Warming Up the FinTech Field: The Rise of Incubators in New York City
It’s not your average tale of two cities.
Silicon Valley has long since been renowned as the heart of startup, and to date houses the most tech companies in the world. However, recent years have seen New York City transform from a food and fashion hub into perhaps the hottest spot for young entrepreneurs with world-changing ideas, especially in the fintech field. With the rise of incubators, our city is disrupting life as we know it - one business at a time.
An incubator is a business designed to help other businesses, and in the case of startups is “a collaborative program designed to help new startups succeed”, providing the expertise that many new businesses need, with services ranging from funding and legal resources to training and mentorship to finding an office space out of which to operate. Incubators have become increasingly popular in the past decade, with the rise of technology-enabled ideas and the enabling power of seed investments and venture capital. According to Accenture and the Partnership Fund for New York City, the value of fintech investments in the United States tripled year-over-year in 2014 to $9.89 billion.
Corporate giant → innovation hub?
In the past, about 93% of business incubators were small nonprofits; a shift is underway, however, as big businesses are pouring big bucks into driving growth in their startup counterparts. Samsung’s Strategy and Innovation Center, FinTech Innovation Lab, Deutsche Bank Innovation Labs, Wells Fargo Startup Accelerator, BNY Mellon Innovation Center, The Hatchery’s B2B Ventures, Ynext Incubator (powered by Envestnet), FinTech Sandbox (backed by Fidelity, Thomson Reuters, Silicon Valley Bank, Amazon Web Services, EY, and Intel), and Rise (powered by Barclays) are just examples of corporate giants making massive investments in the future of fintech. These larger corporations are taking up real estate around the world to help with their endeavors, transforming cities into innovation hubs, and incubating startups from seed to household name.
Rise is a collaboration hub powered by Barclays, and a consistently recognized example of how fintech innovation is transforming New York City; since its founding in 2015, they have grown from one moderately sized building in London to five large locations in business hubs all around the world, including Tel Aviv, London, and of course, New York City. Their shared offices “create the ultimate conditions for innovation and growth in financial services,” and house more than 200 companies. These spaces allow these companies to learn and grow together, while Rise takes care of the more elementary things, like creating usable desk space, setting up Wi-Fi, and the not-so-elementary, like connecting its startups with investors, advisors, and mentors. Thanks to exponentially rising demand, Rise recently expanded their New York City presence from 2 floors housing ~60 startups to 5 floors that will house upwards of 200 startups.
Y Combinator is perhaps the most famous incubator, and one not backed by a notable corporate giant. Their $80 billion investment in over 1,500 startups has clearly paid off, as they have helped to change the world by giving early funding to transformative concepts and household names like Reddit, DropBox, and Airbnb. Another example is Techstars, which “allows entrepreneurs to introduce new technology onto the market regardless of where they choose to live,” and helped Uber get to its place of industry dominance.
It’s clear that fintech is flourishing, but what’s next for New York City?
The answer is life sciences. With sites in New York City and Seattle, Accelerator focuses on the “creation of high-quality, cutting-edge life science companies,” and helps with the development of early-stage biotechnology companies. Their success speaks for itself, as they have aided in the formation of 12 companies, and raised more than $250 million in venture capital support for them. Another growing NYC centered incubation center is Harlem Biospace, which selects their tenants competitively, and supports biotech innovators who will turn ideas into products that help solve real-world health problems. With the creation of life science innovation hubs like BioBAT, Alexandria Center for Life Science, Alexandria LaunchLabs, BioLabs@NYULangone, and JLABS@NYC, the city expects to invest over $500 million to “establish New York City as a leader in life sciences innovation and R&D”.
But what’s it going to cost me?
Incubators vary from charging a few thousand dollars per month, to hundreds of dollars per square foot per year; however, like traditional coworking spaces, “rent” comes at a premium but includes other business necessities like electricity, shared common and conference space, coffee, water and snacks, and even office furniture. As incubators cater to startups, they understand the flexibility that new businesses need, offering flexible lease terms to cater to rapid growth. Intentionally, the most tedious part of becoming one of the “eggs” in an incubator is applying; most incubators go through a careful selection process with the startups they choose to take under their wing, and only have applications open for a few months every year.
With the help of incubators, the startup culture in NYC is thriving, and disruptive technology concepts are dominating our city blocks. If you’re a startup in need of warming up (excuse our puns), or if you just want to learn more, please do not hesitate to reach out to us.
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