{"id":8984,"date":"2019-05-27T15:43:08","date_gmt":"2019-05-27T19:43:08","guid":{"rendered":"https:\/\/blog.brainstation.io\/?p=8984"},"modified":"2019-05-27T15:43:08","modified_gmt":"2019-05-27T19:43:08","slug":"why-venture-capital-keeps-flowing-into-new-york-city","status":"publish","type":"post","link":"https:\/\/brainstation.io\/blog\/why-venture-capital-keeps-flowing-into-new-york-city","title":{"rendered":"Why Venture Capital Keeps Flowing Into New York City"},"content":{"rendered":"

After a record year of investments and big-money deals in the Big Apple, you might have expected venture capital (VC) activity in New York to stagnate in 2019 \u2013 instead, the East Coast tech hotbed has only gotten hotter.<\/span><\/p>\n

The first quarter of 2019 saw New York metro-based VC-backed companies raise <\/span>$4.5 billion<\/span><\/a>, a 110 percent increase over the fourth quarter of 2018, and a massive increase over the $2.7 billion raised over the same quarter in 2018.<\/span><\/p>\n

Amazingly, this kind of growth is expected to continue. Here are some of the reasons why New York\u2019s VC activity has maintained such a feverish pace.<\/span><\/p>\n

VC Activity Is on the Rise Everywhere<\/b><\/h2>\n

Although we\u2019ll get to the ways in which New York\u2019s VC situation is special, it\u2019s worth noting that VC activity is going through the roof across the United States and beyond.<\/span><\/p>\n

It was a banner year in 2018 for VC funding in the U.S., with a <\/span>record $130.9 billion<\/span><\/a> invested in American startups, surpassing the all-time high in 2000. That staggering number was spread across 8,948 deals. Other numbers were similarly positive, including a 33 percent year-over-year increase in exit value and the highest-yet figure for fundraising, with $55.5 billion raised across 256 deals.<\/span><\/p>\n

And experts believe 2019 could be on pace to top those figures.<\/span><\/p>\n

According to the <\/span>1Q 2019 Pitchbook-NVCA Venture Monitor<\/span><\/a>, the deal count trended downward in the first quarter of the year but larger deals elevated the overall value. Moreover, first-quarter capital investment was the second-highest quarterly total in 10 years (behind only the record-setting fourth quarter of 2018).<\/span><\/p>\n

Perhaps most impressive is that 2019 could be poised to surpass 2018 for record exit value, with Uber headlining a series of expected high-profile public offerings.<\/span><\/p>\n

New York Is Outpacing Even That Growth<\/b><\/h2>\n

In the first quarter of 2019, the Pitchbook-NVCA Venture Monitor found that the Mid-Atlantic region, which includes New York, generated 30 percent of all the deal value of VC dollars \u2013 more than double what the region reeled in during the fourth quarter of 2018.<\/span><\/p>\n

According to the recent <\/span>Global Startup Ecosystems Report<\/span><\/a> from the New York City Economic Development Corporation, New York City is the world\u2019s second highest performing ecosystem with 7,000 startups and over $71 billion in Ecosystem Value. New York grew from $2.3 billion invested in startups in 2012 to approximately <\/span>$13 billion in 2018<\/span><\/a> (the sector now boasts 326,000 jobs). <\/span><\/p>\n

New York is also taking a larger and larger share of the country\u2019s overall VC funding.<\/span><\/p>\n

In 2017, dollars invested in New York represented over 14 percent of all investment dollars in U.S. venture-backed companies. Surprisingly, that share has risen gradually over the past decade, more than tripling 2009\u2019s rate and doubling 2012\u2019s.<\/span><\/p>\n

As New York\u2019s piece of the pie has grown, the Bay Area\u2019s has shrunk. Over the first half of 2018, the total number of investments in New York-based companies was almost half that of the Bay Area, compared to only 10 percent in 2006.<\/span><\/p>\n

It\u2019s not just the quantity of investments in New York that\u2019s on the rise, but the average size of investment \u2013 it was up to $12 million in the first half of 2018, compared to less than $4 million as recently as 2012.<\/span><\/p>\n

Numbers from <\/span>Pitchbook<\/span><\/a> show that there were only 91 deals greater than $20 million between 2010 and 2013 \u2013 through August of 2018, there were already 87 deals of that magnitude.<\/span><\/p>\n

New York\u2019s Startup Scene Continues to Diversify<\/b><\/h2>\n

In the early part of the decade, New York\u2019s tech startup landscape was mainly associated with eCommerce (Etsy), social networks (Tumblr, Foursquare) and media (Buzzfeed, Vox). As the ecosystem has matured, New York is now a hub for fintech, biotech, food, cybersecurity, consumer tech, and much more.<\/span><\/p>\n

Consider the diversity of 2018\u2019s biggest funding rounds.<\/span><\/p>\n

Peloton\u00a0\u2013 which aims to create an indoor cycling studio experience that can be accessed from anywhere \u2013\u00a0raised $550 million\u00a0to bring its total to $994.7 million in equity funding ahead of its IPO this year. Second-hand shopping app\u00a0Letgo\u00a0raised\u00a0$500 million Series E, and real-estate platform Compass brought in\u00a0$400 million Series F.<\/span><\/p>\n

The variety in New York\u2019s thriving startup scene doesn\u2019t end there. Dataminr\u00a0\u2013 billed as the world\u2019s first real-time information discovery company \u2013 closed a $392 million funding round at a $1.6 billion valuation, more than twice its 2015 valuation of $680 million.<\/span><\/p>\n

Meanwhile, home buying tool Ribbon announced a $225 million funding round, health insurance company\u00a0Oscar Health\u00a0raised $165 million, robotic process automation vendor\u00a0UiPath\u00a0raised\u00a0$153 million\u00a0in Series B funding \u2013 before receiving another\u00a0$225 million Series C\u00a0in September \u2013 and online startup\u00a0Harry\u2019s shaving club\u00a0raised $112 million Series D\u00a0funding\u00a0before announcing plans to move beyond the shaving business.<\/span><\/p>\n

The Global Startup Ecosystems Report found that three New York sub-sectors are growing particularly quickly: health and life sciences; advanced manufacturing and robotics; and cybersecurity, a sub-sector that generated more than $1 billion in VC investment in 2017 alone.<\/span><\/p>\n

\u201cWe are lucky to have the confluence of existing markets and industries along with the creative culture to drive a truly diverse tech ecosystem,\u201d said Julie Samuels, Executive Director of Tech:NYC.<\/span><\/p>\n

An Improving Environment for Exits and Mergers and Acquisitions<\/b><\/h2>\n

For years, the criticism of New York\u2019s tech scene was its relative lack of high-profile IPOs and mergers and acquisitions \u2013 despite success stories such as Etsy and Blue Apron \u2013 but that has finally changed.<\/span><\/p>\n

In fact, 2018 began with a bang as Roche\u2019s acquisition of digital health analytics startup Flatiron Health for $1.9 billion established the largest tech acquisition in New York history.<\/span><\/p>\n

Stunningly, that figure was almost matched mere months later when Adtech pioneer\u00a0AppNexus, a marketplace for digital advertising, was acquired by AT&T for a reported\u00a0$1.6 billion.<\/span><\/p>\n

Other big exits in 2018 included Salesforce\u2019s acquisition of AI-powered marketing intelligence platform\u00a0Datorama was for a reported\u00a0$800 million and MINDBODY\u2019s acquisition of spa management platform\u00a0Booker\u00a0for\u00a0$150 million\u00a0in March.<\/span><\/p>\n

There were also two major acquisitions of New York-based public bicycle and electric bicycle sharing platforms, as \u00a0JUMP Bikes\u00a0was acquired by Uber for a reported\u00a0$200 million, and just months later\u00a0Motivate, the company behind Citi Bike, was scooped up by Lyft for a rumored\u00a0$250 million.<\/span><\/p>\n

Now, all eyes are on WeWork, which announced in April that it confidentially filed IPO registration paperwork.<\/span><\/p>\n

Other New York companies that went public recently are also performing well. MongoDB has seen its stock price more than quadruple since going public in October 2017, while digital knowledge management platform Yext has a market cap of $2.37 billion after pricing its April 2017 IPO around a $1 billion valuation, and Etsy similarly has seen its market cap skyrocket to $7.26 billion after a year in which its stock price grew more than 100 percent.<\/span><\/p>\n

Strong Local Early-stage Investors<\/b><\/h2>\n

New York\u2019s thriving startup ecosystem in part owes to the robust venture support provided by a number of local early-stage firms, with some of the most active among them including Lerer Hippeau Ventures, Contour Venture Partners, Greycroft Partners, FirstMark Capital and Female Founders Fund.<\/span><\/p>\n

Other multi-stage investors have also been generous with early-stage investments, including Bessemer Venture Partners, General Catalyst Partners and New Enterprise Associates.<\/span><\/p>\n

And of course, it generally helps that New York stands as the financial capital of the U.S., and the number of VC firms operating locally remains high.<\/span><\/p>\n

A Commitment to Innovation<\/b><\/h2>\n

New York didn\u2019t become a hub for innovation and entrepreneurship accidentally, and one of the reasons it\u2019s become such a rich ground for VC investment is the robust government support of the city\u2019s booming tech ecosystem.<\/span><\/p>\n

In 2018 alone, several new initiatives were announced to drive further innovation in the country\u2019s largest city.<\/span><\/p>\n

The New York City Economic Development Corporation (NYCEDC)\u00a0announced\u00a0the city would provide up to $100 million to build the Applied Life Sciences Hub while also providing $17 million to help with the June launch of Johnson & Johnson\u2019s new\u00a0JLabs\u00a0biotech incubator at the New York Genome Center.<\/span><\/p>\n

The city announced the NYC Blockchain Resource Center, intended to stand as a physical hub for the industry, and in October opened\u00a0RLab, the first-ever city-funded virtual and augmented reality lab in the United States. Another\u00a0tech hub\u00a0in Union Square received full council approval in August, and in October, the New York City Economic Development Corporation and\u00a0Cyber NYC\u00a0\u2013 the $100 million public-private investment intended to grow New York\u2019s cybersecurity ecosystem \u2013 announced the launch of the Global Cyber Center.<\/span><\/p>\n

Initiatives such as these will help ensure New York\u2019s record-setting VC activity can be sustained in the years to come.<\/span><\/p>\n

\u201cNYC is creating the infrastructure to grow industries of the future,\u201d said Ryan Birchmeier of the NYCEDC.<\/span><\/p>\n

\u201cThis work is focused on ecosystem building that will attract new venture capital investment, grow startups, increase international expansions and create good-paying jobs for New Yorkers.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

After a record year of investments, New York’s tech startup scene shows no signs of stopping. Here’s why the East Coast hotbed continues to grow.<\/p>\n","protected":false},"author":7,"featured_media":8986,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[692,336],"tags":[242,641,666,88,89,701],"yoast_head":"\nWhy Venture Capital Keeps Flowing Into New York City | BrainStation\u00ae Blog<\/title>\n<meta name=\"description\" content=\"After a record year of investments, New York's venture capital scene shows no signs of slowing. 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