Seed funding thriving (too much?) in NYC

Ronny Kerr · March 15, 2011 · Short URL: https://vator.tv/n/1837

NYC Seed managing director Owen Davis opens up about the transforming seed-stage market

Owen Davis, managing director of NYC Seed, says seed rounds have doubled in size in the last couple years and that valuations have ballooned by as much as 30 percent over the last year, according to a peHUB report.

“There are no more $250,000 seed rounds,“ Davis reveals. “A startup says we want an X amount for our valuation, and all it needs is to get a few people to say yes to it. Then it can say to everyone else, ‘Look, this is what the market is supporting.’”

And a little voice in the back of everyone’s heads starts to whisper, “bubble or boom? bubble or boom?”

While Davis opts not to use either B-word, he does acknowledge that extra cash flowing into new startups has had a negative effect on the quality of those startups: “The bar for investing in seed deals has lowered in many ways.” Whether this will have an overwhelming effect on the industry as a whole, or whether it’ll just mean a lot of unhappy entrepreneurs, Davis does not say.

In the end, of course, no one can categorize the tech climate for certain.

What is certain is how popular seed investing has become, even beyond the natural boundaries of Silicon Valley. Besides NYC Seed, at least four other organizations are set to launch startups in New York this summer alone: DreamIt Ventures, Startl, TechStars (also in Boston, Boulder and Seattle), and NYCEDC Sunshine Bronx Business Incubator.

Startups that want to get seed funded the old-fashioned (and Pacific coast) way can always apply for Y Combinator, whose startup classes are nestled in Mountain View, Calif., right in the thick of Silicon Valley.

Also, it's worth noting that incubators do a lot more than provide funding. Besides highlighting their startups and giving them media attention, incubators offer first-time entrepreneurs lots of valuable advice for creating a business.

The last startup we wrote about to be NYC Seed-funded was SeatGeek, which raised new money from Hollywood and social media star Ashton Kutcher and Guy Oseary through their investment fund A-Grade Investments.