By JENNIFER MALONEY
New York has the nation’s fastest-growing tech sector and has surpassed Boston as the No. 2 hub, behind Silicon Valley, for Internet and mobile technologies, according to a report released Wednesday by the Center for an Urban Future.
The study, funded by the Association for a Better New York and ATT New York, compiled data on 486 digital start-ups formed in New York between 2007 and 2011 that received angel, venture-capital or other outside funding.
“New York for a long time has badly needed to diversify its economy to rely less on Wall Street,” said Jonathan Bowles, executive director of the Center for Urban Future and co-author of the report. “Tech is providing such a boost for New York…It’s attracting capital from outside the city. It’s luring incredibly smart people to New York that otherwise would have stayed in Silicon Valley or Boston.”
Of the seven leading technology centers in the U.S., New York was the only one to see an increase in venture-capital deals, which are predominantly, though not exclusively, with tech companies, according to the analysis. Nationally, there was an 11% decline in venture-capital deals.
In the last five years, information-technology jobs in the city have increased by 29% to 52,900 from 41,100, according to the center’s analysis.
Ramsay de Give for The Wall Street Journal
Inside the offices of Etsy Inc., an online marketplace for crafts, in Brooklyn’s start-up-heavy Dumbo neighborhood.
The report gives substance to what tech-sector observers say they have been seeing over the past few years: an explosion of tech start-ups in Manhattan neighborhoods such as the Flatiron District, Hudson Square and SoHo, and more recently in Dumbo in Brooklyn.
“When I walk around Dumbo, you see a lot of web designers and engineers talking about building websites,” said Chad Dickerson, CEO of Etsy, which was founded in Brooklyn in 2005. “It definitely has the feel of a burgeoning tech sector.”
Mr. Dickerson said he moved to New York in 2008 after working for a decade in Silicon Valley.
His career path mirrors a shift of more than a dozen established tech start-ups, which have moved to New York in recent years from the San Francisco Bay area, Boston and other places, according to the report.
New York is drawing tech companies in part because much of the innovation happening now is connected to industries that are centered in New York: advertising, fashion, financial services and media.
“The technology world needs expertise that it hasn’t needed in the past,” said Seth Pinsky, president of the New York City Economic Development Corp.
Another big draw: Google’s 2010 purchase of a former freight warehouse in Chelsea. The company’s move signaled the tech world was taking New York seriously and has acted as a magnet, pulling other digital companies to the city.
The 10 New York tech start-ups that received more than $50 million in funding between 2007 and 2011 include Gilt Groupe, an online designer fashion sales company; ZocDoc, a platform for finding and booking appointments with doctors; Tumblr; and Foursquare.
The city’s support services also have grown to accommodate start-ups.
The city now has more than a dozen incubators and co-working spaces, up from just a few in 2009.
Still, challenges remain for the future growth of the sector. Tech companies have cited a lack of engineers and the need for better broadband infrastructure, said Bill Rudin, chairman of the Association for a Better New York.
The planned Cornell University-Technion Applied Sciences Campus, coming to Roosevelt Island, should help, he said.
Mr. Pinsky said the city is working on improving broadband infrastructure and creating even more incubator space for start-ups.
The demand for real estate in downtown neighborhoods by tech companies and others attracted by the “cool factor” of start-ups has led to plummeting vacancy rates in SoHo, Herald Square, the Flatiron District and Chelsea, said Ken Fishel, president of president of Legacy Real Estate, a commercial real estate company.
“It’s a tectonic shift in which the center of Manhattan has, from a commercial standpoint, moved south and west,” he said.
Write to Jennifer Maloney at firstname.lastname@example.org
A version of this article appeared May 10, 2012, on page A17 in some U.S. editions of The Wall Street Journal, with the headline: Tech Boom Sets Pace.