Is NYC the East Coast’s New VC Capital?

Everybody knows it. Tom Brady knows it (when he was racking up Lombardi Trophies in Boston, he was getting his mail here). Mark Zuckerberg may have said he’d rather start Facebook in Boston, but the reality of it is, he launched offices in New York City. Clemens, The Babe, and Boggs: they all know, too.

New York is where it’s at. New York’s VC scene is showing all the signs of outpacing Boston’s, and at a bad time for Beantown, too.

VCs have trained a keen eye to Silicon Alley’s tech deal potential: Canaan Partners opened up shop here about a year ago, and Accel Partners hung their shingle in New York soon after—more VC shops are expected to increasingly focus on investments here.

The Facebook CEO (and Harvard dropout) isn’t the only entrepreneur looking to move offices here, either; when peHUB spoke with Box.net CEO Aaron Levie, he, too, said he’ll bring operations to New York. Where out-of-town operations aren’t taking up real estate, New York-based businesses are expanding, courtesy of some sizeable ’11 rounds: this May, Gilt Groupe packed away $138 million in VC backing and in September, Tumblr reeled in $85 million; Buddy Media bagged $54 million the month before. And startups, in turn, are always looking to put that cash to use.

“We’re constantly hiring,” said David Steinberger, CEO of Comixology, the New York-based retailer of popular comic titles to tablets on all platforms. “There are enough startups here that serious, talented engineers are always in demand.”

Why is New York on a roll?

It isn’t just ‘Melo, (the potential arrival of) Dwight, or the sporting chance that the right entrepreneur to wind up with enough post-lockup cash could feasibly buy the Mets. As consumer Internet plays become increasingly popular, New York has siphoned more and more capital from Boston (and Silicon Valley), and the state—based mostly on business coming to one borough, really—finally outpaced Massachusetts for the first time in more than a decade by capital invested.

A whole lot of capital is coming at just the right time, and it may only be the tip of the iceberg. New York Mayor Michael Bloomberg has increasingly sought to make the city fertile for startups. New York will develop (if all goes as planned) a tech incubation center on Roosevelt Island, and if some reports are to be believed, Stanford University is a frontrunner to plant one of those fancy golden shovels into an island that will all of a sudden need to be accessible by a whole lot more than just a Wifi-connected funicular.

At the same time the Harvard of the West looks to capitalize on the new East Coast VC spending capital’s Zip code (and skyline), the real Harvard is surrounded by VC operations in the medical device, healthcare and biotech space—one that has offered few exits, scant IPO opportunities and not many new fundraisings, either. Strategics are eliminating R&D funding and it seems to only take longer and longer to get drugs and devices approved in the U.S. In fact, if some investors are looking to put capital in the healthcare space, Brazil, and not Boston, might offer brighter prospects.

New York’s odds, on the other hand, are hinging on solid chances. As the subscription app economy continues to develop, that the city is a publishing epicenter offers worthwhile long-term prospects to the budding VC scene here. If and when a downturn hits, how many angel investors remain when the tide pulls back will serve as a potential bellwether for New York’s next economic trend. The city’s permanent status as a fashion hub will offer it entitlement to e-shopping businesses (like Gilt Groupe) and, of course, the seemingly endless abundance of wealth in this town will glow to entrepreneurs across the globe. And, finally, there’s the fact that no baseball team in its right mind in this town would ever put Bobby Valentine and his fake moustache in charge.

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4 Comments

  • [...] A whole lot of capital is coming at just the right time, and it may only be the tip of the iceberg. New York Mayor Michael Bloomberg has increasingly sought to make the city fertile for startups. New York will develop (if all goes as planned ) a tech incubation center on Roosevelt Island, and if some reports are to be believed , Stanford University is a frontrunner to plant one of those fancy golden shovels into an island that will all of a sudden need to be accessible by a whole lot more than just a Wifi-connected funicular. Is NYC the East Coast’s New VC Capital? [...]

  • Competition and rivalry between sports teams is promoted because it drives revenues for those teams. Companies putting ad sales forces in New York clearly makes sense. But hiring talented software engineers and product managers in New York is hard — harder than in Boston or Silicon Valley today. The best start-ups in our wired world are putting talent in the best places based upon availability of that talent. The New York versus Boston dialogue should stay in sports and reporters/writers shouldn’t try to inflame sports loyalties in entrepreneurs who trying to make good business decisions.

  • i was wondering if anyone can point me to any online resource’s which might compile a list of new VC backed companies that might be hiring? Or if there are several good headhunters to contact?

  • [...] in CA and Boston open offices in NY to take advantage of the deal flow and opportunity. In fact, NYC is now considered the East Coast capital in VC. This took roughly 10 [...]

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