When I chose to move to NYC from Boston three months ago, it was with serious trepidation. I had spent six years living, working, and learning in Silicon Valley, and despite the growing evidence of New York's success as a tech hub, SV still remains the king of innovation by any statistic. To be frank, I'm ambitious like many of the people in tech I work with, and I want to run the kingdom, not some outlying New Amsterdam duchy.
Since summer is of course the best time in both NYC and venture capital to analyze an ecosystem in action, I figured I would give some early indications of what I have observed.
These observations are of course drafts — three months is quite limited to fully form an opinion on an industry as diverse and large as tech in NYC, and my opinions are held, but lightly. Views are subject to change!
Good: Cooperation – The tech ecosystem here is surprisingly cooperative compared to Boston and particularly Silicon Valley. Investors share deals much more freely, and it just feels as if everyone is trying to connect others in the ecosystem to make New York a stronger contender. Plus, there are a remarkable number of casual events to meet other people. While there may be an enormous number of stereotypes of New Yorkers, at least when it comes to tech, they are almost all false. In short, the asshole density in NYC is just lower than in SV. It's refreshing.
Ugly: Lack of Leading VCs - That cooperation comes from the unique moment that NYC finds itself in. I've been quite surprised by the number of VC funds in the ecosystem who don't lead rounds, particularly at the seed stage. While partially a function of fund size, it also is a function of risk appetite on the part of investors to actually make real bets.
New York has seen an explosion of seed funds in the last few years, many of which are offshoots of family offices and high net worth individuals. By my count, there are 250-300 venture firms in the city, of which I have only met around 40 in the last few weeks.
There is an incredible amount of seed financing available, but so little of it is willing to be the first check into a company. CRV always leads rounds, but we're also just one firm. That's a real risk for this ecosystem that needs to be rectified if the kinds of moonshot projects that become legends are going to find success.
Good: Tech is Cool – One way to judge an ecosystem is to see how much tech reigns supreme over more traditional paths like investment banking and consulting. Tech often pays lower than these fields, so it's a good indication of people's choice between income and interesting work.
I've been surprised by the number of people who say "I work in tech" with gusto in the city. In fact, it's been interesting to see how much people hide their backgrounds in finance and consulting these days and instead talk about software. Tech is definitely "in," and while I wasn't here years ago, I have to believe that the culture has changed a lot over the past few years.
Good: Technical and Product Talent Increasing – Along the same lines as above, the sheer number of engineers and product managers in the city is quite exciting. There is really a great cohort of people moving through the city these days. I have a very strong bias toward founders who can build (the bias of a software engineer I suppose), and so that's great news for the health of startups going forward.
Bad: The Independent Entrepreneur – One surprise that I have had as I track investments across the city is the sheer number of startups that are incubated by VCs. Even more surprising, some firms even make it a point to make incubation investments most and sometimes all of their invested capital.
I am not completely negative on this model – some of the Valley's most impressive outcomes have started in VC offices. But it is not healthy when such a large proportion are being built this way. Frankly, VC incubation projects tend to be much more incremental than projects invented by some crazy technical engineer. A SpaceX is not going to be invented in a VC office.
This is similar to the issue with seed funds noted above: a lot of entrepreneurs in the city are indeed more experienced in their verticals, but at the cost of a serious risk appetite to work on truly bold projects. There's more "change the back office process for a law firm" then "change the world" in this ecosystem, and the balance needs to move toward the latter.
Good: Deep Tech is Accelerating – We live in a post-app world, where the future value of startups is moving back toward the complex and deeply technical products from which VCs first built the asset class (Intel, Genentech, etc.). It's been great to see the strong growth trajectory of deep tech in NYC, and the wide diversity of bets in this particular space. Also great is that local seed funds seem to be poised to put more money into this space, guaranteeing that it will continue to grow for the foreseeable future.
Bad: NYC Lacks a SpaceX – On the flip side though, those deep tech startups have not created the sort of marketing leader that SpaceX has become on the West Coast. At least from what I know (feel free to correct me below in the comments), I have yet to see the kind of truly imaginative company that would say to the world "New York Tech can imagine bigger than anyone."
Call it the Crazy Thesis, but New York desperately needs a massive technical bet, and this is my number one funding priority at CRV these days. As they say on the New York City subway: "If you see something, say something (by sending Danny an email at email@example.com)."
Posted on September 22, 2016