Bruce Brodoff Communications
Bruce Brodoff Communications
High Tech Opportunities in New York City

There has never been a better time to do business in New York City. Our economy is stronger than ever, and much of this success is due to the City's burgeoning high-tech industry.

Mayor Giuliani recognized early on the importance of this industry, and nurtured it with numerous innovative programs that have made New York City the e-business capital of the world. Under Mayor Giuliani's leadership, New York City's high-tech industry has grown from a handful of companies to almost 4,000 high-tech related companies that employ approximately 140,000 workers.

This is up from 2,600 companies and 55,000 workers in 1997, and it is expected that by 2002 the City's high-tech workforce will reach almost 260,000 employees.

Revenues generated by New York City's high-tech industry grew to $9.2 billion in 1999 from $2.8 billion in 1997, and our high technology industry is now a leader in the global technology marketplace.

Venture Capital in New York City

With the success of Internet companies in the New York City metropolitan area, Silicon Alley now has an abundance of new and newly expanded venture capital funds and continues to grow at an astonishing rate.

According to VentureOne, a San Francisco-based market research firm, Silicon Alley venture investments registered an annual growth rate of 205 percent last year, compared with a 145 percent increase in Silicon Valley.

A recently released PricewaterhouseCoopers Moneytree survey reported that venture capital investments in New York metro-area new media-related companies reached $263 million in 1999, a 177 percent increase over 1998. Investment in the metropolitan area's networking and equipment related companies grew 155 percent, reaching $171 million in 1999. In addition, 40 New York City∆based new media companies raised more than $1 billion in initial public offerings last year.

Despite the recent challenges to this industry, there is still plenty of good news to report.

PricewaterhouseCoopers' Moneytree also reported that New York Metro Area companies attracted nearly $1.4 billion in venture capital funding in the First quarter of 2000, with New York metro area new media companies accounting for more than $123 million. During the first quarter of 2000, investment in the metropolitan area's networking and equipment-related companies totaled $7.3 million.

According to the Private Equity Analyst newsletter, New York City led in total private equity fund-raising with $21.3 billion during the first half of 2000. The newsletter also reported that U.S. venture capital funds raised $25.2 billion in the first half of 2000, almost three times the amount raised in the first half of 1999, and that the venture capital total for this year is on track to beat the $35.6 billion raised in 1999.

The number of Silicon Valley venture capitalists who are expanding into the City is an excellent indication of just how hot New York City is. Among others, Draper Fisher Jurvetson recently opened Draper Fisher Gotham, and Michael Dell's brother, Adam Dell, gave up a partnership in a Silicon Valley firm last year to start Impact Venture Partners, a 100 million-dollar NYC-based fund devoted to business-to-business Internet investments.

New York City∆based venture capital firms are also investing heavily in New York City companies. One such company, Baker Capital, recently closed a new $1.1 billion fund, which rivals the funds raised this year by more established West Coast venture firms.

Investments by the City of New York

With all the attention paid to private venture capital funds, it might surprise some to learn that the City of New York is also a major player in the funding of high-tech companies.

Among the innovative programs that the Giuliani Administration instituted to promote this industry is the Discovery Fund, a high-tech venture capital fund that launched four years ago to assist growing New York City-based advanced technology companies.

The Discovery Fund is a unique and innovative public-private equity investment fund managed by Prospect Street Ventures. Its investors include The New York City Economic Development Corporation (EDC), Keyspan Energy, Con Edison and the New York Power Authority.

As the first New York City-based venture capital fund to focus on local information technology businesses, the Discovery Fund pioneered Silicon Alley venture capital activity and has invested in some of the City's most promising companies. These companies, such as 24/7 Media, About.com, Multex, Promotions.com, Juno Online Services, and many others have greatly contributed to shaping today's dynamic landscape of Silicon Alley.

The Discovery Fund, which is capitalized at $76 million, and a related co-investment fund have invested in 17 companies with a market value of $245.8 million on total invested capital of $61.6 million. The 17 portfolio companies, all based in New York City, have attracted nearly $1 billion of total investment from other investors in addition to the Discovery Fund. Collectively, these portfolio companies have retained or created more than 2,000 "new economy" jobs in New York City. The fund has also helped attract over $672 million in third-party capital to its portfolio companies.

The Discovery Fund also allowed the City to leverage a $10 million investment into a vehicle that will help create thousands of additional jobs.

Due to its strong return on investment and its tremendous impact on New York City's economy, Mayor Giuliani just announced that EDC, on behalf of the City, will reinvest in the Prospect Street NYC Discovery Fund in an effort to further stimulate the growth of the City's technology industries. With this reinvestment, the fund is expected to increase its capitalization to more than $175 million.

Emerging Industry Funds

Another initiative is the Emerging Industries Fund, a $25 million venture capital fund to provide equity and/or debt financing for small, fast growing companies in New York City. A portion of the Fund may also be used to develop technology programs and commercialization in the City.

Designed to assist companies seeking first-round investment, the fund will be available to companies in the Internet, biotechnology, software and telecommunications industries.

The Fund's investments may range from $100,000 to $1,500,000 with an emphasis on investments of less than $750,000, and may be structured as debt, equity or a combination of the two. All companies eligible for assistance by the fund must be located in, or moving to, New York City.

Paramount Capital has been selected to serve as biotechnology investment advisor and Draper Fisher Jurvetson Gotham will serve as high-tech investment advisor.

We have received over 100 different business plans, and expect to make some investments in the first quarter of 2001.

Digital NYC: Wired to the World

Another way the Giuliani administration is aiding the high-tech industry is by helping to establish affordable, Internet-ready office space beyond the traditional boundaries of Silicon Alley in Manhattan.

We are doing this is by expanding the successful Plug 'n' Go program, which the City created in 1997 to provide wired space for start-up and expanding high-tech companies. Since 1997 Plug Ôn' Go has leased more than 550,000 square feet of space in Lower Manhattan.

Digital NYC: Wired to the World is a marketing program that will establish high-tech districts in neighborhoods in all five boroughs, offering more than 200,000 square feet of wired, affordable space. Each district will be managed by a not-for-profit entity in partnership with building owners and technology service providers. In some cases, educational institutions and industry associations are also involved in the partnerships.

Under the program each district will receive a grant for a portion of marketing expenses and services for two years, and EDC expects to spend over $2.5 million on the program. Companies locating in any of these districts may be eligible for a number of benefits that may include tax credits, real estate tax abatements and reductions, utility discounts, and access to financing.

The following high-tech districts have office space available immediately, and may be contacted directly for more information:

SI HUB, St. George, Staten Island (718-477-1400; siedc@admin.con2.com)

HIWAY 125 on 125th Street in Harlem (212-410-0030, ext. 125; info@hiway125.org)

BROADBAND BROOKLYN (718-875-1000; brooklynchamber@worldnet.att.net)

(Broadband Brooklyn encompasses the following areas: siliconharbor.org in Red Hook; Downtown/DUMBO; the Brooklyn Information Technology Center at Bush Terminal in Sunset Park; and the Brooklyn Navy Yard).

CYBERCITY@LIC, the Long Island City High Technology District in Queens (718-786-5300, ext. 22; www.licbdc.org)

The BronxSmart District in the South Bronx is also participating in this program and will have office space available for lease later this year.

How We Can Help

For the past five years the Giuliani Administration has done a great deal of work to help create and expand New York City's increasingly important high-tech industry. The Mayor and the City are committed to helping entrepreneurs start or expand businesses in New York City.

For more information on how we can help you, please visit our website (www.newyorkbiz.com), or call 212-312-3600 (Toll free outside New York City: 888-NYC-0100).

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