Manhattan's thriving Silicon Alley Content: California's Silicon Valley has engineers. New York City's Silicon Alley has content. Its mile-long strip is alive with creative young people thinking of ways to make the Web interesting.

Sun Journal

December 13, 1997|By Joe Mathews | Joe Mathews,SPECIAL TO THE SUN

NEW YORK -- Everything about Jaime Levy and her start-up Internet services company seems raw and new. She talks less like a CEO and more like a Greenwich Village diva. Her four employees work out of an old machine shop on West 25th Street. Her creative director alternates between designing World Wide Web sites and adding plaster to the walls.

But at age 31, with seven years of experience in new media, Levy is among the oldest and most successful of the old guard in Silicon Alley, the name given to lower Manhattan's quirky, artsy alternative to the great valley of silicon out West.

Over the past three years, a cluster of new media firms, generally providing services and content for the Internet, has appeared where no such businesses existed before: the mile between Wall Street and Fifth Avenue's triangle-shaped Flatiron Building, which was the world's most technologically advanced skyscraper in 1902.

The number of Silicon Alley companies, most of which are small start-ups owned and staffed by recent college graduates, nearly doubled between January 1996 and the summer of 1997, according to a recent study by the accounting firm Coopers & Lybrand. During that time, the alley's annual revenues climbed 56 percent, to more than $2 billion. The new media in New York now employ more than 32,000 people full-time -- more than the city's advertising or publishing industries.

"Silicon Alley has become the single most important base for small-business growth in New York," says Kathryn Wylde, president of the private New York City Investment Fund. "It's remarkable: This is an old city with an unemployment rate twice the national average, and we've lost so many industries. And now, just like that, a new industry appears and is growing."

This week's huge Internet World conference and show, which attracted about 60,000 people to Manhattan, underscores New York's changing place in the high-technology world. In the 1980s, it seemed that the rising information technology industry had left the Big Apple behind for programmer-rich territories in Massachusetts and California. But in this decade, the growing popularity of the Internet has posed a different set of challenges, to which New York's artists and writers may be better suited than Stanford-trained engineers.

Consider Levy, a Los Angeles native who went to college in San Francisco. She has worked for IBM and could be making more money designing software in Silicon Valley than she is on Silicon Alley. But there is plenty of good software in the world, she says, and not enough quality content on the Internet. So in recent years, she has produced the well-regarded Web magazine Word and designed Malice Palace, a groundbreaking multiuser game of sorts, set in a post-apocalyptic San Francisco.

"If you go on the Web right now, you see there isn't a lot to see yet. Content is needed, and that's why I'm willing to pay New York rents," says Levy. "New York has the content providers -- artists, musicians, writers, the underemployed creative types -- that will fill the new medium."

Silicon Alley's early success is particularly sweet to New York political and business leaders because of the city's earlier failures to attract high-technology industries. In the 1970s, a number of key biotechnology discoveries were made in the city, but the companies that profited from the research located in low-tax, low-regulation enclaves such as North Carolina's Research Triangle.

Twenty years later, the new Silicon Alley companies complain about taxes, but the city's creative community and a dash of idealism have kept the businesses here. Many Silicon Alley pioneers are New Yorkers who left jobs in other industries -- journalism, advertising, publishing -- to explore the creative possibilities of "individual publishing": circulating one person's pictures, words and ideas to millions at low cost by putting them on the Internet.

The number of newcomers has made Silicon Alley both vital and volatile. According to a trade group, one-third of the alley's companies have been established within the past 18 months; during the same time, more than a sixth have folded.

Eighty-three percent of New York's new-media businesses have annual revenues of less than $1 million. And the pay is poor by New York standards, an average of $37,000 a year for a new-media staffer. Turnover among the twentysomethings who staff the start-ups is about 70 percent over the first two years.

"It's a young industry for young people, and there will be ups and downs," said Ralph A. Balzano, commissioner of New York City's department of information technology and telecommunications, during this week's Internet conference. "But in the long run, new media will be a primary economic engine for the city."

In the meantime, two resources remain scarce on Silicon Alley: venture capital and people with strong technical backgrounds.

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