New York City may be the city that never sleeps, but as far as digital entrepreneurship goes, on paper it looks like the city may have taken a nap.

Out of the 500 fastest growing tech companies, NYC only has six. In the first half of 2008, New York City startups raised $926 million in venture capital. Nearby (and much smaller Boston) had more startups, that raised $2.6 billion in the same time frame.

The Bloomberg administration would like to change that, and is fostering a few programs to do so. Yesterday at City Hall, the City Council held a hearing to address some of the issues that have been hoding New York City back and what can be done to improve the city’s standing amongst other urban capitols around the country. While there may not be a silver bullet to bring New York City’s startup culture in line with Silicon Valley, the meeting was an eye opening look into some of the challenges at hand.

First off, there is clearly an active tech community in the city. According to startup lawyer Heather Mills, there are more tech employees here than in Silicon Valley.

The Bloomberg administration, for its part, is trying to help. Incubators like Hive@55 offer affordable office space for freelancers and entrepreneurs around the city. The NYC BigAPPS contest is currently offering $20,000 (and lunch with Mayor Bloomberg) to whoever can best deploy the city’s store of information into a funcational mobile application.

But the first thing that became clear yesterday morning is that there’s a long way to go. Taking place at City Hall in New York City, the Council Chambers room was equiped with WiFi. There was also a Twitter feed to follow and the entirety of proceedings were livestreamed.

According to co-chair Gale Brewer:

“This is the only hearing at the City Council that has anything close to these arrangements.”

And early on, many attendees were frustrated with the proceedings. It was a hurried meeting, and speakers like Hermann Mazard, “chief enthusiast” at digital grocery list HomeShop, questioned the city’s commitment to technology entrepreneurs.

It soon became clear that the Technology in Government Committee is not attuned to the city’s technology community. To fix that problem, they had invited around 30 entrepreneurs, venture capitalists and educators to speak on the hurdles they face working in tech in New York City.

More than a few suggestions were thrown out, including tax incentives for investors, more office space, more courses to train workers and more infrastructure generally.

Cities like New Orleans offer tax incentives to lure companies within their boundries. There is no sure way to make entrepreneurs make New York City their home, but disincentives like the $2000 fee to publish in the New York Law
Journal that all companies incorporated in Manhattan are required to
pay don’t help entrepreneurs heavy on ideas but short on cash.

And as it became clear at the City Council meeting yesterday, simple communication will be a huge part of making New York City seem like it is open for tech business. As Charlie O’Donnell, First Round Capital’s Entrepreneur-In-Residence, put it:

“If you’re not participating in the community, I don’t know how you get good data.”

This point was brought many times during the proceedings. At one point, Councilmember Diana Reyna implored people not to forget The Mayor’s Office of Industrial and Manufacturing Spaces, because it “is a very important office that seems to fall by the wayside… whenever you talk about startups…. This is the office that is supposed to hold sacred our industrial parts.”

But people looking to start a business don’t want to wade through
paperwork and red tape to find an office that has the right to dole out
space to them. They just want to get started with the business of doing their jobs.

And that gets to a larger issue. Even though the city has started several initiatives to foster business around the city in the past few
years, many entrepreneurs (and general New Yorkers) don’t know about
them.

Simply helping to fix communication will be a big step way toward making New York a more open city to new businesses. As the tech community spreads out around the city, it may no longer fit into a collection of streets that can be found in Silicon Alley, but the idea behind that concept, that New York has a focused and vibrant new media community, is one that can continue to grow.  

Nate Westheimer,  co-founder of AnyClip and head of the New York Tech Meetup, encouraged attendees to come to the next NYTM
in January. Co-chair Brewer said she would be in attendance. It will be
interesting to see, not just if she will be there on January 5, but
whether employees of her office and the Bloomberg administration become a regular fixture
in tech circles.

Because showing a committed interest in a fledgling community is a big step toward growing it. A major disincentive for individuals looking to start businesses is perception. The high cost of living in New York, limited space and the cost of finding capable employees can deter individuals looking to start a business here. But New York has plenty of native resources that make working in the city a boon. If the city can tap into that and actively show that they care about innovation, it will go a long way toward figuring out how to get things moving in the right direction.

Images: Twitter, SnorgTees