already sold at least two of its New York-based portfolio companies: social media startups GroupMe and HyperPublic. More money is going to the region as well. According to the MoneyTree report, companies in the New York metro area raised $2.73 billion in venture funding in 2011, up from $1.98 billion in 2010.

But while New York City may be the fashionable place for startups today, does the metro area really have the infrastructure to support a thriving entrepreneurial ecosystem over the long term? According to a new report, the answer appears to be “yes.”

The Startup Genome Project, a research collaboration that crunches data from about 16,000 startups worldwide, ranked New York as the second-best technology hub on the planet. The region trailed Silicon Valley by a wide margin, but handily beat the other top U.S. metros for startups – Los Angeles, Seattle, and Boston – by a wide margin. Other findings from the report include:

  • The Silicon Valley startup ecosystem continues to lead the way, but the gap is growing smaller every year. Silicon Valley’s ecosystem is currently 3 times bigger than New York City, 4.5 times bigger than London, 12.5 times bigger than Berlin, and 38 times larger than Boulder.
  • On average, Silicon Valley startups raise two to three times more money in the first three stages of development: discovery, validation, and efficiency. But in the scale stage, compared to Silicon Valley, New York City startups raise 27% more money and London startups raise 30% more money.
  • The number of high-risk companies decreases steadily through the startup lifecycle, except in New York City, where the number of high-risk companies spikes from 45% to 67%, and has 4 times more high-risk companies in the scale stage than Silicon Valley.
  • Entrepreneurs in Silicon Valley are much more “ambitious” than entrepreneurs in New York City and London. Silicon Valley entrepreneurs are 22% more likely to estimate their market size as greater than $10 billion compared to New York City entrepreneurs and 120% more likely than entrepreneurs in London. They are also almost 2 times less likely to estimate their market size to be less than $100 million.
  • Companies in Silicon Valley work 35% more than companies in New York City. In Silicon Valley, teams work 9.5 hours a day on average vs. 8 hours in London and 7 in New York City.
  • New York City has almost double the female founders of Silicon Valley and London (80-20 vs. 90/10 ratios, respectively).

Startup Genome  also ranked what it considers the world’s top 25 startup ecosystems, ordered by what it calls their “average throughput.” They are:

1.    Silicon Valley (San Francisco, Palo Alto, San Jose, Oakland)
2.    New York City (NYC, Brooklyn)
3.    London
4.    Toronto
5.    Tel Aviv
6.    Los Angeles
7.    Singapore
8.    Sao Paulo
9.    Bangalore
10.  Moscow
11.  Paris
12.  Santiago
13.  Seattle
14.  Madrid
15.  Chicago
16.  Vancouver
17.  Berlin
18.  Boston
19.  Austin
20.  Mumbai
21.  Sydney
22.  Melbourne
23.  Warsaw
24.  Washington D.C.
25.  Montreal