Tech startups attract jobs, not create them: Charlie O’Donnell

The excitement around the economic development impact of tech entrepreneurship has a falsehood in it. Many, if not most, of the jobs from early-stage software and Internet companies aren’t attainable for average people.

Though that impact is something we’ve reported on, it was surprising to hear it come up in our last conversation with Charlie O’Donnell, the Brooklyn Bridge Ventures investor who is busy trying to build a reputation by betting on early stage software companies.

“When we glorify startups as creating jobs, well, they’re mostly hiring people who have, say, a PhD in computer science, someone who would have no problem getting a job otherwise,” he said this winter. “So most tech startups are probably moving more jobs than creating them.”

They are moving them from one sector to another by way of creating new software-bound processes or moving them geographically by taking them to where tech business is clustering, in places like the Flatiron District and, increasingly, north Brooklyn.

So what are good businesses for true economic development impact?

“Food businesses employ people who might not have work otherwise,” he said. Not that restaurants or produce distribution efforts or production firms are often interesting to investors — they’re not — but growing those in a place like Brooklyn has a real role in improving the way of life here, he said.

How clustering venture-backed startups does help communities is to bring people who can support a local community, like those corner delis that create opportunity. That’s why news that the IT sector is now New York’s second biggest employer matters. It’s a way that New York is continuing to attract some of the world’s most talented problem solvers.

Shouldn’t every region in the country then build its own tech economy?

“I don’t believe that every third tier city should or even could support a real venture-tech startup community,” he said. “But every downtown should have a building where technologists and other people who are building things can bump into each other and learn from each other.”

“Entrepreneurship does not mean venture backed business,” he said. That’s when O’Donnell reminds us of a conversation we had with First Round Capital investor Phin Barnes, who lives in Williamsburg.

“I think each ecosystem should look at their strengths and act on them,” Barnes said.

That can mean things other than venture-backed tech startups too, but the lessons from that culture can inform other gains, O’Donnell said. He pointed to the Bronx Academy for Software Engineering, for which he sits on the board. He doesn’t expect all of the graduates to go out and become engineers for highly scalable tech startups but he does expect every graduate to come away with the problem solving skills that can help them in whatever they do.

“There are a lot of ways that having a tech economy can help a city that aren’t the obvious ones,” O’Donnell said.