New York more fertile ground for tech startups

NEW YORK (Reuters) - Boston and New York's rivalry is moving beyond baseball as startup companies in the Big Apple are capturing venture capitalists' attention more frequently than their northern rivals, an industry executive said on Tuesday.

"There has been a noticeable slowdown in technology innovation on the Route 128 corridor" that rings Boston, said Lawrence Lenihan, managing general partner at New York-based PequotVentures, the venture capital arm of hedge fund Pequot Capital Management.

"We used to be on that shuttle to Boston every day, and now the Boston (venture capital) guys are coming down here," Lenihan said at the Reuters Hedge Fund and Private Equity Fund Summit in New York.

For years, the technology companies dotting Route 128 outside of Boston boomed as the city's money managers relied on a steady flood of ideas generated at prominent universities like Harvard and Massachusetts Institute of Technology.

Venture capital firms even moved their headquarters from Boston to nearby towns like Waltham, trading the city's skyline for faceless office buildings and vast parking lots to be closer to companies in which they might invest.

But the pulse seems weaker now. "It isn't growing nearly as fast there as in other areas," said Lenihan, who studied electrical engineering in college and has concentrated on technology companies since founding PequotVentures a dozen years ago.

The pace of technology innovation is now far more rapid in New York, where a string of local start-ups are working on software products for the financial services and insurance industries, he said. He is looking at a number of these companies in what is known as Silicon Alley, New York's version of California's Silicon Valley.

"There is a lot of innovation happening in New York City right now," he said.

But Lenihan acknowledged that New York has some drawbacks, such as the high price of real estate.

But the slowing economy is a plus not a negative, Lenihan said. "The worst time is the best time to spawn the best companies."

(For summit blog: summitnotebook.reuters.com/)

(Reporting by Svea Herbst-Bayliss)