Cloud 100 – NYC !

As you may have seen,  Forbes published the Cloud 100 , here is their description: Forbes Cloud 100 recognizes the best and brightest of the cloud. Compiled with the help of partners Bessemer Venture Partners and Salesforce Ventures, the list tracks candidates by operating metrics such as revenue and funding, with the help of 25 of their public cloud CEO peers.

Out of the 100 companies, 13 are based in NYC, specifically in Manhattan, see images below.  One of the great things about the startup scene in NYC is the density of companies, these companies are all in walking distance, less that 4 miles separates the most northern company to the the southern company.  I highlighted the density aspect in a previous post when looking at the locations of Fortune 500 companies (spoiler alert, 42 are based in Manhattan).

Startups (& VCs) have realized the sales opportunity that NYC provides and we are going to see an acceleration of SaaS companies being built here.

 

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LPs and Diversity

A lot has already been said and written about what is happening in our tech community with regards to how Women Founders are being sexually harassed and/or assaulted.  Recently, several Men have lost their jobs (careers?) for their behavior and I suspect others will too.

In addition to vocalizing how this is an issue, what actions can we take to improve things? While Women are at the center of the recent discussions, I do want to expand the conversation and include minorities in our community, as they are being impacted due to racism.

One of the most important areas we need to work on is diversifying the GPs (General Partners) of early stage VC funds.   The reason I say early stage funds, is that they are usually the first to financially support a startup, at a time when the company has very little data/revenue, so the VC is making a big bet on the Founders(s).  As you can see below, 92% of senior investment professional (GPs) are Men.  78% of GPs are White. The image below was via an article written by Kim-Mai Cutler in 2015.

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The fact that there is a lack of diversity in the senior GP ranks, isn’t news but it is worth to highlight this again, especially for LPs (Limited Partners) who are reading this post (hopefully they are).  White males are not more capable of running firms than other gender(s) or ethnicity.   I believe that LPs have the most power in changing the make up of how VC firms look.   We need LPs to think about diversity when they invest their capital in VC funds, so how can we help?

Specifically, we need to mentor new and diverse VC funds (aka Emerging Managers).   We need to help leverage our LP rolodex to get these firms access to capital.  We need to help provide high quality Founder referrals.  We need to get these professionals engaged in industry events/dinners that we organize.  We need to ask these firms, “how we can help”, as every firm has different needs.  I don’t want to assume that everyone is looking for help or needs help but it doesn’t hurt to ask them if they need help.

If you are a VC, are you willing to share some of your LP connections?  Are you willing to invite these firms into your syndicate?  Are you willing to invite them to your dinners and/or speaking events?

Given that I’m based in NYC, I want to take this time to highlight diverse emerging managers based here.   If you are LP and haven’t already spoken to these firms, it it worth exploring why that is and finding time to connect with them (assuming they want new LPs now or in the future).

  • 645 Ventures
  • AlphaPrime Ventures
  • BBG Ventures
  • Female Founders Fund
  • Flatiron Investors
  • Future/Perfect Ventures
  • Human Ventures
  • Lattice Ventures
  • New Age Ventures
  • Primary Ventures Partners
  • Rucker Park
  • SoGal Ventures
  • Startup52
  • Techstars IoT
  • Third Kind Venture Capital
  • Trail Mix Ventures
  • WME Ventures 
  • Work-Bench
  • XFactor Ventures

Please let me know if I missed any firm(s).  This list is comprised of firms who meet all of the following criteria:

  • HQ’d in NYC
  • raising Fund I/II and/or currently investing out of Fund I/II
  • General Partnership is comprised of at least one woman and/or minority.  This person has to have substantial carry (which to me, means they are one of the leaders of the firm)
  • Early investment focus (Seed/Series A)

The point of the post is not to throw LPs under the bus, but it is fair to say they could be doing more to change the diversity of firms.  That being said, every stake holder in this community (including me) has a role that they can play in making changes that improve the makeup of VCs (and Founders).  It is worth taking time to think through how you personally can be helpful, I’m still thinking through it and welcome any feedback/thoughts.

My commitment is to help the above mentioned firms.  I have helped a few of them already but need to do more.

 

 

Top 10 Startups in NYC , Q1 2017 edition

“who are the best startups in NYC?”….I get this question a lot.

It is very hard to quantify an answer, usually is based on some anecdotes but rarely is it a data driven answer.  One way to quantify this is by utilizing information via Glassdoor  If a company is highly ranked on Glassdoor, it should indicate that the employees overall are happy campers.  If you have happy employees, there is a strong likelihood that customers are happy, which usually means $$$.   I have not researched whether or not, there is a strong correlation between happy employees and company success, but intuitively I think it makes sense, if you disagree, please let me know.

In any case, here are my top 10 startups in NYC, would love to get your thoughts.

In no particular order:

  • Seatgeek
  • Apprenda
  • CB Insights
  • Boxed
  • Datadog
  • Hightower (now VTS)
  • InVision
  • Kemp
  • Justworks
  • BounceExchange

These companies met ALL of the parameters below, again the data is from Glassdoor:

  • HQ’d in NYC
  • At least 20 reviews provided by current/previous employees
  • At least a score of 4.7 (out of 5)

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Summer Internship 2017

We (SVB) are seeking an amazing intern for the Summer of 2017.

The past interns that I’ve hired have gone to do some interesting things in the startup/venture community:

  • Kevin Carter, who subsequently joined SV Angel as an Associate and is now a Partner
  • Chaz Flexman, who subsequently joined SVB full-time, then worked for A16Z and now is VP of Strategic Relationship at PCH International
  • Thomas Knowles, who subsequently joined the SVB venture arm and is now a Partner at Gratitude Railroad (a VC fund in Utah)
  • Dimitris Kouvaros, who subsequently and recently became a Director at Newark Venture Partners (a new VC fund / Accelerator)
  • Lorel Sim, who was our most recent Intern this past Summer, she is currently a Sophomore at Stanford and will no doubt be doing interesting things in her career

Here are the characteristics that the candidate must possess:

  • PASSION for the startup community
  • Articulate (both in writing and presenting)
  • Takes initiative
  • Hard worker
  • Have an opinion (let me know which sector(s) you are excited about)

If this sounds like you and can clearly demonstrate the above characteristics, please fill this out:  google doc

A few key points to highlight:

  • This is a paid position (~$15 / hour)
  • Ideally, the candidate is currently a Freshman, Sophomore or Junior
  • Start date would be around June, flexible depending on your class schedule
  • Could be either full-time or part-time
  • Position is based in NYC
  • Ideally, the candidate lives in NYC, in case we would like to extend the internship beyond the summer
  • You get to work directly with me 🙂
  • All the work you will be doing is squarely focused on data/metrics regarding the startup/vc community.  A lot of ad hoc projects around venture funding/activity, sector analysis, portfolio reviews, assisting with blog posts, working with CRM, etc.
  • I will review applicants in Jan/Feb/March and make a decision in early April.

About SVB:

In short, we are the leading global commercial bank for entrepreneurs and investors.  A more detailed overview is provided below.

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VCs who back the best* startups in NYC

Recently went through the exercise of creating a list of the best* startups in NYC.  The companies ranged from seed funded startups to Pre-IPO companies (so, all are still private).  The process was partially data driven, partially based on word on street and partially based on my interactions with the founders of those companies.  It was really more subjective than anything else.  Ended up coming up with a list of ~60 startups.

Decided not to share the list, as it was really more of exercise to see if it was possible to narrow the list down to manageable number.   The good news is that there are so many exciting companies in NYC, that is was a very tough process to get it down to 60 startups.

One insight I thought would be interesting to share, is which VCs most frequently show up as backing these best* companies:

  • Box Group – 7 investments
  • First Round Capital – 7
  • Lerer Hippeau Ventures – 6
  • Thrive Capital – 6
  • Google Ventures – 5
  • Founder Collective – 5
  • Index Ventures – 5
  • Accel Partners – 4
  • Iconic Capital – 4
  • Union Square Ventures – 4
  • Wellington Management – 4
  • Institutional Venture Partners – 4
  • RRE Ventures – 4
  • New Enterprise Associates – 4
  • Battery Ventures – 4

There were many other VCs that showed up, but the list above reflects the firms that are most active in backing the best* startups.

Now, I think the early stage VCs deserve more credit than the later stage VCs, as the late stage folks have data/revenue to hang their hat on.  So, just take that into account when reviewing the list.

PS If you put together a list of your top 60 NYC startups, happy to meet up in person and debate the list over coffee.

*this list wasn’t produced by any scientific means, was mostly subjective and we will likely disagree on the outcome.  Please send the hate mail to Santa Claus, PO Box North Pole 🙂

 

 

 

NYC sub-sector trends in 2016

Many people ask what is happening in the NYC startup scene and they still assume it is mostly adtech, commerce and content.  That might have been true in the past, but it’s not what is happening now, at least based on anecdotes and what I’m seeing.  Decided to do use some data to determine if this accurate.  Used Pitchbook to this query:

  • Seed and Series A rounds
  • rounds done in 2016
  • NY HQ’d companies

 

Below is the dollars & percentage breakdown of sub-sector activity.

The surprising trend will likely be that SaaS is leading all the sub-sectors.  Second, the trend in healthcare, big data, AI/ML will be an eye-opener.   Overall, NYC is really balanced in terms of sub-sectors and isn’t overly dependent on one to drive future returns.

I would like to see more VR/AR related startups, given how much content companies and studios are based here.

What are you thoughts on this?  What are we going to see more of in 2017?

Industry Vertical Capital Invested (in M) Percentage
SaaS $313.77 17.7%
E-Commerce $286.55 16.1%
Mobile $272.14 15.3%
FinTech $250.60 14.1%
HealthTech $135.28 7.6%
Big Data $100.43 5.7%
Artificial Intelligence & Machine Learning $72.75 4.1%
Marketing Tech $51.14 2.9%
Internet of Things $43.84 2.5%
Lifestyles of Health and Sustainability $36.84 2.1%
AdTech $33.19 1.9%
Manufacturing $30.75 1.7%
EdTech $22.08 1.2%
Cybersecurity $21.60 1.2%
Life Sciences $21.20 1.2%
Wearables & Quantified Self $20.75 1.2%
Virtual Reality $17.41 1.0%
Robotics and Drones $14.92 0.8%
3D Printing $10.05 0.6%
AudioTech $9.75 0.5%
Nano-technology $6.70 0.4%
CleanTech $3.00 0.2%
$1,774.74 100.0%

3x DPI ?

The goal of most Venture Capital funds is to drive a minimum of 3x the capital invested to their Limited Partners.  The terminology that is used and most important to dig into is DPI (Distributed to Paid In).

From time to time, you will meet some audacious General Partners, who will claim they can drive 5x DPI.

Most VC funds have a 10 years life span, meaning the 3x DPI goal should be achieved within this time frame.

Lets look at the publicly available data on Pitchbook.  I pulled up all VC funds that were in the 2006 vintage (meaning the fund started investing that year, so we are at the 10 year mark now).  Pitchbook had return data on 27 funds.  I realize that Pitchbook doesn’t have access to return data of all 2006 vintage funds, but for this exercise and to make my point, 27 is a decent sample size, considering there are 322 funds that are a 2006 vintage per Pitchbook.

Of the 27 funds:

  • NONE have a 3X DPI
  • ONE fund has 2x+ DPI (1 / 27 = 3.7%).
  • TEN funds have a 1x+ DPI (10 / 27 = 37%)
  • 17 funds has less than a 1x DPI (17/27 = 63%)

This post isn’t meant to discourage VCs or LPs, but do want to highlight that this is a very hard business to be successful at.  With so many new VC firms being formed and many  new LPs rushing into the VC industry, it is important to reiterate the point.

I’m not sure on the history of why 3X became the default return target by LPs, as opposed to 2.5X or 2X (will do some research on this).  I realize that LPs are looking for a 20%+ IRR, which is how they get to 3x DPI goal, but it is fair to say that they have misplaced expectations.  VCs are in the business of investing in outliers and therefore LPs are looking for the same, but based on this data and other available data, if you are generating 2x+ DPI, you are an outlier.

Below is the dataset that I am referencing:

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