By Matt Turck

’ m fascinated by tech ecosystems and the network effects behind them . As an NYC venture capitalist , I ’ m particularly interested in New York .

The New York tech ecosystem is in an interesting place right now . The emergence of NYC was a big story at tech conferences and in the press maybe four or five years ago . Fast forward to today : on the one hand , NYC has become the clear number two to the Bay Area ; on the other hand , it ’ s hard not to notice that things have gone a bit quiet — at a minimum , we seem to be past the stage of unbridled enthusiasm .

The bull case is that New York is now firmly established as a startup hub , and therefore it is less press-worthy than when it was first emerging ; to wit , entrepreneurial activity and VC investment levels have never been higher ( for context , with $ 1.9B invested , Q1 2016 saw almost 7x more VC investment in NYC than Q1 2012 )

The bear case is that , for all the progress , NYC still suffers from many of the same issues that have plagued it for years : a relative dearth of $ 1BN + exits , a lack of local anchor companies that can serve as acquirers , and a comparatively lower concentration of talent , particularly when it comes to not just starting , but actually scaling , startups .

Those are non-trivial concerns . While they offer some protection , network effects can just as easily peter out as they can get stronger — an ecosystem is fundamentally a living and breathing organism .

My take : New York is in the process of catching up to the hype . That doesn ’ t make for splashy headlines , and takes a long time , but the reality of the NYC tech ecosystem coming of age is actually happening right now .

The Slope of Enlightenment

So where are we ? If there was a Gartner hype cycle for emerging tech ecosystems , my sense is that New York would probably be somewhere in the “ slope of enlightenment ” phase .

Both the scale and the steepness of the slopes are not right , but this is probably directionally correct .

New York had a long ride to the “ peak of inflated expectations .” Throughout the 90s and the 00s , New York went from having a handful of entrepreneurs and VC firms to something that felt more like a real community ( then known as “ Silicon Alley ”).

But it probably wasn ’ t until four or five years ago that people started talking excitedly about New York as having the potential to be a major global tech ecosystem . There certainly was tons of momentum , with everything coming together nicely . It had a deep connective tissue of meetups , conferences and new incubators . It had a mayor , a tech founder himself , who truly got it . It had some VC firms like Union Square Ventures with national appeal , and West Coast firms were starting to actively invest in later rounds . And most importantly , it had a whole series of fast-growing startups , the bloodline of any ecosystem . The press ( a lot of it New York based ) was all over it — not only was New York going to take over Boston , it was also about to give Silicon Valley a major run for its money !

A lot of the above is still true , but unfortunately , there has been a number of hiccups along the way . A lot of the “ poster

child ” companies that were frequently mentioned then have gotten into various levels of trouble , after raising large amounts of VC money . Gilt ($ 271M raised ) had an underwhelming exit . Fab . com ($ 336M raised ) was a flameout . Quirky ($ 175M raised ) went bankrupt . Foursquare ($ 166M raised ) has been working on finding its second wind as a data company . There were some great acquisitions ( Tumblr ’ s $ 1.1BN acquisition was a watershed moment ), and some New York startups had IPOs — but unfortunately , those newly public companies , like many others across the country , experienced difficulties in the public markets ( Etsy went from a $ 3.3BN market cap at IPO to $ 1.1BN currently ; OnDeck went from to $ 1.3BN at IPO to less than $ 400M currently ), with Shutterstock being the exception .

Finally , there are a number of large startups in New York that have been doing quite well , but are now reaching the ten-

year mark , and have yet to reach an exit .

All of this had led , perhaps not to “ disillusionment ,” but certainly to more nuanced feelings , and people generally realizing how long it will truly take for New York to come into its own .

Rinse and Repeat : Still Early

As any student of emerging tech ecosystems knows , the key dynamic to success is the “ rinse and repeat ” cycle . You need several waves of successful tech companies to go through the whole cycle of founding , financing , scaling and significant exit . Post-exit , the hope is that successful founders , employees , and investors then contribute back both money and expertise to the next generation of tech startups , a few of which eventually become highly successful themselves and then provide money and expertise to the following generation .

The trouble is , each successive cycle takes years , because the average successful startup takes five to ten years to get to a large exit .

One key reason the Silicon Valley has become such a powerful network is that this “ rinse and repeat ” cycle has been happening there for decades , at least since the 1940s and 1950s ( Hewlett Packard ), with a real acceleration in the 1970s and 1980s ( Apple IPO , founding of Kleiner Perkins , etc .)

At the other end of the spectrum , some of the more recent tech hubs are arguably just at the beginning of their second cycle . In Paris , for example , the next cycle is under way , with alumni of successful startups like Criteo or Exalead creating a number of new ventures , such as Algolia and Dataiku , but those are still relatively young ( two or three years in ).

New York is somewhere in the middle , but probably still on the earlier side — perhaps five cycles in ? The comparative lack of exits doesn ’ t help , as it slows down when the next cycle starts . The point here is that , while New York is well on its way , things take time , and you can ’ t just hope to rush through cycles — getting to a fully mature tech ecosystem will require continued patience .

Read the rest of Matt Turck ’ s assessment of the NYC Tech Ecosystem on NYIntl . net

Matt Turck is a VC at FirstMark Capital . @ mattturck