SIPA’s Entrepreneurship & Policy Initiative Working Paper Series Silicon Alley: A Framework for New York City’s Entrepreneurship Ecosystem and its Public Policy Considerations By Hollie Russon GilmanI Executive summary In the last decade, there has been no dearth of lit- As cities like New York emerge as hubs of innovation erature seeking to defne “innovation.” Literature resolved in using technology and engaging non-gov- spans the globe, outlining characteristics that include ernmental actors, this white paper pursues an analysis multi-sector stakeholder engagement, horizontal and of the actors in the urban innovation ecosystem to pin- lateral collaboration, and the use of diferent technol- point what makes these ecosystems distinct from their ogies. Yet, in defning and distinguishing innovation suburban counterparts. New York is unique in the way ecosystems, experts and actors are often in dialogue it describes innovation and entrepreneurs, pursuing an to the standard set by Silicon Valley, which is not a open and loose defnition, enabling it to engage stake- sufciently comprehensive lens through which to look holders and actors in a way that other places cannot. at the innovation ecosystems emerging within urban By bringing multiple perspectives and stakeholders into areas as these are rapidly evolving and changing. Fur- the fold, New York is able to pursue entrepreneurship thermore, it is pertinent to assess not only the use of hand in hand with civic duties, fostering an environ- diferent technologies but also its disruptive role in the ment that centers public and social good in many cases. economy, workforce, and skills, which have a large Actors then blur the boundaries between being entre- impact in shaping entrepreneurship ecosystems. preneurs, public servants, and civil society members. In each quarter of 2017, New York City surpassed San This paper explores the urban dynamics of innova- Francisco in venture capital funding. Moreover, where tion ecosystems, focusing on the role of New York in seed and Series A funding increased across the board, fostering and orchestrating them. Section I analyzes an uptick in Series C funding in New York shows the the disruptive role of emerging technologies in soci- pervasiveness and maturity of New York as a true hub ety, focusing on workforce and skills. Section II defnes of entrepreneurship. With more people moving to cit- urban innovation ecosystems, assesses the forces that ies than ever before, it is time to look at what makes are propelling this new spatial geography of innova- cities innovation districts distinct from Silicon Valley tion, and provides insights into redefning the new and how cities can foster entrepreneurship.1 dynamics and while arguing that the urban innovation I. Hollie Russon Gilman is a Lecturer and Post-Doctoral Fellow in Technology and Policy at Columbia SIPA where she teaches a course on Technology and Governance. She has a forthcoming co-authored book, Civic Power, with Cambridge University Press Fall 2019. ________ Silicon Alley: A Framework for New York City’s Entrepreneurship Ecosystem and its Public Policy Considerations"| 33 ecosystem remains distinct from traditional “innova- “machines that respond to stimulation consistent with tion ecosystems.” Section III provides a case study of traditional responses from humans, given the human New York’s innovation ecosystem and lists the multi- capacity for contemplation, judgement and inten- ple assets of the city as an innovation district. Finally, tion.”8 AI is being incorporated in a variety of dif- it puts forward policy considerations for a diverse set ferent areas, such as fnance, transportation, aviation, of stakeholders, including policy makers, technology and telecommunications. It is being used to replace companies, and civil society on how leveraging tech- humans in a wide range of areas, such as space explo- nology and entrepreneurship ecosystems can catalyze ration, advanced manufacturing, transportation, innovation; and illustrates policy actions applied to a energy development, and health care.9 Augmented reality number of challenges. is bringing 3-D technologies and graphic displays. For instance, Facebook’s Oculus, Google’s Magic Leap, I. Background: and Microsoft’s HoloLens represent consumer exam- ples of such development.10 These enable people to Emerging Technologies and supplement the usual senses with computer-generated Disruptive Innovation graphics, video, sounds, or geo-location information, Technology is moving fast and in diferent direc- and these images can be mapped to the physical world tions, which makes it challenging for public policy to and made interactive for the user.11 Machine-to-ma- track and adapt. Yet technology also drives economic chine communications and remote monitoring sensors remove growth and unleashes disruptive change.2 Disruptive humans from the equation and substitute automated technologies change the way people live and work, processes and are often used in the health care area.12 enable new business models, and provide new forms 3-D printing is a method for software to send design of innovation ecosystems opening the door to new plans to specialty printers and have those devices actors.3 These technologies will have a large impact make identical copies of those products. This tech- changing the way businesses organize themselves, nology is used in the manufacturing area for things how jobs are defned, and how technology is used to composed of a single material, which has transformed interact with the world. It is incumbent upon public product manufacturing and delivery, and changed policy to fully examine the implications of emerging global supply chains.13 Unmanned vehicles and autonomous technology and its impacts. drones are creating new markets for machines and per- forming functions that used to require human inter- From robots, augmented reality, algorithms, block- vention. One of the most recent examples is driverless chain, machine-to-machine communications, 3-D cars. Google has driven its cars almost 500,000 miles printing, blockchain to autonomous vehicles provide and found an extraordinary level of performance.14 In help and support to people with a scope of diferent India, unmanned drones are being used by authorities tasks. Robots are expanding rapidly in the developed for crowd control. Whenever there is extensive vio- world. The total rose to around 1.5 million in 2014 lence, police deploy drones armed with pepper spray and is projected to increase to about 1.9 million in and cameras and use to disperse crowds.15 2017.4 Tech experts predict that by 2030, thirteen core jobs will be automated including insurance-re- 1.1. The Future of Work lated roles, customer service and most warehouse and manufacturing jobs.5 There are computerized algorithms Technological advances are also enabling a growing that are able to take the place of human transactions.6 number of tasks traditionally carried out by humans An example is in the stock exchanges, where high-fre- to become automated. As reported by OECD (2017), quency trading by machines has replaced human while initially such automation occurred mainly in decision-making by spotting trading inefciencies routine tasks (e.g., basic paralegal work and reporting, 16 or market diferentials at a very small scale and exe- bookkeeping, etc.), with the rise of Big Data, AI, the cuting trades that make money for people.7 Further, Internet of Things (IoT) and the growing computing artifcial intelligence (AI) incorporates critical reasoning power, non-routine tasks are also increasingly likely to 17 and judgement into response decisions. It is defned as become automated. 34 |"SIPA’s Entrepreneurship & Policy Initiative Working Paper Series _______________________________________________________ Automation enhances efciency by decreasing errors new employment and economic growth with the cre- and improving speed, and has historically increased ation of new employment and business categories.27 economic growth and prosperity. Based on the sce- For instance, the technology sector in New York has nario modeling in the report “A Future That Works: increased jobs faster than in other sectors, becoming Automation, Employment, and Productivity” from a source of direct and indirect employment,28 and McKinsey & Company, it could raise productivity accounts for 12 percent of city tax revenue (HR & growth globally by 0.8 percent to 1.4 percent annually. A Advisors 2014).29 From 2006 to 2013, the technol- The report recommends assessing the impact of auto- ogy innovation ecosystem in New York created over mation at an individual level rather than at the overall 500,000 new jobs.30 The positive correlation between occupation level.18 growth in the ICT industry of a city and job creation It has been estimated that by 2020, robotic automation has been noticed in other cities, such as Barcelona 31 and artifcial intelligence will be responsible for a net and Bangkok. loss of more than 5 million jobs across 15 developed The concentration of these disruptive technologies nations.19 The “Digital Revolution” is described by the in cities no doubt has an immense impact on entre- World Economic Forum as a fusion of technologies preneurial ecosystems, and urban entrepreneurial blurring the lines between the physical, digital, and impacts more specifcally. What is this impact and biological spheres.20 The rapid technological develop- how do they difer from the Silicon Valley context? ment is disrupting the global economy with artifcial Moreover, when looking at the policy considerations intelligence, widening skills gaps, and rising indepen- for New York City, it becomes clear that the increasing dent workers.21 A recent McKinsey report estimates prominence of these technologies across industries like that 50 percent of today’s jobs are susceptible to arti- fashion, fnance, advertising and journalism which to a fcial intelligence capabilities that are already in the large extent are globally headquartered in New York, market.22 The rapid advancements in robotics, artif- require centering in any analysis. cial intelligence, and machine learning are leading to a new age of automation, as machines match or outper- 2.