How Grand Central Tech does startups New York-style
Grand Central Tech has no time for startups with inane ideas like “Tinder for Cats,” a light-hearted reference to the popular dating app. Instead the New York accelerator, which overlooks the famous train station of the same name, only accepts companies into its program that belong in the city’s economic fabric.
This month, it welcomed a second such batch of startups in a meet-and-greet on an empty office tower floor high above Madison Avenue. The 19 new arrivals, which include entrepreneurs working on everything from health tech to internet connected toys, will receive free rent in the building for the next year. And unlike many other startups, they don’t have to hand over a chunk of equity in exchange for mentorship and a space to work.
All this is part of a larger plan by Grand Central Tech (GCT) to foster startups, but also to ensure Manhattan’s sprawling mid-town office tours are full and that the heart of the city stays thriving. In this sense, GCT is less of a traditional accelerator – places that usher young tech stars and wannabes through a bootcamp program – than a networking club and a real estate gambit.
GCT’s approach is to nurture connections between the New York’s established companies, and entrepreneurs who want the adventure and independence of a startup. Matt Harrigan, who helps run day-to-day operations, also sees it as a place for people who want to build serious businesses rather than dabble in far-flung internet fads.
“What does New York have going for it? First and foremost, it’s the density of corporations that provides a unique competitive advantage,” explained Matt Harrigan, who helps run GCT’s day-to-day operations. “If we can leverage that, we’ll have diminished the market for crappy startup ideas.”
Harrigan believes a “primary cause for crap” is the declining appeal of traditional companies as a career option, which leads many would-be workers to invest in themselves instead. While this can produce vibrant new companies, it can also lead to half-baked startups, especially in Silicon Valley, where a surfeit of venture capital can lead investors to chase even absurd ideas.
In the case of GCT, however, the focus on real-world New York companies means flaky ventures are unlikely to find a footing.
“Each startup partner will have a corporate partner interested in them and strategically waiting in the wings,” said Charlie Bonello, who runs GCT alongside Harrigan. He added interest on the part of corporate partners, which include Microsoft, Google and Goldman Sachs, is primarily cultural as the established companies seek to stay conversant in the startup world.
As for the entrepreneurs, they include people who’ve already made it big in the start-up world before, including the founders of Gilt and General Assembly. According to Harrigan, both these veterans and the less-seasoned newcomers find that workplace camaraderie is the most appealing part of the GCT arrangement. The free rent and lack of equity demands are no doubt big draws as well.
So what’s in it for GCT’s backers? Even though the corporate partners are picking up the operating expenses, GCT must still provide the office space. As it turns out, that’s a strategic move too since GCT’s chairman is Michael Milstein, the scion of a prominent New York City real estate family. The Milsteins (like many others in New York) have an interest in seeing the towers of mid-town Manhattan stay full at a time when their traditional occupants, like law and financial firms, are shrinking.
The startups setting up shop at GCT could turn out to be a new generation of tenants. Harrigan says early indications are promising, and that every one of the companies in GCT’s inaugural class of startups agreed to sign a lease in the building even though they had no obligation to do so.
And, in one other indication that it’s playing a long-term game, GCT chose an incoming class in which two-thirds of the firms are run by women, minorities or veterans.
“We want diversity, not just a bunch of finance bros transitioning from one career to another,” said Harrigan.
At a time when too many cities may be fixated on becoming the “next Silicon Valley,” GCT’s plan to develop a startup model tailored to the city that surrounds it may be a good example.