Since June, I have been hanging out in the New York tech scene (and getting back into the NYC-kicks scene as a sneakerheadVC) and think the environment that cradled jazz and created Hip-Hop is now supporting a new generation of creative talent. For me, the key to the NYC community, what makes it sexy, is a culture that expects to win and to win big. Certainly the urban density and the consumer insight this offers to those who will listen is powerful and the scale required for notable success in this environment sets a high bar for entrepreneurs to judge themselves against, but it is the swagger of NYC, the assumption of victory and pride in the success of other New Yorkers that defines this movement.In my mind companies being built in NYC have advantages and these advantages led an entrepreneur to tell me, “I don’t care what they do. I am in New York, they aren’t. Ultimately, we will win.”

The reality of starting a company in NYC is an environment that shapes your thinking as an entrepreneur:

1. User feedback — surrounded by millions of people who will try shit, interrupt you and tell you what they think. NYC start-ups know they have to iterate early and often or become irrelevant. Stealth doesn’t happen here.

2. Not afraid to jump — you have to have guts to live in NYC in the first place. Starting a company is hard, but the street-smarts required to survive the bright lights and big city serve New York founders well.

3. Really big pie — when the center of the universe is outside your front door, you don’t view ideas or the entrepreneurial ecosystem as a zero sum game — collaboration, not competition, is the dominant approach. Entrepreneurs in The City know each other, help each other and root for each other. They are also honest with each other.

4. Culture of winning — success is expected in NYC. Home to the world’s most famous arena, Wall Street, Hip-Hop, Madison Ave. and the fashion industry–if it is not a big idea it is not getting airplay in NYC. But everyday new ideas spring up and take shape as smart, highly motivated people are inspired by their environment and informed by their community.

5. No sleep ’til Brooklyn — the answer to “what do you do?” in NYC is your job. In New York people live to work, love to crush and the entrepreneurs find time to have a blast doing it. I have been lucky enough to work hard and play hard in NYC this year and I can’t think of a better place to do it or a better group of people to do it with.

If you have other reasons that NYC is creating so many sexy companies with such great commercial potential, I would love to discuss in the comments and if you want to include me in your hard work or play in 2010, shoot me an e-mail (phin@firstround.com) or find me on twitter @phineasb

Click the pic to get Andy Goldsworthy's book from Amazon

A couple days ago I saw Ted Schlein speak at Wharton. He focused on the importance of Green Tech and KPCB’s investments in thst area, but he did take some time to speak more generally about the risks that face a new business and therefore any venture investment. According to Ted, there are four types of risk that all start-ups face:

1.    Market Risk
2.    Technical Risk
3.    People (management) Risk
4.    Financial (Funding) Risk

He also pointed out that these risks are cumulative and add up to a total level of risk that is or is not palatable to venture capital investors and angels. In the current environment, reducing risk without limiting innovation should be a top priority for entrepreneurs.

Based on my experience with Yourself!Fitness I think technical risk can be lowered though a specific approach to innovation that leverages new applications of existing technology to solve a consumer need rather than investing in significant technical R&D. While working on Yourself!Fitness, consumers told me that they loved home fitness video for its convenience and price, but that it was boring, did not help them track their goals and did not feel personalized to meet their needs. Based on this, I decided a successful product would deliver a personalized, interactive and goal-oriented fitness experience to the consumer’s living room.  We could have tried to advance the DVD experience or create On-Demand video or web-based workouts delivered to the television. In the end, each of these would have required us to develop new technology and integrate with existing infrastructure in new ways. Instead of taking on these technical challenges, we decided to utilize the gaming platform in a new way (for 2003) and deliver a fitness game for women. In doing so, we mitigated our technology risk and focused all of our attention on market risk. As it turned out I should have focused on people and legal risk, but I digress.

Wikipedia defines creativity as “a mental and social process involving the generation of new ideas or concepts, or new associations of the creative mind between existing ideas or concepts.” In today’s market, entrepreneurs who are able to focus on “new associations” rather than “new ideas” will build businesses with competitive upside potential for value creation and much more appealing risk profiles. By taking processes and technologies that work in one area and applying them in a new way or to a new consumer problem, old becomes new, the proven technology becomes the foundation for a creative solution that delights the consumer.

the artist Andy Goldsworthy provides a great example of this type of lateral thinking and illustrates this point.

Think about a snowball and answer these 5 questions:

Context is everything

1.    Where is it?
2.    What time of year is it?
3.    How big is it?
4.    What is it used for?
5.    What’s left when it’s gone?

How could a snowball become art?
1.    Put it in the middle of a busy city sidewalk.
2.    Put it there in the middle of summer.
3.    Make it 5-10 feet tall.
4.    Make people confront it, stop and look at it, touch it, talk about it.
5.    Fill it with natural elements so that when the snow melts, there is a reminder of the magic that took place.

The snow is just snow, but its application, impact and value are completely different. Entrepreneurs who can feel summer coming and start creating mid-summer snowballs while the rest of the world is still focused on surviving the winter will be the ones who build the great companies that emerge out of these difficult times.