Testimonial for the New York Council Committee on Technology and Government

A copy of my testimonial for the New York Council Committee on Technology and Government:

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Testimonial of Andrew S. Feigenson

Managing Director, Digital Dawn

Before the New York Council Committee on Technology and Government

Hearing on Promoting the High Technology Business Sector in New York City

December 16, 2009

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Members of the Council:

Good morning and thank you for inviting me to testify today. As a proud New Yorker and a supporter of the local technology industry, I appreciate the opportunity to offer my thoughts about how to continue growing our high technology economy.

To begin with, New York is a unique place, a huge economy and a powerhouse for many industries. However, it is still a disproportionately small player in the emerging technology sector. And since many of its core industries, like Media and Finance, are being actively challenged, it is more crucial than ever to address this gap.

While I can’t pretend to have all of the correct answers, I would like to offer six thoughts on what New York might do to create a more robust environment for high technology businesses.

Addressing (and Accepting) the Cost Issue.

Cost is an unavoidable issue for New York’s businesses.

Our real estate costs, living costs and salaries are among the highest in the country. And while a number of recent initiatives have begun to address this through things like incubator programs, New York’s overarching cost issues are based on macroeconomic variables that probably will not change in the near term.

If we accept this premise, then the local economy needs to find ways to compensate for its cost disadvantage by creating incentives, building better infrastructure, and opening new opportunities for revenue and idea creation.

Building Links to Industry.

New York is home to a disproportionate number of large companies, with the Tri-State area accounting for almost 18% of the Fortune 500 list.

While some of these companies and industries invest in research projects amongst themselves and run small venture funds, few have committed to helping build local technology communities.

More direct support from these established companies may create stronger incentives for high technology firms to locate themselves in New York and may help these very same industries find ways to re-invent their own businesses.

Developing New Funding Mechanisms.

Two problems face technology companies which are looking for capital in New York. First, there isn’t enough of it (as documented by the Council for the Urban Future). Second, the current Venture Capital model has been suffering since the dot.com bubble and needs to be tweaked to support certain types of emerging businesses.

Just a few examples of where I see gaps are: Niche Plays, which are companies that will never result in $1 billion IPOs but which represent solid and sustainable innovations; Creative Concepts, such as publishers and video creators, which have a hard time finding funding because of the seemingly speculative nature of their businesses; and Clean Technologies, which require large up front investments and have longer term payback horizons.

With all this said, I applaud the impact of local VCs like Union Square Ventures, RRE and the New York Angels for playing an invaluable role in growing New York’s technology community. And also call attention to some of the newest government programs like NYSeed and NY Accelerator for Renewable Economy.

Improving Access to Universities and Engineering Talent.

As home to some of the world’s top universities, one would expect more success in growing our technology industries directly from academic institutions, a point which is also noted in the Center for Urban Future’s report “Building New York City’s Innovation Economy.”

Taking this a bit further, I recently had the chance to visit China and was struck by the degree of emphasis that their country’s educational system places on building engineering talent.

In contrast, many of our brightest students find themselves creating new financial instruments or managing funds, which can be very lucrative professions but which bring little long-term value to the economy.

So, we would stand to benefit by improving technology transfer and by developing our engineering talent.

Fostering an Entrepreneurial Community.

New York’s entrepreneurial community has evolved immensely over the past decade, and it still has a way to go.

Groups like the NY Tech Meet-Up and its various offshoots are great venues for furthering our entrepreneurial spirit.

These groups should be encouraged and supported and would likely benefit from central, physical locations where entrepreneurs can cluster to share energy and ideas.

Facilitating International Partnerships.

Finally, New York’s technology companies exist in a global economy. Many of them outsource pieces of their development, sales and operations abroad. And, many of them also have opportunities to generate revenue by selling into foreign markets.

Smaller companies often find it difficult to source and negotiate international business relationships, due to a variety of complexities ranging from distance to language.

Understanding this reality, New York might be able to initiate programs that leverage its international status to assist in the globalization of its high technology companies.

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In conclusion, I would like to thank the Committee once again for giving me the opportunity to be here today. As founder of a company which works with large and small, Media and Technology businesses, this topic is very important to me and to my team. So, I hope that my testimony was has been helpful.