On the nextNY mailing list, there has been a great discussion about the NYC startup culture, what (if anything) is broken, and how to fix it.
Google making NYC its second home is a good start (though I'd like to point out that 14th St and 8th Ave isn't exactly "the heart of Chelsea"). One of the recurring themes in that discussion was that we need an "anchor": once things get going, the ecosystem will feed itself, but until that point we need someone like Google to be the base. "Google's perceived less as a threat in New York -- one that might hire away top talent from surrounding companies -- than as a catalyst of good things to come."
Cost is obviously an issue. The NYSIA gave cost in NYC a C- for cost, and some suggest that we are becoming "a trustafarian resort-town". Office space (can be) expensive, but there are alternatives. It should come as no surprise that many startups are moving to DUMBO and Williamsburg which are (slightly) cheaper and perhaps a bit "hipper" - see, e.g., the Etsy Labs launch. (As an aside, Charlie and I are both pulling for Bay Ridge to be the Next Big Thing.)
Beyond that, though, wages are a major issue. It is very expensive to live in NYC, and I'm not sure the culture here has quite caught on to the idea of deferred compensation like those out west. The first question you're likely to hear when being introduced to a New Yorker is "what you do", as if that somehow defines who you are as a person. More people seem to be impressed when you say you work at a top financial or law firm, but personally I would be more proud of something I've built from the ground up.
All told, I've been amazed at how many entrepreneurial-minded folks there are in NYC, and how many passionate these folks are about changing the culture and furthering the resurgence of Silicon Alley.
On that note, I'll be attending the nextNY community conversation tonight at CRESA Partners. I'm looking forward to some interesting discussions and will post a recap tomorrow. The event is full, but if you're interested in joining us for a drink afterwards, we'll be continuing the discussion at the The Gingerman.