Why San Francisco is just a sandbox compared to New York

Co-founder of Call Tracking Service Anryze Anton Gerasimenko told the publication vc.ru about why a startup is more effective to develop in a megacity, and not in the Valley.

From what it all began

We arrived in New York from Kiev after we were selected for the third acceleration group. Starta accelerator. Before that, I lived in San Francisco for a year, where I went with my first startup, which allowed me to get to know all the realities of the Valley in the context of a startup ecosystem.

Honestly, at first I had doubts about a trip to New York, since at the same time with Starta Accelerator we also passed the selection to another accelerator located in San Francisco. I was attracted by his focus, as well as the fact that I was already familiar with the conjuncture of San Francisco and the Valley. However, the intuition and excellent portfolio Starta prompted me to make a choice in favor of New York. And I did not lose.

First impressions

The first thing that catches your eye is the difference in attitude to business. Compared to San Francisco, in New York they are really doing business, and not spending money from gullible investors. The word “sandbox” did not leave me when I thought about the differences between the two cities.

Also very important factor was that in New York they always tell the truth about what they think about your startup. In San Francisco, everyone will say what a cool idea you have for a billion, but it's all just a show of politeness. There is no time for courtesy in New York. And it really sets up the real work.

This is where the understanding comes that your project should make money. And together with the other technical components of the project, you immediately think about where to attach the billing and how to correctly calculate monetization. In San Francisco it happens like this: we will make a project, we will receive investments, we will get users, we will make an exit. In extreme cases, then we figure out how to make money.

By way of life, New York is radically different from other cities. In the areas of Times Square, Union Square and other "hotbeds" just a huge number of people. After a couple of weeks, you already get into a rhythm and learn to maneuver between hurrying brokers, clerks, women with strollers, homeless people and cars. Traffic lights are often a simple convention for pedestrians: motorists give way even to their green light.

Фото: Depositphotos

The city is built very logically - in the form of a grid of quarters - and it’s pretty easy to navigate here. Most of all, those who live further than Brooklyn or Jersey City have no luck - they have to drive a car, and in the mornings and evenings Manhattan becomes a hell for motorists - the whole city is stuck in traffic jams.

For all my time here, I only used Uber once, and then because of the extreme necessity, it is much faster to get there using the metro. Therefore, in New York, even the rich and famous come down the subway.

Cost of living

We came to New York together with a co-founder and first settled in a room in Brooklyn using the Airbnb service. It cost us $ 40 per day. In Manhattan, rooms in Airbnb cost from $ 60 per day. Later we got acquainted with other guys from the accelerator and with them rented a large apartment with five bedrooms on the Upper West Side (where the events of West Side Story took place). The whole apartment cost us $ 4 thousand per month. For two, we gave $ 1600.

In addition to renting, we considered that for two people we spend about $ 2 thousand per month, which we were extremely surprised, because by local standards it is a very small amount. We didn’t go out to dine in restaurants and often cooked at home, practically didn’t use Uber and taxis, and we preferred home parties in bars. Perhaps due to this lean approach we managed to optimize our costs.

For an average New Yorker, the usual price for lunch is $ 10-12, and this is a standard check for establishments, but there are many alternatives: vans with incredibly delicious halal dishes and other street cooking, where you can also have a good lunch for $ 5-6. For the most thrifty, there is Dollar Pizza, which offers a large slice of pizza for one dollar.

Prices for products, goods and services differ depending on the area of ​​New York (here they are called borough) - everything is cheaper in Brooklyn than in Manhattan.

At one of the meetings I met a guy who told me how he earns money here. As it turned out, in New York there are many ways to make money without special skills. For example, there are constantly shooting various TV shows that require extras. So for five hours on the site, you can earn $ 50.

Favorable differences

New York is a great place in terms of the availability of customers and investors. Let me give you an example: Anryze is directly tied to an audience of stockbrokers. And almost all of them are on the legendary Wall Street. Upon arrival, we realized how in the right place and at the right time we were - all our potential clients and partners came to our meetings with pleasure and were almost immediately ready to sign contracts. With this I have never come across.

Фото: Depositphotos

Investors from the top funds of New York are not at all unattainable ephemeral personalities from Olympus: they also ride the subway and buy coffee in the same Starbucks. They willingly meet, get acquainted with the project, give feedback, get acquainted with other investors and potential clients.

New York's market is not as saturated with startups as San Francisco and Valley, and this is very good. While startups from all over the world are striving to go to the Valley, in New York you can safely work in a field of relatively low competition.

Ideal city for b2b segment

New York is the perfect place to grow b2b sales. The largest companies in the world are concentrated here, the largest financial market in the world is located here, and therefore the start-up approach to business is much more utilitarian than in San Francisco.

It is curious that many young entrepreneurs here bashfully utter the word “startup”, preferring the traditional term “young company”. After all, according to the classical definition, a startup is a start-up business with a still uncertain business model.

There are some minor flaws. During my life in San Francisco (and in Kiev), I used to walk in slippers (or sneakers), shorts and T-shirts for any meetings, pitches, and so on. In San Francisco, this is a kind of dress code - if you come to a meeting in a suit, you will be treated ironically, like a “tie”. They can also be called an accountant.

In New York, the dress code matters. If you come to a meeting with an investor in a T-shirt with a print and in shorts - you show disrespect to him. If you come to the client in this form - you may not be taken seriously. I realized this after visiting one Reg-Tech-mitap, where all companies and start-ups from our market gathered.

All were at least in jackets and shirts. During networking, I met some representatives of start-ups who instantly asked: "Are you probably from San Francisco?". The next day I went to buy a suit.

For any business line here you can find mitapy. Virtual reality, sales, fintech - everything can be found here. It is advisable to choose mitapas that ask for a nominal fee of $ 10-20 - they sift out uninteresting people and gather a higher-quality public. But not top investors. I personally spoke with several investors who say that they never come to free meetings because of the risk of being “attacked” by start-ups.

"New" director role

Here I began to treat my leadership role in a different way. It is quite difficult to explain. I felt growing up and some new degree of responsibility for the company. There comes an understanding of the correct delegation of tasks, a different system of priorities is built, a higher degree of involvement in different processes appears. It is not enough previous knowledge, and you strive to learn new things.

I would call it this way: a mutation begins from the head of a startup to the general director of a company.

Business. How things are arranged

The fundamental difference between a business in New York and a business in San Francisco is the existence of a customized and operating system of transactions and sales. In San Francisco, this is a chaotic process, built on connections, dating and successful meetings.

Business in New York is a system of customers (companies), those who provide services (for example, start-ups), and a layer of intermediaries (consultants or even angel investors). As a rule, these intermediaries have the broadest acquaintances in all areas of business, and if they see that they can “sell” you, they will.

Intermediaries earn a percentage of the transaction. If such a consultant leads a large client, you sign a service contract, and the intermediary receives 5% of the transaction. Sometimes 10-15%. If the angel offers you to collect a round, he will take 10% of the "raised" amount. And the most amazing thing is that it works: they take commitments and immediately fulfill them.

Investors

In New York, a large number of head offices of many investment funds are concentrated. We were interested in funds with a focus on RegTech and FinTech. In New York, many investors shun ordinary mitapes and business days, preferring to come and get acquainted with startups at those events where the entry threshold is much higher than $ 10.

These are various conferences and events like TechCrunch Disrupt. This is the whole logic of the high price - the organizers, who already have so much money, do not make money on such events, but weed out the excess.

However, investors can be contacted in more simple ways. Linkedin is an indispensable tool in building connections. With a well-filled profile, you can safely write to new people.

New York. Photo: Depositphotos

I spent two weeks on this site, pitching and adding new people from the areas of interest to me in the network. After that, the investors themselves began to write to me. One of the partners of the reputable Bessemer Partners Foundation once became interested in what we were doing and contacted me. Two days later we met, and I already showed him how our product works.

The most effective approach to contacting investors, I would call a feedback request for questions of interest. Once I wrote to the partner of the In-Q-Tel fund with a request to give me an answer on the market, and he answered me with a direct question - is it interesting for us to consider their fund for investment. By the way, the In-Q-Tel foundation was established by the CIA, which today is its main partner.

Another example is Bain Capital, a fund that last year became one of the leaders in terms of investments in the RegTech market and in whose portfolio there are very large companies. I wrote to the partner of the fund, which deals with the initial investment, and corresponded with him about our market.

I was interested in his opinion on trends in the field of regulatory technologies and how their foundation evaluates new companies. After several messages I wrote that in June we would open the first round of investments and that I would like to see them on board, and he gladly agreed. As a result, we became friends with him, constantly keep in touch and exchange interesting links.

The investment market is highly competitive: just as startups hunt for funds, funds hunt for good deals. Very often new ventures enter the market, who are actively looking for lucrative deals in which they can participate along with reputable funds.

For them, this is vitally important from the point of view of strategy: to have in the portfolio not only interesting and promising companies, but also the opportunity to declare that they are included in projects along with well-known funds with a name. I met with one of these funds for the sake of interest. It was the foundation of Bleu Capital - a company with French management and Chinese money.

They are only a year old and they are actively looking for good deals in the US market. For them, the most important factor was who was already in business. Their offer is an average check of $ 100-200 thousand and a willingness to enter the round. Such funds are usually not ready to lead the round, and this is normal.

We did not grow together with them, because they did not understand our market and decided not to take risks. This speaks of them as a promising fund with proper management, because even in the midst of a desperate desire to invest money in quality companies, they do not risk entering those markets they do not know.

When opening a round, it is very important to choose the right investor who will lead it. When leading the round, the investor assumes a huge responsibility, and everyone understands this - therefore they are cautious. It was here that we faced the first problems - we are going to a pool of investors who are ready to enter the round with money, but not ready to head it. Those who were ready to lead him, in some ways did not suit us. Now our story is still ongoing, and we are negotiating with potential lead investors.

What unites New York and San Francisco?

One very significant feature is present in both cities: in San Francisco and in New York you will never feel like a stranger. You have an accent - but everyone has it here. Everyone came from somewhere, they want to achieve something, they are working on something. Here you are in the company of the same ambitious foreigners.

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