The New York tech scene is finally all grown up

Steven Loeb · July 15, 2015 · Short URL:

The ecosystem is seeing companies raising later stages, along with an increase in exits and IPOs

When it comes to tech scenes around the country, there is Silicon Valley and then there's everyone else. Among that "everyone else," there are a number of other cities vying for second place on that list, including Los Angeles, New York, Boston and Austin. They all have their strengths, and their weaknesses.

The New York tech scene is one that always seems to be "up and coming," but now there's data showing that it may have actually, finally, arrived.

The last five years have seen New York growing at a pretty amazing rate, according to data from CB Insights. In fact, deal activity has increased every year since 2009. In that time, New York startups have raised over $20 billion across 3,800 deals since 2009.

How quickly has it been growing? 2014 saw a high of 890 deals, raising $5.31 billion. Already 2015 has seen 362 deals and over $3.8 billion. This year is on track to see $5.5 billion in funding.

There is one troubling sign, though: deals are actually expected to go down slightly slightly this year, to a total of 875.  Is this drop something to worry about, and is it something that might be pointing toward a downward trend for the ecosystem? Not really, Anand Sanwal, CEO and Co-Founder of CB Insights, told me.

"That's a pretty marginal drop and is a run-rate projection so don't think it's all that noteworthy," he said.

Something also to note is that the second quarter of this year was the first time since the end of 2012 that it failed to reach 200 deals, topping out at 152. That being said, it was, by far, the biggest quarter for funding in at least the last five years, with $2.4 billion; that easily dwarfs the next largest quarter, which saw $1.8 billion. 

The fact that there are fewer deals being done, but with more money being funneled in, is a sign of a maturing ecosystem, one with older companies that are raising at later stages.

"A lot of companies that received seed and Series A funding are moving along and getting more mature.  The more relaxed funding environment also helps," Sanwal told me. 

Overall, the last four quarters, including the second quarter of 2015, saw a combined $6.7 billion in funding, 49% more than the previous four quarters. Overall, 2014 deals and dollars have grown 305% and 483%, respectively, versus 2009.

It's not just the funding scene that is showing signs of the New York tech scene becoming more mature; you can also see it in the increase in exits. Not only did 2014 see the highest exit total of the past six years, with 176 total, it also reached a six-year high for IPOs with five, including those of OnDeck Capital and Varonis Systems. That is up from 148, including two IPOs, in 2013. 

So far 2015 has seen 86 exits, including one IPO, Etsy, which, with a $1.8 billion valuation, became the largest New York-based tech exit ever.

Etsy also kept up a pretty impressive streak, as there has now been at least one New York-based, VC-backed tech exit at a valuation of at least $1 billion in each of the past three years. The others were OnDeck Capital, which went public in 2014 at a $1.3 billion valuation, and Tumblr, which was was acquired by Yahoo for $1.1 billion in 2013.

Other big exits have included Salesforce buying BuddyMedia for $745 million in 2012, and Shutterstock's IPO at a $570 million valuation, also in 2012.

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