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Amazon's HQ2 to Boost the Tech Sector in NYC

  • New York-based tech startup executives say they are looking forward to Amazon HQ2's move to the city because they believe it will bring an influx of tech workers along with it.

  • But some warn an economic downturn could make it more difficult for smaller companies to compete.

  • Amazon plans to bring 25,000 jobs to NYC when it builds its "second headquarters" in Long Island City in Queens.

While many New Yorkers are dreading the day Amazon moves into its new "headquarters" in the Long Island City neighborhood of Queens and crowds the subway with 25,000 new workers, there's one group of people welcoming the company with open arms: Executives at other tech firms.

It may seem counter-intuitive that smaller tech companies are eager for a large potential rival to move onto their turf. But New York-based recruiters and tech leaders say they're using a different playbook from Amazon. They theorize Amazon's presence will bring in new tech talent that might not otherwise come to New York.

That could mean those new workers will eventually move on to smaller tech companies or come up with ideas for startups on their own, spurring interest from venture capitalists in the area.

According to interviews with 15 New York-based entrepreneurs, tech executives and venture capitalists, Amazon's move to NYC will lift up the local tech sector across the board, though some warn that it could also make it harder for smaller tech firms to compete for talent in the event of an economic downturn.

"We play the long game when it comes to talent," said Melissa Enbar, VP of People and Culture at Birchbox, an online subscription service for beauty products.

Enbar said people are attracted to smaller firms for different reasons than large ones, like the opportunity to have more exposure and responsibility early on. She said she expects Amazon's move will bring a wave of new talent to the city that a smaller company like Birchbox couldn't afford to relocate on its own.

"Maybe their second job, like after they're done with Amazon, is Birchbox," Enbar said.

Amazon's arrival in New York will certainly mark a significant moment for a city already considered to be the tech hub of the East Coast. Executives and investors said the move reinforces the city as an important place for tech and will help infuse it with venture capital and elite talent.

But what's yet to be seen is how that talent and money will be distributed across the existing tech companies in the city in an already-tight labor market. While New York tech executives are hopeful that Amazon's presence will spread the prosperity around, it may only last as long as the economy remains stable, some warn.

"In my experience in the past, when there's been recessions, there's always been a flight to safety from tech startups to larger companies that can provide more cash and more security," said Dan Finnigan, president and CEO of recruitment platform Jobvite. For Amazon, that means "they could be timing it perfectly."

Still, Finnigan and other tech leaders said Amazon's move will be a net positive for the city's startups. At the very least, they said, it won't change much about the way they're already competing for tech talent.

"To be honest, this is like the fifth time this has happened," said Dennis Crowley, co-founder and executive chairman of Foursquare. Facebook and Google both have major offices in New York, with Google planning to invest another $1 billion in its new Hudson Square campus, following a $2.4 billion purchase of shopping and office complex Chelsea Market earlier this year. Between the two investments, Google said it could double its New York workforce of 7,000 over the next 10 years.

Amazon's impact in New York is largely dependent on the types of jobs it ends up bringing there. Warren Lee, an independent New York-based investor who most recently worked for Canaan Partners, said that Google and Facebook would likely remain the chief rivals for engineering and product talent if Amazon opts to establish less technical projects in New York. Amazon did not respond to requests for comment.

On the other hand, Lee said, Amazon could pose a serious threat to AdTech companies in the city if it builds its advertising arm there, as many suspect was a key motivator to select the marketing mecca. In that case, AdTech companies would have to consider upping their pay and benefits to keep their niche talent, he said. Amazon said it will pay employees an average salary of $150,000 at its Long Island City office.

Reinvigorating New York tech

Amazon's move to New York could shake up the perception that Silicon Valley is the only viable place to be for tech. But it's unlikely to overturn it altogether, entrepreneurs and investors said.

When Google first built New York operation in 2000, "it legitimized New York as a destination for engineering," said Howard Lerman, founder and CEO of New York-based cloud technology company Yext. "The more companies that pick New York as a headquarters, the more likely [engineers are] going to end up staying on the East Coast."

That's a stark contrast from the sentiment around tech even a decade ago. When Eliot Horowitz began the database company MongoDB in 2007, "People thought we were kind of crazy for building a pure tech company in New York," said Horowitz, now the chief technology officer.

"We literally had VCs telling us we wouldn't invest unless you move to the Valley," said Mediaocean co-founder and CEO Bill Wise about his time at a previous company. Even now, he said "I still have people who ask me, 'Oh can you really get good tech talent sitting in New York?'"

But it's not all about showing up the West Coast.

"New York would have a long way to go to dethrone San Francisco, but I don't think people in New York see it as a competition," said Eric Hippeau, managing partner at the New York-based venture capital firm Lerer Hippeau. "It's not a zero-sum game as technology affects pretty much every sector."

Besides growing the talent pool for established companies, Hippeau said, Amazon's move to New York will likely sprout new entrepreneurs.

"You'll find some people who go work for Amazon and Google and Microsoft and some of the other big tech companies and decide to use their skills to start businesses," Hippeau said.

Foursquare and Flatiron Health are two successful New York startups founded by Google alums. Crowley, the Foursquare founder, and Nat Turner, co-founder and CEO of Flatiron Health, both joined Google by way of acquisition before leaving to start new ventures. Swiss pharmaceutical company Roche said in April it completed its acquisition of Flatiron Health for a value of $1.9 billion, "on a fully diluted basis, subject to certain adjustments." Foursquare declined to disclose its valuation for its latest $33 million funding round in October, but said it increased its valuation from 2016 which was reportedly around $325 million, according to the New York Times.

Finnigan, the Jobvite CEO, said Amazon's move to New York will mark the beginning of a cycle of investment.

"Amazon's presence will attract capital that will seek out the Amazon alumni," Finnigan said. Any initial fear startups had about Amazon's move to New York seems to have abated for now. "I'm looking at Amazon the same way I look at J.P. Morgan" and others, said Lorna Hagen, chief people officer at human resources software company Namely. "All in New York, all enormous and all looking to take our talent."

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