While Silicon Valley on the West coast has become synonymous with technology, Silicon Alley on the East has become an oasis for Internet content. Development in a depressed district of New York began two years ago in a co-operative venture between real estate and the
digital world. Since then, 55 Broad Street, the New York Information Technology Centre located in the heart of Wall Street, has become Manhattan's hottest wired office building and the focal point of a wider area now dubbed Silicon Alley.
According to its chief technology officer, Mr John Gilbert, the goal was to create a totally wired work environment where small companies could be empowered with the buying power of larger companies and thus compete within the electronic world.
"We basically came up with a new model for real estate to look at bandwidth distribution and offer technology companies a multi-choice of products and carriers at their fingertips," said Mr Gilbert. The "we" refers to Rudin Management Company which is one of the largest privately held real estate entities in the City of New York.
The 400,000 sq ft office building at 55 Broad Street had been lying vacant for five years until Mr William Rudin, president of Rudin Management, spent $45 million (£30 million) equipping it with: seven telecommunications systems; two fibre optic cables and four copper lines; satellite broadcasts from the desktop; 11 Internet providers; six long-distance and five local dial-up phone companies.
Since completion in March 1996, the building has become 100 per cent leased mainly to content creating companies. "We believe it is the epicentre of Silicon Alley," said Mr Gilbert.
Silicon Alley stretches from the Flatiron building, south of 23rd Street to 55 Broad Street. As the Internet took off and browsers became more commonplace among consumers it became clear that there was a market for new media. The first people to jump on the band-wagon were publishers like Conde Nast who thought they could generate revenue from electronic commerce supported by advertising.
Smaller companies with good ideas contacted the Flatiron Partners, the New York Discovery Fund and West Coast venture capital firms for funding. A considerable amount of money also came from so-called "angel" investors who gave money for a small percentage of the firm. Startups generally need about $300,000 to $400,000 in seed money. Most took off by offering content development or Web site services.
"The business-to-business technology companies are the ones that are making money," said Ms Janet Stites, publisher of AlleyCat News, a monthly newsletter for the area. "It is clear that New York is the hub of financial services, the advertising industry and now the hub of media," she said. She added that the development of the Alley was never intended to one-up Silicon Valley. And to demonstrate that point, she is organising a conference in San Francisco next March called the Alley to the Valley.
While 1997 is the year that Silicon Alley grew up, Ms Stites believes 1998 will be the year of the fall-out. Those companies that have had a twoyear lead-in time will either make or break their business.
Some of the winning companies she believes will be N2K Inc, a music Web site for selling cassettes and CDs; DoubleClick, an interactive advertising network which recently received $40 million in funding; and WebGenesis which operates an Internet-based community service called The Globe. WebGenesis recently received a $20 million investment from Mr Michael Egan, former founder and president of Alamo Rent-A-Car who studied at the two young founders' alma mater, Cornell University.
"It's all about relationships and networking and that's why people are in New York," said Ms Stites. "People still need to meet even in the electronic world. They want to work with people they trust." She said that rather than continually look for venture capital, new companies should try to form appropriate strategic alliances to leverage their expertise.
The New York New Media Association together with Coopers & Lybrand recently conducted its second annual survey to gauge the new media business in Manhattan. It found that the biggest category of job creation was in sales and marketing. The number of full-time jobs in the new media business was 32,013 in mid-1997 up from 27,488 at the end of 1996. Over the past year, the number of new media companies doubled to 2,128 compared with 1,175 in early 1996 and annual revenues climbed 56 per cent to $2.8 billion. Nearly a third of the companies have been established in the past 18 months and more than a sixth have folded in the same period. Nearly three-quarters of the employees are under the age of 40.
The survey concluded that the New York area's abundance of artists, designers and writers put it in a good position to capitalise on the growing importance of developing Internet content. The access to software talent and customers, the image and credibility of New York and the availability of technology infrastructure were also primary strengths while the principal challenge was to reduce business costs.
And New York doesn't aim to stop there. The New York Information Technology Centre has now unveiled the ITCWW.net, a global network of smart ready buildings. The first of these outside of New York is Carreras House, an art deco building in Central London which is to have technology spokes to Soho, Paddington and Old Street. It will be London's first Information Technology Centre with direct links to 55 Broad Street and other centres around the world via a Broad Band Global Intranet.
Some 14 similar proposals have already been sent to cities such as Los Angeles, San Francisco, Toronto, Montreal, Vancouver, Tokyo, Berlin, Edinburgh, Paris, Stockholm and Brussels. And if anyone was interested in Dublin, one could conceivably be set up there.
