Upstart Start-Ups

The start-up businesses in New York's Silicon Alley have never been comfortable about getting down to numbers--revenue, site traffic, profits, even the coordinates of the ''Alley'' itself (south of 41st? 14th and up? Any address with a decent view of the Flatiron?). No wonder--the usual comparisons with the giants of Silicon Valley are humbling, to say the least. Intel, 3Com, Cisco, Netscape, and Sun alone make 15 times annually what all New York's new media companies generate in 18 months.

On its own terms, however, the city's new media biz is beginning to add up. According to the sweeping ''2nd Annual New Media Survey,'' released last month

by Coopers & Lybrand and the New York New Media Association, local new media revenues are now $2.8 billion a year, while employment has jumped by 105 per cent (to 56,000 full-time, part-time, and freelance jobs) since the end of 1995, making new media a larger employer in New York City than publishing, TV, or film and video production.

Hidden in that data is a surprising truth: the Alley businesses fueling that growth are getting smaller and riskier. Outfits with revenues under $1 million now make up a stunning 83 per cent of the industry, compared with 63 per cent in late 1995. Without a network of seed capital, these Alley entrepreneurs break even because they absolutely have to. For most of them, getting rich by going public is about as likely as paying for shareware or buying a copier. In New York, survival alone is a form of credibility. As much as new media dislikes numbers, we've chosen 10 of the city's biggest success stories, relatively speaking--the front-runners of an evolution in process.

Jaime Levy

Age: 31

CEO, Electronic Hollywood

As the city's most in-demand hired hand, Levy developed an enhanced music disk for aural revolutionary Billy Idol, designed the seminal Web zine Word, and brought a dark edge to avatar-based chat with The Malice Palace. But beginning October 1, Jaime Levy finally went to work for Jaime Levy. Funded by a private investor, Levy's new company--a still-fetal ''entertainment network'' called Electronic Hollywood--wisely splits its duties between the fun stuff (animation, multiuser environments) and paying the rent (services like custom search engines and site design). In many ways, Levy, a West Coast native, is the success story of the Alley. After struggling to find work with a ''really expensive'' multimedia degree from NYU's Interactive Telecommunications Program, she's now got venture capitalists and agents publicly offering her money just to play. It's the inspiration--not the industry--that keeps her tied to Manhattan's sandbox. ''In L.A. we'd be limited to film, in San Francisco to technology,'' Levy says. ''[But] in New York, we've the got the perfect combination of content providers--there are just so many bands, artists, and filmmakers...but we can also get clients.''

Tom Watson, Jason Chervoks

Ages: 35, 33

Editors, @NY

For many in the new media industry, news breaks at odd times--most specifically Friday afternoon, when the sprawling @NY newsletter drops into the ''in'' box. Delivered to 7000 clients free of charge, Watson and Chervokas's dispatch includes interviews, briefs, analysis, and even catty cocktail chatter. How do they make money? By slyly blending spam into their missives in the form of simple text ads and sponsorships. After two years, the goateed Columbia grads have landed major outlets for their work, including a weekly Digital Nation column on the New York Times site and a syndicated spot in the New York Post. They're even considering franchising the newsletter to other cities--but unlike many a start-up, Chervokas is wary of reaching too far. ''You can very quickly replicate costs without replicating profits,'' he says. ''We started this out of our pockets...like a mom and pop stationery store. We didn't put in so much money, but we put in a lot of sweat equity.''

Scott Heiferman

Age: 25

CEO, i-traffic

The online advertising industry is all about placement, and Heiferman has made a booming business out of stepping into Web surfers' way. A University of Iowa graduate, he came to New York two years ago to work at Sony Electronics, where he was put in charge of the company's first advertising site on AOL. To grab people's attention, Heiferman tracked down the engineering geeks who programmed AOL's Welcome screen and sent them a stash of Walkmans to basically stick Sony up there. Suddenly, the Sony area had monster traffic, and Heiferman had a business model. i-traffic's 40 staffers don't design banner ads--they find places for them. They function like a traditional ad agency's media-buying department, but they consider themselves a ''strategic linking agency.'' The effectiveness of their campaigns has attracted an impressive client list--Disney, CNN/SI, BellSouth, CDNow--and nearly every other interactive ad agency in New York is following their lead. The strategy is to get brand names in front of as many eyeballs as possible, not to build lifeless advertising Web sites. ''If you think about Pepsi, they have these vending machines, they're in all the bodegas,'' says Heiferman. ''People don't go to the Pepsi factory to buy Pepsi.''

Uzi Fisher

Age: 20

producer, Pseudo Online Network

Fisher, in his own summation, ''is all balls'' and all over the map. As the producer of online entertainment company Pseudo's techno-rave Netcast Freq.net.com, Fisher is planning an all-out assault on film, fashion, and music--simultaneously. He had been in discussion with Soho designers Liquid Sky to manufacture his own clothing line--Coolmax uniforms that he calls ''the e-suit made for the internautical journey''--but the deal fell through. Instead, he'll use the designs in his upcoming mockumentary about a secret society of ravers that eventually ends up online at--where else?--Pseudo. The project isn't just product placement. In charge of creating some six new rave music shows at Pseudo with Matt E. Silver (who produced the Prodigy, Orb, and the Chemical Brothers), Fisher wants to create a kind of digital Masons for club kids, to evolve in tandem with the production of the film. ''I want to build this whole culture,'' he says. ''We will design it to be upgradable.''

Lise Carrigg

Age: 27

Executive producer, Girls on Film

It started as a homework assignment in Echo founder Stacy Horn's class at NYU's ITP: design three pages of a Web site. ''It was two and half years ago, the heyday of the personal Web site,'' recalls Carrigg. ''I just thought it would be a great opportunity to do movie reviews.'' Carrigg completed a makeshift version of girlsonfilm.com, then kept the idea percolating, eventually recruiting three Vassar friends to fill out the site. By last December, the whip-smart school project had become a ''property.'' Content development company Concrete Media purchased the site, now the third most trafficked Web site for women. ''I couldn't believe I was in negotiations,'' says Carrigg, who nevertheless won total creative control. She expects to add TV and video reviews soon. Despite the media attention, the brassy, community-driven site has only five full-time staffers--who, Carrigg says, still operate in the ''start-up world where we're all working on each others' laps.''

McLean Greaves

Age: 31

President--executive producer,

Virtual Melanin Inc.

Though the Net demands a certain disembodiment, Bedford-Stuyvesant--based VMI has survived by marketing a sense of place. Greaves's six-person company made its name with Cafe los Negroes, a two-year-old Web conferencing site for Latinos and blacks that continues to grow even without a marketing budget. From there, VMI first brought Spike Lee's 40 Acres and a Mule to the Web, then HBO's Cyber Soul City and Bad Boy Records. Once it had built the music-label site, VMI switched from being developers to technicians, installing a LAN and Web-cam for the Bad Boy offices because CEO Puffy Combs ''is hardcore about the Net,'' says Greaves. VMI is currently compiling an African American city guide to New York for AOL's Digital City content wing. Despite all the hustle it takes to stay afloat, Greaves has never bothered to look for venture capital because VMI does fine on a shoestring. ''We're smack-dab in the ghetto,'' he says. ''We can't go any further down.''

Omar Wasow

Age: 26

President, New York Online

Wasow knows full well the truth about new media entrepreneurship: you are the brand. From his gig as a spot commentator for MSNBC (just renewed for another year) to his extensive speaking engagements to his portrait in Face Forward: Young African American Men in a Critical Age, Wasow walks the line between being a CEO and being his own product line. ''There is sort of a funny hybrid--growing your company and your own personal shtick,'' says Wasow. The 1992 Stanford grad debuted his own BBS--the Brooklyn-based New York Online--in 1994. But when traffic started to flatten out this year, New York Online deftly made the transition to a bustling Web site development house (the enormous Consumer Reports site it designed is poised to launch in two weeks). With his solo career burgeoning, Wasow is also in talks with investors to develop a network of content sites under the New York Online banner. ''It's good for New York to pretend it has a booming industry,'' says Wasow. ''But until the environment changes--with heavy taxes, regulations, and a crappy public education system--it's going to be a struggle.''

Peter Seidler, Michael Block

Ages: 38, 41

Cofounders, Avalanche

After attempting to design interfaces for bulletin boards in the early '90s, Seidler, joined by Block, christened Avalanche as New York's debut interactive marketing and communications company way back in 1994. Within a year, the company snagged the Super Bowl account (Microsoft's first hosted site), which turned into a benchmark of Net traffic--logging a monster 17 million hits during the halftime. Late last year, when ad consortium Omnicom offered five interactive ad agencies $5 million each for a minority stake, Avalanche declined. ''We felt that we had a distinct culture and we didn't want to mess with that,'' says Seidler. Avalanche has shrewdly wrangled long-term contracts with clients (like Guardian Life Insurance), shoring up its independence into 2000. But like any entrepreneur, Seidler will entertain all options. ''We aren't looking for outside investors,'' he says, ''but we haven't closed the doors.''

Theresa Duncan

Age: 27

CD-ROM producer

First it was two girls' desultory exploration of their hometown (Chop Suey). Then, a smart-aleck young girl's summer misadventures (Smarty). Her third project? Parisian rooftops at the turn of the century, seen through a girl's eyes (00). For three years, Duncan--a writer, producer, designer, marketer, and sound designer--has waged a one-woman crusade to hand the CD-ROM industry back its dignity. Her first disc won Entertainment Weekly's CD-ROM of the Year Award, and her third title was largely considered the saving grace of the junk-game carnival E3 back in May. Compared to the rest of the market, Duncan's discs--illustrated by her boyfriend Jeremy Blake--are the work of an auteur: quirky, elaborate, and attentive to minute details. ''Publishers are timid, shortsighted, spend too much money, and won't take any chances,'' chides Duncan. When the market went bust last year and she couldn't find a distributor for her second title, Duncan took matters into her own hands and badgered F.A.O. Schwarz and the Virgin Megastore over the phone until they gave her shelf space. She made another cold call asking David Sedaris to narrate Chop Suey (he happily agreed). For the time being, she's nested among the developers at Nicholson NY, which is paying to produce 00. Her next project is already in the works--''one for older girls about a paranoid fashion model,'' says Duncan, ''a faux girlhood memorial.''

Jason Calacanis

Age: 26

Publisher, Silicon Alley Reporter

If you work in new media in New York, Calacanis knows you and has likely snapped a photo of you in a compromising position. As the publisher-editor--delivery boy of his industry magazine, Calacanis started the SAR last December with gossipy dish, copyediting snafus, and a big anti-Microsoft grudge. But in the space of nine months, the SAR has grown from a stapled broadside to a glossy, 48-page, full-color magazine--a business and lifestyle bible for Silicon Alley. Though Calacanis fancies himself an East Coast version of Wired founder Louis Rosetto, he's really a spectacular PR agent. His Pseudo radio show--cohosted by Joystick Nation author J.C. Herz--regularly attracts the biggest heads of the NY businesses, if only to give them a chance for self-promotion. ''It's absolutely silly to compare the three-year-old Silicon Alley to a 20-year-old Silicon Valley. It also shows how nervous the Valley is about us,'' Calacanis says. ''I'm not so concerned with three years, they're just the prologue to the movie. It's the years from 2000 to 2010 that will be the interesting part.''

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