DNAinfo, the hyperlocal news start-up that provides hard-hitting community reporting for Manhattan’s densely packed and notoriously amorphous neighborhoods, is in the process of expanding into the the city’s outer boroughs and, in time, Chicago. News of the expansion was reported first earlier this month in the New York Observer (although DNAinfo’s editorial director Leela de Kretser also referenced the move in a panel at the Street Fight Summit in October). De Kretser told Street Fight in a recent interview that the decision to expand was the logical next step in a specific roadmap, which the company has been following since its inception in 2009,
Why now? De Kretser says the timing was mostly a matter of audience. “One of the reasons we feel that we can expand, is that the appetite for higher-local news — i.e. neighborhood news — has been incredibly strong in Manhattan,” she explained. “Already, in just over two years, we have an average of 1.2 million visitors each month, and that’s why we believe that we can take what we built in Manhattan and expand it to the rest of the boroughs.”
With significant financial backing from billionaire founder Joe Ricketts, the company has built its hyperlocal news machine on a willingness to pay for quality journalism, and a strict adherence to the neighborhood as the organizing principle of its news product. “Neighborhoods have shaped our entire model, and that’s what we’re about,” says de Kretser. “Manhattan has neighborhoods, and so does Brooklyn, Bronx, Queens and Staten Island — they have neighborhoods too. That is the key, shaping focus of all of our coverage.” As it expands, the question for DNAinfo will be how, and to what it extent, the company will need to alter its editorial and business models to fit these new markets.
With its expansion, DNAinfo joins a new class of hyperlocal companies — led by tech startups like Foursquare — that were spawned in New York City and now are in the process of scaling their products into other markets. New York (and Manhattan in particular) has become a hotbed of hyperlocal activity in recent years. Much of the growth can be attributed to the city’s burgeoning tech scene, whose infrastructure (particularly around funding) is just now reaching a critical maturation point. Here are a few of the factors that are making the city increasingly popular as a hyperlocal incubator:
“[Early stage capital] is very plentiful in New York, and the people who are around the table are unbelievably qualified,” Owen Davis, managing director of NYCseed explained on a panel about the subject at the Street Fight Summit in October. “These days, if you’re a young startup you can get great people, capital, great mentorship, at almost any stage of your life cycle, which really never existed in New York before today.”
For hyperlocal plays however, investors in New York are more reticent, says Eli Portnoy, CEO of New York-incubated-but-L.A.-based ThinkNear. “There is a fear of hyperlocal, and I think that’s probably true broadly, but very few investors in New York had a lot of experience in [local]. In L.A. on the other hand, you have a lot of big companies that have emerged in local, so the investors we we’re able to get know a lot, and really understood the space.”
“New York is an easy market to create hyperlocal stuff because everything is so condensed,” says ThinkNear CEO Eli Portnoy.
As others have reported, the market for developers in New York has become absurdly competitive in recent years and remains a major obstacle for companies looking to scale products. At the Street Fight Summit in October, Hearst Digital Media VP of strategic investments Scott Wolfgang suggested that the scarcity of talent is in part an unintended consequence of the recent deluge of early-stage capital.
“It’s never been easier to start a company in New York. The flipside of that is it’s never been more challenging to scale a company,” explained Wolfgang. “We see a lot of businesses who are looking to hire employee number five, six or seven, but much of the good talent instead is saying, ‘I’m not going to come join you because I’m going to go to something like TechStars, and start my own company.'”
TechStars managing director David Tisch acknowledged the issue on the same panel, but said he believes the problem will self-correct as bigger companies surface: “I don’t think it is an economic bubble as much as it is a talent bubble, where there is just too many companies. At some point, that will consolidate and greater companies will emerge.”
What is arguably New York’s most attractive quality for hyperlocal startups — its unique density and walkability — could potentially sow the seed for failure. “New York is an easy market to create hyperlocal stuff because everything is so condensed,” says Portnoy about New York’s conundrum. “But anything you build through the New York market is impossible to take out of New York and apply to other cities.”
Portnoy points to Foursquare as an early victim of New York’s hyperlocal conundrum. The location-based social network recorded its one billionth check-in in September but appears to be struggling to gain traction in less-urban environments. Even in Los Angeles, which has traditionally been a hub for local innovation — spawning dominant players like ReachLocal, CityGrid, and Local.com — Foursquare usage is scant, says Portnoy, who moved ThinkNear from New York to L.A. after graduating from TechStars.
Regardless of potential scale-related difficulties that face New York hyperlocals, most agree, Portnoy included, that at the moment New York is the best place to launch a local venture. With a fully developed stack and flourishing entrepreneurial culture, there currently isn’t a better places for location-centric startups to build a product. The question will be how successful models like DNAinfo fare once they venture off off the island, and whether they can transform their NYC-testing product into multi-metro big business.
Steven Jacobs is an associate editor at Street Fight.
Photo credit: Flickr user hyunlab.