CB Insights, Silicon Valley Bank, Others See Rise in NY Investments

9/12/13Follow @jpruth

Deals and venture capital investments in New York startups are on track to set a new five-year high, according to projections in a report released Thursday.

Venture data firm CB Insights based in New York gathered the stats for the New York Venture Capital Almanac, sponsored by Silicon Valley Bank and law firm Orrick, Herrington & Sutcliffe. I ran into Anand Sanwal, CEO of CB Insights, at last night’s Enterprise Tech Meetup, which featured a discussion on acquisitions and exits for startups. During the panel, he said New York currently seems to be one the few innovation hubs outside the evergreen West Coast with some investment momentum.

“Overall, 2013 is going to be a record year based on the first half of the year in terms of venture funding,” Sanwal said during the event. “New York is the only market making even a slight dent in Silicon Valley—and it is a slight dent because Silicon Valley is a beast.” On a deals basis, he said, every quarter Silicon Valley typically sees 50 to 60 percent of the deals inked in U.S. startup hubs while New York sees about 8 to 12 percent.

But that huge gap, Sanwal said, does not diminish the progress seen in New York. “One of the monkeys on [New York’s] back was it did not have a billion dollar exit,” he said. “That’s now off its back with the Tumblr acquisition.”

Sanwal fellow panelists were Barry Silbert, CEO of SecondMarket; Wiley Cerilli, vice president with Constant Contact; Ben Boissevain, founder at Bois Capital; and Ed Zimmerman, chair of the tech group at Lowenstein Sandler and founder of First Growth Venture Network. Bloomberg Television’s Deirdre Bolton moderated.

Last night’s conversation covered deal-making, pivots, and cycles of boom, bust, and survival. Zimmerman said the New York market has changed from the last cycle (circa early 2000s) where the pool of acquirers diminished so much that even after venture capital thawed, few deals were made. “That is no longer the case,” he said. “We’ve seen large private companies becoming very viable buyers, challenging public companies.”

With the lineup of potential deal makers evolving, Zimmerman is not concerned about startups coaxing incumbent tech giants to make acquisition offers. “If IBM and Oracle don’t want to buy you, I don’t give a shit,” he said.

The number of deals made in the city seems to show there is opportunity out there for those who seize it. Based on the almanac released this morning, New York is expected to see 382 deals by year’s end, up from 191 deals so far this year. New York companies in the first half of the year garnered $1.33 billion in deals and the report forecasts that will to rise to $2.66 billion by the end of 2013. That compares with $1.97 billion in investments and 353 deals for all of 2012.

The report highlighted New York’s big deals including Yahoo’s $1.1 billion acquisition of Tumblr  and Stratasys’s $403 million buy of MakerBot Industries.

As far as exit trends go, whether through IPO or M&A deals, New York might end the year a bit down from 2012. Twenty-four exits were recorded for the first half of 2013 with 48 projected by year end. That compares with 53 exits by New York startups last year.

In an industry-by-industry analysis, the report found that Internet startups in the city continued to take the lion share at 78 percent of the financing dollars reported thus far, up from 72 percent for all of 2012. The financial sector in the first half of 2013 saw its share of each invested dollar rise to 5 percent compared with 2 percent of funding in 2012.

Other sectors did not fare as well, though. Healthcare funding in New York, based on the report, got squeezed down to 1 percent of investments made here in the first of 2013. That compares with, the healthcare sector representing 7 percent of investments made throughout 2012.

The almanac, which can be read in its entirety here, contains more details such as who the most well-funded companies tech startups are in the city (Fab, Gilt, and AppNexus led this crowd). It also includes perspectives on the past four years such as Google ranking as the top acquirer of companies based in New York with Yahoo and AOL tied for second place. The most active venture capital investors in New York were (from first to third) Lerer Ventures, RRE Ventures, and First Round Capital. Among angel investors, David Tisch’s Box Group, New York Angels, and David Cohen were listed as the most active since 2009.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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