Active Early Stage Investors in NY based companies (Jan ’17 to Aug ’18)

In preparation for an event that we run on a regular basis, called Fundraising Workshop, wanted to provide an update on some of the most active early stage VCs (Venture Capital) who are investing in NY based startups.

A few items before providing you the information.

  • The data was pulled via CB Insights
  • The investors do not need to be based in NY but have to be investing in NY based companies
  • The date range was Jan 1 2017 to August 13 2018
  • It only includes venture capital firms and excludes accelerators, angels, corporates, etc.
  • CB Insights doesn’t provide data on who is leading the rounds, so the assumption with these firms listed, is that they participated in the round and not necessarily lead, a critical distinction when fundraising.  If you are fundraising, you need to do more homework to figure out is actually leading rounds.

The data is below.

Most active VCs who participate in sub $2M rounds, see below.  Many of the seed and pre-seed rounds are sub $2M in size, so if you are looking for firms who are active at this size, this is a good target.  Now, the data around pre-seed and seed is challenging since many of these rounds are not announced , which makes it is difficult for CB Insights to capture.  So this list is not comprehensive but I think it provides a lot of signal on the right firms to reach out to.

sub $2M rounds

Most active Seed VCs, see below.  In this query and unlike above, I didn’t put parameters on the size of the seed round.

Seed

Most active Series A VCs, see below.  Again, no parameters on the size of the round.  As I mentioned in beginning of the post, I am unable to query who is “leading” these particular round.  So some of these firms could be leading and other could be participating in them.

Series A

Top NYC growth startups?

Are these the top growth startups in NYC?  I don’t know, but lets take a look at some PUBLICLY available data from LinkedIn, Glassdoor and CB Insights.  If you want a TLDR, scroll to the bottom.

As many of you are aware, they are so many listicles circulating online about the top companies, they are rarely data driven and read like who is the most popular, not who is best or fast growing.  They typically are about driving pages views.   Wanted to take a look at PUBLIC data to see if I could derive some signal from the noise.

Another lens that I thought about was, if I was going to join a startup, how would I choose which startup to join?  It is a very difficult process to narrow down the list.   As an example, on AngelList, there are ~2,900 startups in NYC, of which ~700 have posted a full time job on that site in the past seven days.

One of the public data sources is Glassdoor.   If you aren’t familiar with this service, it is essentially Yelp for employees.  Before you get up in arms, I realize that some disgruntled employees will post negative items on there but I think if there are enough inputs, it can provide some signal on the health of the company.  Not only can you provide input on the company but on the CEO as well.  For this exercise, in order to qualify, you had to have at least 20 reviews, which I thought was a large enough sample size that if there were some disgruntled employees with an ax to grind, it could be balanced by happy current/past employees but I do realize this can be gamed.  Regardless, there is some signal that you can derive from this service.  In addition, the startup needed a ranking of at least 4.6 or greater (max number is 5, larger the number, the better).  See example below.  As a side note, Glassdoor was recently acquired for $1.2B, congrats!

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The other data source was LinkedIn.  If you are in the tech community, LinkedIn gets trashed a lot, primarily by engineers/developers, who get a lot of unsolicited emails from recruiters,  but I can see how that can be annoying.  I don’t think LinkedIn has figured how to deeplink yet, you will see my tweets ranting about this 🙂 .  That being said, if you are in a sales or relationship driven role, this service is invaluable.  If you pay for their subscription, you get access to two data points that I used for their exercise,  number of employees and growth rate.  See below as an example for a NYC startup, Lemonade.

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Number of employees is an important data point, as it CAN provide some signal on potential top line revenue.  If you are a startup that has a clear revenue model, I assume that every employee generates at least $100K in revenue, which takes into consideration their salary, benefits and overhead (office space, taxes, electricity, etc).  So in this example, I would assume that Lemonade is generating ~$9M ($100K x 91 employees) in top line revenue.   I don’t know if this is accurate in this particular case but that would be my assumption.   For companies who don’t have a clear revenue model, I would obviously assume no revenue.  Feel free to disagree with me on this, comments are open and would like your feedback on this.

The other data point that is important is growth rate.  For this exercise, I took a look at the 1 year growth rate, in the example above, it is 69%.   In order to qualify for this exercise, I took a look at companies that are growing at least 20% in the past year.

Lastly, utilizing ChubbyBrain Insights (aka CB Insights), I took a look at a how much VC funding the company has raised.  Two data points that you can generate some signal, total funding amount and last round of financing.  If I were to join a startup, knowing when they raised their last round is critical, as it provides some signal on how much cash they have remaining.  How much total funding can provide some signal as well, especially if have ownership in the company is important to you.  Generally speaking, the more the company has raised, the less ownership they will provide to a new employee.  So if ownership is important, you might want to take a look at this data point.  For this particular exercise, I didn’t require the company be VC backed or that it has raised a new round of financing but I did provide info on that for you on Airtable (PS, I love their service)

So without further ado, here are the companies that qualified based on the all the criteria provided above (PS, if I missed you by accident, please lmk and I will update the post).

In alphabetical order:

  • Augury
  • BounceX
  • Button
  • CB Insights
  • Compass
  • Convene
  • Dataiku
  • Elite SEM
  • Fundera
  • Greenhouse
  • InVision
  • Justworks
  • Kustomer
  • Lemonade
  • SeatGeek
  • Updater

Special thanks to Bella Rubin for helping with gathering data for this post.

PS, another signal that was derived from this exercise, is looking at which VC firms were the most prevalent in backing these companies in the early days (Seed & A rounds only).  See the Airtable referenced above for a link to that information.  There were five firms (all NYC based) that showed up on two occasions: Lerer Hippeau, First Round Capital, Thrive Capital, FirstMark Capital and Box Group.  The signal strength is a bit low as 2 out of 15 is not substantial but still wanted to highlight it.

PSS, this comment from the CEO of CB Insights is a worth highlighting.  Looking at capital efficiency is good lens when taking all the data points into consideration.

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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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cloud

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%

Fastest Growing NYC Startups?*

Although I’m familiar with Mattermark, I only recently started using the service.   As I got to play around with the functionality, I gravitated towards the metrics around number of employees and employee growth rate.

Given that startup revenue figures aren’t provided on any public databases that I’ve seen so far, the closest (but imperfect) way to measure the growth of a startup is by employee growth rate.  If a startup is doing well, generally speaking, they are hiring.   This is a broad statement but true in most situations. That being said, hiring a lot of people quickly, certainly doesn’t equal success and in some instances have actually driven companies out of business, due to spending too much money, but that is an entire blog post in itself.

I set out a few parameters in order to find the fastest growing midsize VC backed companies HQ’d in NYC, here was the search criteria:

  • 100+ employees
  • HQ’d in NYC
  • VC backed
  • Still private (haven’t exited)
  • 20%+ employee growth rate in the past six months
  • 2%+ employee month over month growth rate

The results (sorted by Employees Month over Month Growth):

fastest nyc startups

One ratio I thought was particularly interesting, was (Employee Count / Total Funding). If this ratio is high, you COULD derive a few things: 1) they are more capital efficient 2) likely to be generating significant revenue.  For example, look at Movable Ink, an enterprise software startup.  They have 139 employees and only raised $12.3M to date.   If you want to use this ratio, it would only be fair to compare apples (Enterprise SaaS) to apples (Enterprise SaaS), as opposed to apples (SaaS) to oranges (Hardware).

*Again, this is certainly an imperfect way to find the fastest growing startups or most capital efficient, but it can provide some insights on these two fronts.

 

VCs who lead seed deals in NYC startups

Sent out a few tweets last night:

While there is a lot of discussions (and some clarity) on how the opaque VC world operates, it is still hard to get data for Founders who are fundraising.   In particular, getting information on seed rounds is challenging as many rounds are not announced and the specific VCs who invested, aren’t always listed.  To make things even more murky, who actually led the round isn’t always disclosed.

While fundraising is supposed to be challenging for startups, we could make it slightly easier for Founders to identify who the active VCs are and more importantly, who are actually LEADING rounds.   Many of my discussion with seed stage Founders are about fundraising and there is a lot of confusion as to who leads rounds vs those who participate rounds, a very important distinction.  In order for a round to really come together, you need a VC who will lead the round, which typically means they are setting terms (“pricing”) and writing the largest check in the round.

The criteria I’ve set is as follows:

  1. NYC HQ’d startup
  2. VC has raised a new fund in the past 36 months
  3. VC has led (or co-led) two seed deals in the past 12 months in NYC (see point #1)
  4. Check size of lead VC is $500K+
  5. Round size is $750K to $3M (could be an equity or a convertible note instrument)

So with the parameters outlined above, I have gone out to several data sources to see what could be found, although it has not been fruitful, at least on the point of who lead the round and how much they invested.

Given that many of the VC rounds haven’t been announced, the data isn’t actually available yet, so I also solicited feedback from the community on which VC firms fit ALL of the parameters outlined above (in alphabetical order).

  • Accel Partners (SF)
  • Bloomberg Beta (NYC and SF)
  • BOLDstart Ventures (NYC)
  • Bowery Capital (NYC)
  • Canaan Partners (NYC and SF)
  • Collaborative Fund  (NYC)
  • Eniac Ventures (NYC and SF)
  • ff Venture Capital (NYC)
  • First Round Capital (NYC and SF)
  • Flybridge (NYC and Boston)
  • Genacast Ventures (NYC and Philadelphia)
  • Greycroft (NYC and LA)
  • Homebrew (SF)
  • IA Ventures (NYC)
  • KEC Ventures (NYC)
  • Lerer Hippeau Ventures (NYC)
  • Metamorphic Ventures (NYC)
  • NextView Ventures (NYC and Boston)
  • Primary Ventures (NYC)
  • Resolute Ventures (SF and Boston)
  • SBNY (NYC)
  • Scout Ventures (NYC)
  • True Ventures (SF)
  • Two Sigma Ventures (NYC)
  • Union Square Ventures (NYC)

I’m actually surprised the list is this long, thought it was much shorter when I sent out the original tweet.  That being said, my sense is that there is room for more players as some of these firms are focused on specific sectors, while other sectors aren’t covered as actively.  In addition, the market is growing and there is an increase in the amount of seed stage companies being formed.  Lastly, most of the firms listed above are leading on average two deals per year in NYC, so that means ~40 NYC based startups would have lead every year.  I would assume there are more than 40 high quality companies per year in NYC that should have a lead, so again, room for more players.

If you think I missed your firm on this list, please send me a note at sgoldman at svb and provide specific information on which deals you have led in the past 12 months, thank you.

This list was purposefully focused on seed deals.  I think pre-seed is a distinct category and deserves a separate post/list, might work on that, stay tuned.

I have received feedback from people on the parameters that I set out.  They were done thoughtfully based on discussions with stakeholders in the community.  Feel free to write your own post based on other parameters if you disagree with mine.