Why Yahoo Buying Tumblr Is Not Great For NYC's Tech Scene

http://www.forbes.com/sites/ciocentral/2013/05/24/why-yahoo-buying-tumblr-is-not-great-for-the-nyc-tech-scene/

by jmduke • 13 years ago

29 28 13 years ago

ChuckMcM• 13 years ago

Its an interesting thesis. I too have noticed that there are many fewer 'tech billionaires' in NYC than in the Bay Area. But the investment percentages of money are what really seem telling to me. People tend to invest in what they know, and if banking and trading are the things that made people wealthy, they are more likely to invest in new banking/tradiing schemes than tech schemes which they don't have a deep understanding of the mechanics for.

We hit this cognitive wall here in these discussions all the time, which basically is the difference between how difficult something looks versus how difficult something is. And while I've done some Angel type investing in the past I only have done so with other tech startups because that is something I've done from the ground up so I really feel like I can understand it, but I would never feel comfortable funding a new trading scheme or HFT algorithm because I could not dive down to the bottom of the idea if I was uncomfortable and re-assure myself. It would feel way too much like the gambling it is and so I don't do it.

samspenc• 13 years ago

Or Tumblr could have gone under. In which case it would have been moot.

At least this way there's now some focus on the NYC tech scene, which I think is pretty exciting.

nissimk2• 13 years ago

"Another way to put it is that there are lots of billionaires, just no tech-billionaires." False.

From your hedge fund list, at least James Simons and David Shaw are tech billionaires and probably some more that I don't recognize. Also, one of the most successful NYC tech billionaires your forgetting: Michael Bloomberg. Although all of these guys are finance/tech it is still tech.

Comparison of the size of venture capital funds is probably accurate, but that is changing as well.

rayiner4• 13 years ago

Relevant biographical info: "David Elliot Shaw (born March 29, 1951) is a Jewish-American computer scientist and computational biochemist who founded D. E. Shaw & Co... A former faculty member in the computer science department at Columbia University, Shaw made his fortune exploiting inefficiencies in financial markets with the help of state-of-the-art high speed computer networks."

D. E. Shaw & Co. also hires a ton of STEM folks. Also: "D. E. Shaw Research (DESRES) is a computational biochemistry research laboratory based in New York City. Under the scientific direction of David E. Shaw, the group's chief scientist, D. E. Shaw Research develops technologies for molecular dynamics simulations (including Anton,[1] [2] a massively parallel special-purpose supercomputer, and Desmond,[3] a software package for use on conventional computers and computer clusters) and applies such simulations to basic scientific research in structural biology and biochemistry, and to the process of computer-aided drug design."

busterarm7• 13 years ago

I used to work for DESCO. Some seriously smart folks there and especially in the DESRES group.

That's the thing though. The top engineering talent goes to financial companies in New York because that's what's fashionable there. There's an actual cultural difference.

There's one other big cultural difference that has an affect on who wants to do tech startups. In SV people care about "What can you do?/What have you done?" where in NY it's more "Where did you go to school?/What's your pedigree?" and in my experience, Ivy Leaguers are generally funneled into Finance. There is a lot of money spent on recruiting them, so it's easier to just take the hedge fund job out of school than go work for or found a startup.

When Jeff Bezos, who used to work for DESCO, founded Amazon, he didn't do it in New York.

pvdm• 13 years ago

Jeff Bezos worked for D.E. Shaw before starting Amazon.

der3k3• 13 years ago

You're obviously correct, but as Michael Arrington not long ago said, "Oh come on, Bloomberg doesn't count." And I feel like 90% of HN would agree w/ that sentiment.

rayiner4• 13 years ago

That's rich, given that Bloomberg has a degree in electrical engineering while Arrington has ones in economics and law. Bloomberg made his fortunate literally selling computers.

carterschonwald• 13 years ago

I think there's enough other tech companies going on in NYC that it frankly doesn't matter. (Modern journalism is often borderline link bait as is).

Tying an entire ecosystems vitality to one company that was making a blogging platform, wrong and boring. That is all.

There's so many interesting companies that are both in the black AND have neat tech challenges in NYC. You just have to take the time to look. Admittedly most of these businesses are boring or opaque to those who don't deeply know tech or aren't familiar with the specific vertical, but all the better for those businesses! They get to focus on their customers and product and evade a publicity circle jerk with folks who don't understand their business.

potatolicious• 13 years ago

The Tumblr acquisition was the best possible outcome for the NYC startup scene.

The author is right that for NYC to really try to claim competitiveness with the Bay Area they need some big exits that establish anchor tenant companies. They need their own Google, or Sun, or Facebook.

But let's be honest, Tumblr was never that company. They didn't, don't, and probably will never have the kind of revenue required to be a Google or a Facebook. Tumblr took Yahoo's offer because a massive IPO and becoming a giant amongst NYC's tech companies was clearly not going to happen.

So they did the next best thing: they showed that large, successful exits are possible in NYC startups.

We're still waiting for a Google here, and it'll probably take years to get one, but Tumblr was anything but bad for the local tech scene.

Why Yahoo Buying Tumblr Is Not Great For NYC's Tech Scene

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