The World’s Most Social City Meets Social Media: Why One Hot Investor Thinks New York Is on Fire as a Tech Startup Hub

4/4/11Follow @bbuderi

It’s no secret to anyone looking at venture activity that New York has blossomed over the past few years as a startup mecca. Riding a wave of investments in Web , media, and advertising startups, the city has recently climbed past Boston to become the second greatest center (after the Bay Area) of high-tech deal making when it comes to the general Internet space.

But why? It’s not hard to make some guesses about the economy coming back, or about the low cost of starting companies these days. But for a more expert perspective, I thought I would check in with Xconomist Rich Levandov, a partner at Avalon Ventures. Levandov is based in Boston, but he’s had a good ride on New York startups in the past few years—including some great exits with ad technology companies Tacoda and Pictela (both sold to AOL, Tacoda in 2007 and Pictela last December)—and he even took an apartment in the Big Apple last summer.

In fact, the first time I interviewed Levandov was back in 2007 about Tacoda. He and company founder Dave Morgan revealed they had made a deal to get tattooed with the Tacoda logo if the company returned 10x the investment Levandov, then with Masthead Venture Partners, had made—which it did when AOL bought it for about $275 million. (By the way, there’s still no tattoo three years later—what’s up with that, guys?)

Levandov, who also co-led the Series A round in Zynga with New York’s Union Square Ventures and Boulder-based Foundry Group, says he currently has seven or eight investments in New York, among them Ad Summos and TV ad company Simulmedia (which Morgan also founded)—and that he’s seriously looking at three or four more. It’s safe to call him extremely bullish on the Big Apple’s startup future. “Avalon’s interest in New York has been soaring, but I think it’s going to double again,” he says. (In case you doubt the NY connect with Avalon, Levandov’s colleague, Avalon founder Kevin Kinsella, is the son of Broadway and movie actor Walter Kinsella—and one of the original producers of the musical Jersey Boys).

So, following are some of his thoughts and observations on why the city’s innovation scene has exploded lately, what has changed in recent years, and what he thinks the future holds.

—It’s Safe to Go Back in the Startup Waters

“New York City has always been about ideas,” says Levandov. When it came to tech startups, those ideas were largely benched after the bubble crashed early in the 21st century, but that has changed in a big way the past three years or so. Now, he says, “It’s safe to do a startup again. It’s kind of like … Next Page »

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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