Hot or Not? Technology Entrepreneurship in New York City en-us Wed, 31 Dec 1969 19:00:00 -0500 Thu, 10 Jul 2014 18:27:17 -0400 Mike Katz Daniel Wyszynski Tue, 01 Jun 2010 11:18:35 -0400 Hi all, Little late to the game, but just want to pose this question to you. All I keep seeing around NY is these 1-idea tech companies get funded. Not going to name names, but these things aren't revolutionary in any way, either Why is it that in in other industries they would be classified as one hit wonders. When it comes to financial advice, we tell people to diversify. When it comes to tech startups it seems that having one application that collects user data is all it takes. I'm trying to build a mobile software development company. Not a single app. I have multiple clients, publish my own apps on top of that, and I'm having trouble even getting started on how to go about contacting someone to get advice on getting some funding. Every application I see has the usual 'What's the application you're building' question. Heck, I got 5 in development now, and a mile-long list afterwards. So if someone would kindly point me to a resource where I can get some mentorship, I would truly appreciate it. Much thanks, -Dan Mike Katz Thu, 20 May 2010 11:04:17 -0400 Thanks - this is helpful and you bring up some great points. If you don't mind, can you email me (mike AT mikekatz DOT com) so I can ask you a few other questions? I like your perspective and want to better understand the specific circumstances behind the anonymity. I promise not to share with anyone else who you are. Thanks again. NYC Start Up Employee Wed, 19 May 2010 16:02:06 -0400 Why anonymous? Well, I haven't completely thought it out, but this is a site that many in our industry deride. It has its moments but it's a site we all love to hate, the butt of the joke, the perfect example of the web's willingness to publish poorly sourced rumor and innuendo to drive PVs. Many influential people in the space consider it a time suck and a negative influence. If you're on this site during working hours you could be accused of stealing company time or it could be assumed that you also waste time on other non-work related sites, like Facebook (which I rarely visit during the work day and do sometimes judge people negatively if I see it on there screens often or notice lots of posts. I don't mean to judge but if I'm waiting on something work related from them you can't help but wonder if you'd have it sooner if Facebook didn't exist). Some may even question your loyalty if there's a leak to this site and your name has been associated with it before. I am actually in favor of some sites doing away with anonymous comments, particularly political sites that attract partisans with strong views where the conversation could be much more substantive if users weren't allowed to hide - in that case I think the anonymity is more akin to a ski mask or kkk hood -- it brings out the worst in people. That may sometimes be the case here, but it also will sometimes be a positive thing and the anonymity is more like a news show blurring out the face of a whistle blower or person from witness protection or something. Clearly, this site does get its share of unhelpful comments, but they have to worry about throwing out the baby with the bath water if they clamp down because so much of what makes this site work in its current formulation is that its a community where anyone from any part of the companies being discussed can drop their little nuggets of insight without fear of reprisal from their superiors. I'm not saying requiring users to identfy themselves would kill the dynamic they have going but it would absolutely change it and it's hard to say if it'd be for the better. I might still comment if required to use my name, but I probably not. Contributing to this site is an implicit endorsement or at least an indication that you spend time on it. I'm not interested in any blow-back from any unfair conclusions people may draw from it. Mike Katz Wed, 19 May 2010 15:20:32 -0400 Thanks Fred, and I agree that the total VC dollars flowing into New York City is MUCH higher than the chart alone articulates. In fact, my gut-feeling is that if we could collect accurate data, the amount of "non-NYC-based" dollars invested in companies here is indeed greater than your 75% estimate. Unfortunately, however, USV is an anomaly and one of the few firms that provides much transparency. As a result, there's no better alternative to making estimates and providing the appropriate disclaimers. Is the chart right? Not a chance (I even called it "extremely incorrect" in the text below it). But even if it were accurate, the aggregate capital from "pure" NYC firms plus all of the non-NYC money that we anecdotally know is flowing here adds up to a huge number. In other words, if you're an exciting company based in New York (or thinking about moving to New York), don't relocate elsewhere simply because you're worried you can't find investors. fred wilson Wed, 19 May 2010 10:22:55 -0400 Mike - the blog post is excellent. i agree with almost all of it the one place i'd suggest you may have missed the mark is the amount of VC dollars flowing into NYC. i think the local VC firms supply less than 50% and maybe less than 25% of all the VC dollars flowing into NYC right now. you acknowledge that but the chart sort of negates that point. and i have no idea who Cap IQ gets their data on us. we don't provide data to anyone other than Crunchbase Mike Katz Wed, 19 May 2010 08:55:51 -0400 Thanks for your comment "NYC Startup Employee" - you should check out my original (instead of this edited version) because in the original, I expressed my disappointment in exactly what you've described. Specifically, I say: "this paper initially set out to go beyond one-off observations by analyzing concrete macroeconomic data about technology entrepreneurship in NYC. As part of this process, I conducted 35 interviews with local investors, start-up founders, and government officials. It might be a long list of some of the who’s-who of New York, but it is unfortunately far from exhaustive. Additionally, macroeconomic data at the city-level is expensive and time-consuming for local governments to generate. Thus, the most recent information does not include the very robust entrepreneurial periods of 2009 and 2010. These logistical issues, coupled with the confines of an academic environment (i.e. deadlines and page limits), prohibited me from painting the complete picture of what is happening in New York City as I originally intended. Instead, this is a start, and I look forward to further exploring this analysis and discussion for many years to come on this blog." Additionally, you mention Tacoda and Quigo which were both good outcomes, but DoubleClick sold for about 10x these examples. Silicon Valley was put on an entrepreneurial pedestal through billion dollar acquisitions and big IPOs so its going to take several of our own for New York to get proper recognition as a legitimate rival to those folks out west. Finally (apologies that this is a non sequitur), I'm curious why you didn't put your real name on this comment. I'm working on another blog post arguing that sites like this one should promote transparency and thus should prohibit people from commenting unless they actually identify themselves. As a result, I'm trying to understand the motivation behind the anonymous comment (shoot me at email if you'd prefer to discuss it offline). NYC Start Up Employee Wed, 19 May 2010 06:56:43 -0400 The conclusion here was that more NYC startups with big exits will go a long way. Seems like a pretty soft conclusion for what aimed to be a less anecdotal analysis. Also, it mentions DoubleClick but leaves out other NYC firms with big exits. For example, AOL bought NYC firms Tacoda for $275M and Quigo for $340M. Jay Levy Tue, 18 May 2010 14:50:18 -0400 New York is in a very critical point of time related to startups and venture capital. We have plenty of early stage(seed / series A) capital in the NY area right now. The issue we have is a drastic shortage of great startups. A great startup is a great time and decent idea; not even a great idea. I would say that we are actually out of equilibrium right now and there is more capital than is needed to fund startups in NY. The great startups will continue to get funded as they should; though some will probably be overvalued, not good for anyone. The middle of the road startups will begin to get funded; it's a coin toss on whether they should or not. but only time will tell. Hopefully things don't get so overheated that the 'poor' startups don't begin to get funded. We need more great entrepreneurs are tech people in NY if we want to make this community survived and not be looked at as a failure / joke in a few years/ Raises Hand Tue, 18 May 2010 13:13:27 -0400 This is easy: New York is a good place to be an entrepreneur if you have a trust fund and can live your life without worries OR you were a former i-banker who cashed in during boom times. Otherwise, for the rest of us rubes this city has extremely high taxes, high cost of living and isn't very forgiving when you fall flat on your face. I guess the other upside to NYC is that when you do eventually fail recreational activities legal or otherwise are just a cab ride away. Mike Katz Tue, 18 May 2010 13:07:19 -0400 Fred, you're right. I'm sure all of the numbers are way off (unfortunately some of the disclaimers got cut when Business Insider transposed this from my blog), and the publicly available data on VC is indeed horrible. Nonetheless, I tried to come up with an approach that was a "best fit" line for funds in NYC. As you've indicated, USV doesn't reside neatly on that line, but I think in aggregate this approach gets close. Candidly, the point of the table was to convey that there's lots of money out there and your upward revision of my estimates from USV further reiterates that point. If you're interested, this is the description from above as to how I arrived at the numbers: "this data comes from Capital IQ and details the two most recent funds for venture capital firms that meet the following three requirements: (1) the most recent fund exceeds $100 million, (2) the firm’s primary offices are in New York City, and (3) the firm has a bias to invest in NYC above other regions. In the far right column, I also attempted to estimate the capital that remains from the most recent fund (note: assumes half of the fund is reserved for follow-on investments, fees, etc. and the remainder is invested equally over five years. This equal allocation clearly happens infrequently in reality and five years is likely too long, but I tried to estimate variables that seemed consistent with trends in NYC). The analysis is far from perfect, but hopefully helps hammer home that there is a tremendous amount of available capital for startups in New York. Thomas J. Loverro Tue, 18 May 2010 12:15:11 -0400 I'd just add that "hard data" often lags the "soft data" that industry veterans feel and see on the street. Folks who have worked in the industry in NYC a while like Fred Wilson, Stuart Ellman, and Chris Dixon are saying something fundamental about the NYC market has shifted and while it is true these comments can be self-serving from a marketing perspective, that doesn't explain why they are saying it now but were not six years ago. The hard data will come, but you have to know what to look for. It's about more than aggregate dollars raised as a % of the national numbers; quality, success and notoriety matter. Having worked in NYC VC and entrepreneurship for a little while, I have to agree something has changed for the positive. I don't think anyone in NYC is claiming we're bigger or better than the Valley or necessarily even Boston (except perhaps in baseball), but the fact that NYC comes up as a tech startup destination at all is the victory in itself. Just a few years back I remember most folks putting NYC well after Seattle, Austin and even the RTP. fred wilson Tue, 18 May 2010 11:30:07 -0400 your estimate for our "dry powder" at usv is way off mike we have additional funds for follow-ons in usv 2004 and we have not even called 20% of our usv 2008 fund where did you get this data? the publicly available data on VC is horrible and you cannot rely on it for work like this