2018 New York’s Startup-VC Scene (Part I)
Updated: Jan 10, 2018
Hi! I’m a freshly minted New Yorker — B2B enterprise tech professional and investor — who is eager to dive right into New York’s Startup-VC scene. But first, I want to get the lay of the land. I figure, you may want that too. So, I plan to share my research with you in my 2018 New York’s Startup-VC Scene Part I and Part II posts.
If I missed something, please leave a comment. I plan to update this document periodically.
Here’s what you’ll find in this post:
- The current state of New York’s startup ecosystem
- The status of New York’s VC activity
- The most active New York VCs
- The most active New York CVCs
- 2017 New York VC select investments
- New York unicorn trends
- New York VC backed exits
- New York VC returns
- A note for the New York optimist
🗽The current state of New York’s startup ecosystem
According to this year’s Global Startup Ecosystem Report, NYC is the second largest ecosystem in the world by number of startups with over 6,300 startups. It also has one of the highest global resource attraction rates. And did you know that since Google’s 2007 acquisition of NYC’s DoubleClick, there’s been an explosion of talent and startup activity, leading to a healthy number of acquisitions and IPOs? In fact, in the last 4 years, NYC has seen at least one $1 billion exit per year.
🌐 Global Startup Ecosystem Report 2017 (GSER)
When you stack up the global startup ecosystem, NYC comes in at the top — second only to Silicon Valley. NYC ranks in the top 5 for performance, funding, market reach, and startup experience. Although, as per GSER, NYC can stand to improve its talent pool.
The New York ecosystem’s metropolitan GDP is $1,559 Billion, compared to the global average of $267 Billion. The ecosystem performance of $71 Billion is also much higher than the global median of $4.1 Billion. Early-stage funding per Startup averages $568 Thousand, more than double the global average of $252 Thousand. Interesting founder demographics include an ecosystem made up of 19% women and 25% immigrant founders.
In terms of global market reach and entrepreneur connections, New York lands smack in the middle, at a cross-section of about 22% of users reported in the rest of the world and about a 6.7 average number of outbound entrepreneur connections.
New York’s global connectedness has its strongest relationship with Silicon Valley, unsurprisingly.
If you take a look at global Series C/Series A success ratios, then you’ll find that New York City’s C/A Ratio is nearly 30%.
As previously mentioned, NYC can work on their talent. It’s true that in NYC, their availability of engineers has increased, and that the city has the fastest average time to hire engineers in all ecosystems — hiring engineers takes 24 days (3 weeks faster than Silicon valley) — but just look at NYC’s global ranking in talent access and cost. NYC is 7th in talent access and 18th in talent cost.
On the bright side, NYC is second best in attracting international startups (vs Silicon Valley) and third in attracting international entrepreneurs (vs Silicon Valley and London).
🔥 THE CURRENT STATE OF NEW YORK’S STARTUP ECOSYSTEM
As per the PitchBook, the startup ecosystem is playing with healthy entrepreneurial growth and a labor force of 4.3 Million with 35.7% of residents being ≳25 years old or holding a bachelors degree.
VC backed New York startups between 2009–2017
The number of VC backed New York startups between 2009–2017 has yo-yo’d from 370 in 2009 to 1,175 in 2015.
That said, overall, NY’s investment activity entered a stage of moderation after its most significant ramp-up since the dot-com era. As per PitchBook, VC investment in NY has grown from +$2 Billion in 2010 to +$4 Billion in 2017.
In the last 7 years, the largest number of deals in NY have been early stage and the smallest number of deals have been late-stage.
Take note that NY’s VC activity is consistently above $2 Billion (since 2010) but funding dynamics are shifting.
NY’s most VC backed sector is software. In fact, in 2017, software startups are nearly 50% of NY VC investment activity.
🙋🏽 THE MOST ACTIVE VCs IN NY
In 2017, the most active investors in NYC — with ≳10 deals across all stages — include: Lerer Hippeau Ventures, Greycroft Partners, Social Starts, Y Combinator, Female Founders Fund, and General Catalyst Partners.
The top 8 investors in New York seed rounds
From 2014 ’til date, 57% of seed rounds have gone to tech startups and 26% to B2C startups. And the top seed round VC investors in NY based startups include:
1. Lerer Hippeau Ventures
2. 500 Startups
3. New York Angels
4. Great Oaks Venture Capital
5. Social Starts
6. Compound Ventures
T-7. Vayner/RSE
T-7. Techstars
👩💼 NEW YORK CVCs
With over 40 Fortune 500 enterprises headquartered in New York, NYC enjoys a solid list of corporate venture capitalists (CVCs). CVCs include but are not limited to:
- Verizon Ventures (seed to late stage): Verizon Ventures is a venture capital arm of Verizon Communications Inc. specializing in early stage investments, late stage, and seed capital investments. It focuses on connected devices and hardware, media and entertainment, commerce and advertising, infrastructure and networking, data and analytics, new products, technologies, applications and services, AR/VR, Artificial Intelligence (AI), Big Data, Cybersecurity, Digital Media, and Mobility.
- Citi Ventures (incubation and seed): The firm seeks to invest in financial services industry and transformational technologies, including those that leverage the power of social media and information analytics with a focus on commerce and payments; security, cybersecurity, and enterprise IT; big data and analytics; machine learning, and financial technology. Within big data and analytics platform, the firm seeks to invest in companies that address the following needs: distributed Big Data infrastructure management; text analytics on massive unstructured data sets; Natural Language Processing interfaces (NLPs); graph technologies; exploratory analysis and the discovery of hidden insights in complex data structures; security and governance for Big Data and next-generation business intelligence (BI); visualization tools; and marketing technologies.
- Pfizer Venture Investments (all stages): The firm may also invest in funds, spinout opportunities, start-ups, consortia investments and PIPEs. It prefers to invest in the healthcare sector with focus on therapeutic sector, platform technologies, diagnostics, drug delivery, pharmaceutical services, healthcare IT, and other technologies impacting drug discovery and development, developing compounds and technologies.
- American Express Ventures (all stages): The firm targets the areas of consumer commerce with a focus on mobile, consumer payments, marketplaces, lending, loyalty and digital marketing products; B2B services include business payments, process automation, lending and small business services; and core capabilities servicing, customer acquisition, fraud detection, security, data analytics and underwriting.
- Time Warner Investments (early to mid stage): The firm seeks to invest in digital media and technology companies.
- Goldman Sachs Investment
- Lowe’s Ventures
- Nasdaq Ventures
The most active NYC CVCs
According to Built In NYC, the biggest CVCs investing and fueling the NYC startup scene include:
- Comcast Ventures (e.g. Slack, FanDuel, Zenefits, Taboola, and Flipboard)
- AOL Ventures (e.g. Bitly and Betaworks)
- Citi Ventures (e.g. Square, Betterment and Jet)
- Time Warner Investments (e.g. Bustle, Mashable, FanDuel, NextVR and YieldMo)
- Hearst Ventures (e.g. Pandora, BuzzFeed, Hootsuite, Roku and Via)
- KBS+ Ventures (e.g. Yieldbot, PlaceIQ, CrowdTwist, Indicative, Roost, Mezzobit, Dextro and Adaptly)
CVC participation is growing
As per PitchBook, CVC investment has increased from $.5 Billion in 2010 to ≳$2 Billion since 2014.
🚀 2017 NEW YORK VC SELECT INVESTMENTS
This year’s select VC backed startups included $70 to $90 Million rounds for Class Pass, Betterment, PMV Pharmaceuticals, Kobalt Music, Freshly, Vroom, Progyny, and Blink Health. Bread Operations, Dataminr, and Casper Sleep raised between +$90 to 170 Million. The top NYC startup round was raised by Peloton at $325 Million.
Recently, Lemonade Inc. raised $120 Million from Softbank.
🦄 NEW YORK UNICORN TRENDS
New York’s private companies valued at $1B+ (AKA unicorns) include: AppNexus, BuzzFeed, Compass, Making FanDuel, Flatiron, Infor, MongoDB, Oscar Health, Peloton, Sprinklr, VICE, Warby Parker, WeWork, Zeta, and Zocdoc.
New York’s Unicorn Valuations
The valuation of NY’s 15 unicorns range between $1B (Compass) to $20B (WeWork). 14 out of 15 are valued below $11B. 10 out of 15 are valued under $2B.
🤑 NEW YORK VC BACKED EXITS
“The New York Metro area saw the greatest share of companies exit before raising a 2nd funding round, [in the last decade]. New York also saw the highest overall exit rate at 35%.” — CB Insights
As of September 2017, the majority of exits have been through acquisition, followed by buyouts and IPOs. Between 2010 and 2017, there have been over 50 exits a year.
Looking at the exits by dollar amount, we see 2016 was a standout year.
As a whole, NY venture backed exits have grown in numbers and dollars. The number of exits peaked in 2013 at 110 deals. The aggregate dollar amount of exits peaked in 2016 at $6.5 Billion. That said, the number and dollars of exits is expected to come in lower than previous years in 2017.
The top 15 New York VC backed exits
Blue Apron’s June 2017 IPO at a $1.89B valuation was the largest exit on CB Insights’s list. MongoDB’s IPO, Yext’s IPO, and Moat’s acquisition all happened this year too. The rest of the top 15 New York VC backed exits — that happened between 2012 and 2017 — are listed below.
Note: NY’s pipeline of startups and exits continue to be strong with: Warby Parker, Blue Apron, and BuzzFeed (whose valuation is above $1 Billion).
💰NEW YORK VC RETURNS
Have you ever wondered, “what US cities generate the best VC returns?” According to PitchBook’s 2016 analysis, New York City’s percentage of exits per MOIC (AKA Multiple on Invested Capital = exit value/total VC raised) is top 3.
📝 A NOTE FOR THE NEW YORK OPTIMIST
New York is in the up and up. There’s opportunity for venture capitalists to capitalize on the NY rocket ship. So, where can we look for the next unicorns? Manhattan? Brooklyn?
In my book, the New York VC scene is a place worth jumping into head first. Stay tuned for 2018 New York’s Startup-VC Scene (Part II).
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About Author: Lolita Taub is a TEDx speaker and keynote, a World Economic Forum Global Shaper, an artificial intelligence enthusiast, and an enterprise tech professional and investor at Portfolia. She holds 9 years of enterprise B2B software-hardware-and-services sales experience at IBM, Cisco Systems, and in Silicon Valley. Lolita has been recognized for her work on Forbes, Inc.com, The Huffington Post, Entrepreneur.com, and Los Angeles Times, among other publications.
Follow Lolita on Twitter @lolitataub and connect with her here.
