When Facebook COO Sheryl Sandberg told a crowd of reporters last week that Facebook would be opening its first engineering office outside Palo Alto right here in New York, it sounded like the Bloomberg administration’s dream come true. Could the West Coast tech giants finally be taking New York seriously as an innovation center, rather than just a convenient base to sidle up to advertisers?
Indeed, earlier this year, the Economic Development Corporation said its goal in accepting bids to build an applied sciences campus in New York was to “increase the probability that the next high growth company—a Google, Amazon, or Facebook—will emerge in New York City and not in Shanghai, Mumbai, or Sao Paolo.” An engineering office from a company on the verge of what might be the biggest IPO in history sounds like the next best thing. What’s more, Facebook seemed so confident about luring technical talent (typically a sore spot with New York techies) that they weren’t waiting for the campus to break ground.
Facebook’s decision was so glaringly aligned with the city’s goal of diversifying into an innovation capital that it was hard not to wonder if New York had tried to sweeten the deal.
According to Julie Wood, Mayor Bloomberg’s deputy press secretary, however, Facebook was not offered any tax or real estate incentives, “as of right” or discretionary, to start an engineering outpost here. Both EDC President Seth Pinsky and Facebook confirmed the same to Betabeat.
Ms. Wood said a number of administration officials work with Facebook regularly and that the Mayor himself “visited Facebook last year and there’s an open line of communication between our administration and their senior leaders.” Rather, both the EDC and the Mayor’s office credited the move to the city’s strategic approach to economic development.
“In a lot of cities, the role of an economic development agency is very tactical: Let’s get this company to move their office here! It’s great, but it’s a very inefficient way to build an economy,” Mr. Pinsky told Betabeat. “To have an economy that consists of 3.5 million jobs, to build it 100 jobs at a time or 50 jobs at a time is not really going to move the needle.”
“In just the last five years the number of people in the technology sector has grown by nearly 30 percent, though in certain cases that may be attributable to certain tax programs, for the vast majority of cases the reason companies have grown is because this Mayor and this city have put into place the conditions that make it in the interest of these businesses to expand here,” he added, pointing to the applied sciences in particular.
“Remember the whole fuss about Goldman?” asked a source familiar with City Hall’s tech initiatives, referring to the deal Goldman Sachs got to stay in the Financial District back in 2005. “I don’t think they got anything special, they just qualified for things because they were building in Lower Manhattan and the threat of them leaving Lower Manhattan may have kicked some other things in.” In terms of an outsider coming to New York, the city would be even less likely to roll out a red carpet.
“There was no, ‘Hey, come here, we’ll give you $100 million.’ Or ‘Please, please, please Facebook please come here,” said the source. “There’s no courting because we don’t see the need because we know New York is a premium brand. That comes up a lot, New York is a premium brand. We don’t need to sell down. We don’t need to go down market the way other states and cities do. This is like a really, really firm policy. That’s why the applied sciences campus is such a big deal because it’s such a diversion from the standard policy.”
From a Valley perspective, of course, New York still has a lot to prove. But another reason the city was unlikely to offer incentives might have been because they lack the funds to do so, said the source. “There isn’t money to do stuff like this.” That is partly the reason why the EDC offered up sites like the Brooklyn Navy Yard as potential locations for the campus because they represent areas for growth that the city hasn’t yet found a way to develop.
Of course, Mayor Bloomberg and legislators like Chuck Schumer were more than happy to join Ms. Sandberg and company for a victory lap at the press conference. “If this was some specific City Hall thing, you wouldn’t have seen that massive outpour of random legislators all showing up,” said the source. “I think it’s just everybody trying to take credit for something good happening. If Chuck Schumer had been responsible for getting Facebook to come here, doing something, he would have tried to take that event for himself.”
In a statement Facebook sent to Betabeat, the company said its New York engineering team would be located at its current offices at 333 Madison Avenue where they are looking to expand to another floor in the building. “Facebook’s New York office has been open since 2007, so being in New York is not new for us,” the company wrote via email. “Recruiting great engineers is one of our highest priorities and some of the most brilliant, ambitious, and talented people in the world are in the Northeast. We want those people to help us continue to grow and innovate on an experience that more than 800 million people in the world rely on. This is why we selected to open an engineering office in NYC.”
Rather than incentives, Mr. Pinsky said the EDC is more likely to offer tech companies moving to New York help with finding talent or vendors. The EDC is also open to help with locating office space. Betabeat heard they offered to help foursquare with its recent relocation effort. But for the most part, Mr. Pinsky said, the startups are better equipped to do the office search themselves.
Does that mean the EDC will help Facebook staff up, we asked. After all, since Friday the number of open positions for the office has increased from 15 to 17. “[Facebook has] proven themselves to be very effective at hiring talent and expanding their business,” responded Mr. Pinksy, in the understatement of the year. “If they need assistance then the city certainly is here to help as we are for any business in New york City, but they haven’t specifically asked us.”