When you think about New York, there are many things that come to mind: dazzling and diverse fashion, skyscrapers extending further than the eye can see, a bustling and complex financial sector, and vendors selling the iconic ‘I love NY’ t-shirts. New York has always been an exclusive space for creatives and finance enthusiasts alike. In recent years, however, we have seen a notable shift in what New York is capable of. More and more tech startups are ditching Silicon Valley for the temptatious New York workforce and, at first glance, it’s easy to see why. 

In 2016, New York had the third-largest tech sector in the US. Even more promising than this, New York based tech companies showed consistent growth in size. This meant that skilled engineers and workers flocked to New York in hopes of capitalizing on the hype. It would seem that tech startups are beginning to see the obvious appeal of working and hiring in the Big Apple. But, why have tech startups moved away from tech hubs like San Francisco, to New York?

Funding

Arguably the main source of anxiety for tech startups is the process of obtaining funding. A large amount of capital is required to initiate business ventures, as well as to orchestrate the necessary software for a tech company. With startups, there is a lot of risk involved and securing adequate funding is not always easy. In previous years, tech startups have considered Silicon Valley as the only option for their tech company. This is partly due to the prominence of venture capitalists in California willing to bet on a new idea. With large scale organizations like Bessemer Venture Partners, Pegasus Tech Ventures, and Avanta Ventures, Silicon Valley has had venture capitalists on their side. With the rise of tech startups popping up in New York, new opportunities for funding have arised. 

One such funding option is the In-state Private Equity Investment Program, which was originally introduced in 1999. The program sought to address the lack of funding for small and medium sized businesses in New York. Government recognized that in order for business formation to occur, and for New York to continue to grow, startups and other small businesses needed funding that they could not necessarily acquire from private investors. In the decade that has passed since its initial start, the program has continued to fund tech startups, and the overall tech industry. In conjunction with this, venture capitalists have begun to see the appeal of New York, and are setting up shop in the state. This will secure private funding for more tech startups.

LLC Laws in New York

Limited Liability Companies, or LLCs, have proven to be one of the best ways to organize and register your business. Whilst New York is not as favored in terms of LLC law, as states like Wyoming and Nevada, it has greater opportunities and legislation than that of California. 

If you register as an LLC in New York, you will be protected from the dreaded double taxation. This means that all profit from the business will go directly to the owners, who will then need to report their share on their own tax returns. The benefit of this is that the business is not directly taxed. Another advantage for New York is that its general tax rates are less than California. This is particularly important, as corporate and income tax will amount to less. This is yet another reason why Silicon Valley is beginning to be overlooked in favor of New York.

For this reason, many entrepreneurs are looking to start limited liability companies in New York. New York LLC Formation is easy to understand and follow, making the overall process less stressful and efficient. 

The New York Effect

New York is famous for its inexplicable allure; the city’s ‘it’ factor. But how does this translate to why tech startups are choosing New York? For one, New York has an incredibly diverse workforce. It has a broad talent pool with people hailing from all different walks of life. This opens doors for minority and previously disadvantaged groups to push forward with their talent and tenacity, into an industry that was once exclusionary. In fact, New York has consistently shown a rise in female run tech startups. This allows for a new point of view in the tech industry, and many companies are realizing the potential of New York’s diverse and unique economic climate.

Conclusion

Tech startups are choosing New York over other tech hubs for a number of reasons, but the state’s investment into its greater success in the tech industry is a considerable factor. Apart from the unmistakable allure of the dynamic state, New York offers much in the way of business opportunities for startups.