NYC's booming tech startup scene
New York City has a thriving startup scene, especially regarding tech startups. Using data from Dow Jones VentureSource, the New York Business Journal reported that venture capital investment in NYC companies rose 40 percent in 2015 compared to 2014, from $5.87 billion to $8.24 billion. According to The Atlantic, NYC is also the fourth-largest city for venture capital in the world, holding 5 percent of global venture capital investment.
Inc. reported that there are several unicorn companies based in New York City, such as Warby Parker, Buzzfeed and ZocDoc. The number of unicorns in the city grew 75 percent in 2015. Some industries that saw increased growth include biotech, financial technology, enterprise software and health. Eric Hippeau, a partner at NYC-based seed-stage venture fund Lerer-Hippeau Ventures, told Inc. the NYC tech startup scene is the strongest it has ever been.
As venture capitalists continue to fuel startup funding into NYC-based startups, it is becoming increasingly clear that Silicon Valley is not the only place entrepreneurs can succeed.
Inc. reported a few reasons why the NYC tech scene is not only growing, but also spreading all over the city. The increased access to incubators and co-working space is a big factor, as well as more relaxed landlords and brokers. Dave Morgan, who founded a startup in the 1990s, explained that landlords used to require 10- or 20-year leases, which made it incredibly difficult for startups to find office space. The city also provides great access to skilled engineers. In addition, the venture capital scene is now firmly established, as it began setting down roots in the city almost 20 years ago.
On the whole, the kind of massive funding rounds and multi billion dollar valuations seen regularly in Silicon Valley are still far less common in NYC, but according to Crain's New York Business, that may not be such a bad thing.
"These smaller companies have had more realistic valuations placed on them," said Pitchbook analyst Nizar Tarhuni. "They can still get attractive funding packages from VCs who are looking for quality companies."
It is incredibly difficult for unicorn companies to live up to such large valuations. Right now 85 venture-backed companies who transitioned from private to public in 2015 are trading at an average of 23 percent below their initial values. Smaller companies may be in a better position to live up to what their worth, Crain's said.
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