Why New York Needs AOL

AOL has been the subject of intense media scrutiny over the past few weeks. The transformation from an internet access business to a media company has not been easy, especially when sideshows like TechCrunch distract from the serious business at hand. Also, there have been reports that AOL is seeking a merger with Yahoo!

Will AOL’s transformation be successful? If AOL merges with Yahoo will New York remain important to the company? As a former AOL employee and now once again an entrepreneur I hope so. The company has been a vital part of the New York media startup ecosystem for a number of years now. Here’s why:

Startups Need An Exit
Our startup community is dependent on large media companies eventually buying the local startups. Otherwise why leave a good job and work day and night on your idea if there’s no prospect of a pot of gold at the end of the rainbow?

Over the past few years AOL has been highly acquisitive, buying New York startups like The Huffington Post, Tacoda, 5Min and Pictela. These four exits combined pumped over $600 million into the pockets of New York-based startup founders and employees (as well as their venture capitalists and associated limited partners).

And while being acquired by Google or Microsoft can work out OK, I believe that it’s best when New York startups are purchased by New York-based companies. We need our talent to stay here in the city.

Startups Need Angels
Redistributing the cash that its declining dialup business throws off to New York entrepreneurs has been essential in building a flourishing angel community. I can count at least a dozen New York startups that can trace some of their investment back to AOL’s purchase of Tacoda.

Startups Need Support
AOL regularly does things like produce job fairs and host startup events. AOL is also a university of sorts, teaching people how to manage technology, service campaigns and sell media. The people AOL graduates often move on to work for a startup or sometimes start their own companies, creating a positive feedback loop. Thousands of of people in the New York media scene have spent some amount of time at AOL.

I wish my friends at AOL the best of luck in transforming the business. If for some reason AOL does merge with Yahoo! let’s hope New York remains an important base for operations and investment.

New York and its media advertising startup community is depending on it.