Silicon Alley Could Measure Up To Silicon Valley And China's Own Dragon

In visits with various venture capitalists around town in NY, it has struck me that the city has a more congenial environment for startups and their investors than hotspots such as Silicon Valley and Beijing.

That could be because there’s simply less competition for deals in New York than with these two other tech locations.

New York has developed into the second-largest venture market in the U.S. but it’s still small compared with the Valley, points out David Teten, a managing partner at HOF Capital in the city’s happening startup district in the West 20s. He adds that while there may be as many as 400 venture capitalists in California, that number compares to only dozens in Silicon Alley.

The New York-based venture market is about one-third the size of that of Sand Hill Road and surrounding areas in Northern California, measured by both dollars and deals, according to various market studies.

Valuations for deals are also more realistic in New York City than Silicon Valley, say VCs with an East Coast tilt. “It’s rare to have a competitive round of financing in New York,” says Teten.

But as valuations for New York-based startups are on the incline, expect to see some VCs turn down investments where valuations are too high. That’s already a familiar scenario in Silicon Valley and China.

Google, Facebook and eBay are just some of the U.S. tech titans that have set up offices in New York to capture this new startup spirit in the city and forge ahead.

Silicon Valley is also getting competition from Silicon Alley for frontier technologies. Oliver Mitchell, founding partner of Autonomy Ventures, is a specialist in emerging technologies. He has a particular focus on robotics and how it’s changing lifestyles, business and production. He’s known (seriously) as the Robot Rabbi.

New York City is capturing tech talent too that might have gone to the Valley in the past. Millennials (and others) like to live close by their work, and would just as soon avoid the traffic jams and long commutes in the Valley. In the city, you can have as many as five meetings a day. In the Valley, you’re lucky if it’s three.

Moreover, New York’s startup scene is becoming decidedly more global. Whereas California has a large Asian stronghold, New York attracts startups from those who tend to be from Europe, Israel and the Americas. Increasingly too, New York-based founders are looking globally for expansion opportunities for their startups. Just like on the West Coast, China remains a popular destination because of the sheer size of its market and potential for success, at least if you know the market.

All this is not to mention the several new governmental-backed initiatives for New York-based startups to go outbound -- and that in turn can help to boost the city’s economic expansion. Judging by the number of new construction projects in New York (including the new Jacobs Technion-Cornell campus on Roosevelt Island) and the clustering of startup communities, accelerators, incubators and co-working spaces along the West Side, clear progress is being made even though the climate may not always be so pleasurable as in California.

Rebecca A. Fannin is founder/editor of news and events group Silicon Dragon, author of three books on innovation trends, and a contributor to Forbes, CNBC and special reports.