A recent report by CNN suggests that the rapidly growing New York City tech scene is boosting competition among investors and, consequently, leading to higher startup valuations and creating a bubble that may pop in isolated segments or perhaps even in a market wide burst.
New York City has become something of a competitor to Silicon Valley in recent years, as hot new tech startups such as foursquare, Tumblr, GroupMe and Etsy have caught the attention of angel investors and venture capitalists. Even West Coast luminaries such as Google are seeking talent in the Big Apple. The Mountain View, California-based tech giant even recently purchased a massive high-tech building in Chelsea for $2 billion.
The craze has led to competition among investors, CNN reports, that may be causing risky business valuations among startups seeking to incorporate in New York City.
However, analysts such as Adrianne Jeffries of the New York Observer are quick to point out that the threat is nowhere near as dangerous as the burst of the dotcom bubble in 2000, where web startups were going public at an alarming rate and spreading risky capital throughout the market. The current New York bubble is limited to investors.
"My prediction of what will happen is that there could be a meltdown in the New York tech scene," Lawrence Lenihan, managing director of New York-based FirstMark Capital, told CNN."But it's like a forest fire: It's good, it clears out the dead wood."
Tags : ny, small business management
Posted: Dec 20th, 2010