Investments in New York City startups rise over 73%

Steven Loeb · April 13, 2016 · Short URL:

Some of the biggest deals for NYC companies included Oscar Health, Flatiron Health and Betterment

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Outside of Silicon Valley, the biggest tech ecosystem in the country is probably New York City. Now Silicon Alley, as it's called, is seeing some of its highest numbers yet. 

There was $1.95 billion invested in New York-based startups in the first quarter of 2016, according to data out from CB Insights. That number is a record for the city, beating out the previous high of $1.9 billion, raised in the third quarter of last year.

The dollars put into companies in Q1 was a 73.5 percent increase from the $1.1 billion that were invested in Q4 2015. On a year-to-year basis, dollars rose by 42 percent.

The large amount of funding is being attributed to three big raises: Oscar Health, which raised $400 million; Flatiron Health, which raised $175 million; and Betterment, which raised $100 million. Those three deals accounted for a third of all funding going to New York City-based companies last quarter. 

While dollars going to startups were reaching new heights, the same cannot be said of the number of deals that New York companies are seeing. In fact, even as more money is flowing, it's becoming harder for them to raise funding. 

There were 127 deals in the first quarter, flat from Q1 2015. The number of deals was up 8.5 percent on a quarter-to-quarter basis, but the number was still down significantly from Q2 and Q3 of last year, which saw 154 and 148 deals, respectively. So things might be bouncing back, but they are still down from where they had been.

The numbers in New York reflect the larger trend globally, of more money flowing, but fewer companies getting it. 

VC investments were down18.5 percent quarter-to-quarter in Q1, but while the number of companies getting money is way down, the number of dollars actually were not affected. There was $30 billion invested in the quarter, down only 6 percent from Q1 2015, but also up 13 percent from Q4 2015, when $26.6 billion was invested.

As such, the median deal size increased from $1.6 million in Q1 2015 to $2.3 million in Q1 2016.

Exits in New York rose in Q1, up 55 percent percent to 17, after they fell 35 percent, down to 11, in Q4. On a year-to-year basis, exits are down 15 percent. Some of those exits include Drip, an online community for music fan, which was acquired by Kickstarter, and Brewster,  a social address book, which was acquired by FullContact, a contact management platform.

All exits over the the last three quarters have been acquisitions; there has not been an IPO of a New York-based company since Etsy went public in the second quarter of 2015.  

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