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New York City's Tech Boom

 |  StatsBee

By Michael Moynihan, Chief Economist & Senior Vice President for Research & Analysis

It’s no secret that the New York City technology scene is booming. Spurred by city initiatives combined with favorable global trends, the City has incubated some of the hottest startups around. Tumblr, Foursquare and Gilt Groupe are just three examples of the City’s ability to spawn new companies that leverage the City’s existing strengths in media, communications and fashion. While startups abound, many are still privately-held, making the precise value of the overall tech sector hard to quantify. However, confirmation of the economic value of the startup scene emerges from recently released figures that testify to the large number of 2012 exits through acquisitions. 2012 witnessed the sale of 100 firms New York high tech firms at a total price of $8.3 billion. Included in that figure is the largest tech acquisition in the United States of the year: $2.2 billion paid for AboveNet by Zayo Group.1

Exits are important not only because they validate new technologies but also because they provide money to fund new rounds of investments. A roaring fourth quarter for New York State led to the highest growth rates in the nation in both VC funding and deals, ahead of growth in California and Massachusetts. Both the number of deals in the fourth quarter, 97, and their value, $572 million, represented a 24% increase over third-quarter figures.2 The number of deals was also approximately evenly distributed between Seed, Series A and later rounds, suggesting that financing is available at each stage of the fundraising process.3

All told, venture capitalists placed $2 billion in bets on New York companies in 2012, including $115 million in Seed funding, $467 in Series A funding and $449 billion in Series B funding. Deals in the Internet sector, which has been historically strong for New York, accounted about $1.4 billion. However, healthcare and mobile and telecommunications also fared well, accounting for $134 and $132 million in new funding, respectively.4 Among the top deals of 2012 were a $101 million round raised by Fab.com, an e-commerce design website, a $68 million financing round by Quirky and a $53 million round by Street Response Labs.5

Strong exits through acquisitions demonstrate that the City is providing strong returns on prior investments in start-ups and technology. New money and a large number of companies in the pipeline suggest the virtuous cycle will continue. See the infographic below for more detail.

NYC Tech City Infographic

1 PrivCo
2 PricewaterhouseCoopers/National Venture Capital Association MoneyTree report; data from Thomson Reuters
3 CB Insights
4 CB Insights
5 PricewaterhouseCoopers/National Venture Capital Association MoneyTree report; data from Thomson Reuters

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