Monday, 27 June 2011

Does NYC exceed Silicon Valley in Venture Funding?

Let's look at the statistics first according to Q1 2011 Venture Capital Report

- As for the Share of Total Venture Capital by State(including Internet, healthcare and energy sector): Transaction: CA39% MA12% NY10% / $ Amount: CA52% MA10% NY6%. California still dominate the market, followed by Massachusetts and New York.

- When it comes to VC investment in Internet business, while CA still dominate with 42% of # of transaction, NY follows CA with 15% share (MA is next with 8% share).

- As for the VC Internet business investments by the cities; San Francisco 49 deals | $315M; New York 39 deals | $218M; Chicago 12 deals | $491M(Large funding to Groupon); Palo Alto 12 deals | $189M; Redwood City 4 deals | $82M; Mountain View 8 deals | $78M; San Mateo, CA; 7 deals | $72M; Seattle, WA 9 deals | $54M; Indianapolis, IN 1 deals | $54M; Los Angeles, CA; 5 deals | $50M. NYC is ranked 2nd although still lags behind Silicon Valley as the whole. It is also notable that City of San Francisco is the largest Internet VC capital destination Vs. cities in Silicon Valley.

- As for the VC transaction on Healthcare business by states (P21), CA37%, MA19% NC2%, PA5%, NJ2%. NY is not even in the list. The fact that Top cities are Redwood City, Cambridge MA, Mountain View and Palo Alto, Healthcare VC investment tend to go to the cities in suburb.

- As for the VC transaction on Green & Clean Tech by states (P29), CA42% MA9% MO3% CO4%. Again NY is not even in the Top 5. Top cities are suburban cities such as Oakland, Santa Clara, Irvine, San Leandro and Sunnyvale.

To summarize, top VC funding destination cities are:

  • San Francisco 72 deals | $533M
  • Chicago 12 deals | $491M (Internet business only)
  • New York 61 deals | $383M
  • Santa Clara 7 deals | $379M
  • Palo Alto 23 deals | $322M
  • Mountain View 20 deals | $222M
  • Redwood City 14 deals | $215M
  • Oakland 3 deals | $211M
  • Irvine 3 deals | $196M
  • San Jose 11 deals | $193M
  • Austin 20 deals | $184M
  • Sunnyvale 10 deals | $170M
  • Cambridge 19 deals | $163M
  • San Leandro 1 deals | $135M
  • Waltham 12 deals | $114M
  • Seattle 19 deals | $82M
  • Houston 5 deals | $81M
  • Dallas 4 deals | $15M

Based on above number, we can conclude that:

- NYC is the 2nd largest city for VC funding, preceded by San Francisco.

- However,compared to Silicon Valley as whole, NY VC funding is probably around 1/4(25%).

- VC Funding on NYC is predominantly (approx. 60%) on Internet business.

- Even in Internet VC funding, NY share is around 1/3 of that of Silicon Valley.

My theory on booming NYC internet start up scene is (and it also explain surging popularity of startup in San Francisco Vs Valley):

- The more and more internet start up business are based on consumer service, social media and advertising based, NYC has good talent pool in industories such as mass media, publishing, advertising and fashion.

- Due to financial crisis, top notch talent has moved from financial industry to internet start up business.

- Young hipster engineers for consumer business prefers to live and walk in walkable, urban environment (Vs. middle age engineers' preference on family and education friendly suburban setting).

- Old money from Wall Street, PE and HF gained risk appetite and funding more on startups.

Lastly, here are some interesting article about booming internet start up scene in NYC, all published in early 2010.

- How Tech Start-ups Like Foursquare and Meetup Are Trying to Overthrow Old Media and Build a Better New York -- New York Magazine

- Tech Start-Ups Eligible for New York City-Sponsored Fund -

New York Isn’t Silicon Valley, and That’s Why They Like It -

Hope it helps!

P.S. NYC mayor Mike Bloomberg is very aggressive in turning NYC into Digital City. Here is his Road Map