New York, often referred to as the "Big Apple," is not only one of the most prosperous cities in the world but also a cradle for tech startups to realize their dreams. Over the past decade, New York has seen waves of eye-catching IPOs. This trend has attracted tech entrepreneurs and VCs from all over the world, positioning New York just behind Silicon Valley as a major tech hub.
However, New York wasn’t always the main stage for tech. A report by CNBC pointed out that compared to New York, Silicon Valley in Northern California or Boston on the East Coast has been more recognized as tech hubs, with Boston seen as the central hub for enterprise technology development in the U.S.
In terms of market value standards, tech startups in New York have valuations ranging from \(9 billion to less than \)30 billion. While these figures aren’t staggering, CNBC believes that these budding startups are paving the way for a new entrepreneurial ecosystem in New York.
New York’s Investment Last Year Was Second Only to Silicon Valley
According to data from the National Venture Capital Association (NVCA), New York’s investment amount last year ranked second among all 50 U.S. states, reaching $29.2 billion, with 2,048 startups receiving investments. California, home to Silicon Valley, took the top spot, while Massachusetts ranked third.
Before this decade-long IPO wave in New York, in 2014, the top investment states were California, followed by Massachusetts, and then New York. NVCA data suggests that over the past nine years, the capital invested in New York has grown sevenfold, even amidst a downturn in the tech industry last year.
2022 was NASDAQ’s worst performance since the financial crisis of 2008. Even now, tech stocks are struggling to recover from last year’s Federal Reserve interest rate hike.
The previous year, 2021, was a peak for capital raised, with New York startups raising nearly $50 billion and 1,935 companies benefiting. In comparison, California raised three times this amount, bolstered not only by Silicon Valley but also by the launch of ChatGPT by OpenAI in San Francisco in November, making the city a mecca for AI development.
According to PitchBook data, investments in San Francisco startups have exceeded $60 billion this year, with half of this going to the AI industry.
New York’s IPO Wave Driven by Enterprise Software Startups
Murat Bicer, a VC who has worked with numerous New York startup fundraising campaigns, told CNBC, "People often think it’s challenging to run an enterprise software company in New York and believe Boston is more suited."
Reflecting on the investment climate a decade ago, Olivier Pomel, the French co-founder and CEO of data services company Datadog, remarked that West Coast venture capitalists rarely invested in startups outside the West Coast. MongoDB CEO Dev Ittycheria told CNBC that ten years ago, he wanted to start a new company, BladeLogic, in New York but had to establish it in Boston due to a lack of experienced entrepreneurs in New York.
Nevertheless, Datadog decided to establish an SaaS company in New York. European VC firm Index Ventures subsequently joined Datadog’s financing round, providing the funds needed for its New York expansion. Today, Datadog’s market value exceeds $28 billion.
Apart from Datadog, database unicorn MongoDB and cloud infrastructure provider DigitalOcean have also gone public on the New York Stock Exchange, creating wealth that is reinvested in the New York ecosystem.
Startups Can "Undoubtedly" Thrive in New York
Albert Wang, once a product manager at Datadog, moved from Boston to New York with his wife a decade ago. He feels the city is very different now, saying, "More people are starting businesses, and the city is much more diverse." Four years after leaving Datadog, Wang started his own sales software company, Bearworks.
Investors who have traditionally focused on the San Francisco Bay Area are also establishing bases in New York, including tech giants like Google and Salesforce. This move makes it easier for New York startups to find skilled talent. Venture capital firms such as Andreessen Horowitz (a16z), GGV Capital, and Lightspeed Venture Partners are also being drawn to the city.
In July of this year, Sequoia Capital, one of Silicon Valley’s most prominent VCs, opened an office in New York. Sequoia was also one of MongoDB’s early significant investors.
Eliot Horowitz, co-founder of MongoDB in 2007, has now started a New York-based robotics software startup called Viam. He believes that, today, entrepreneurs can undoubtedly succeed in New York and establish a thriving company.
Whether in finance, media, health tech, or green energy, New York continues to attract visionary entrepreneurs and startups. Dev Ittycheria, who was skeptical about New York years ago, added, "New York has become a hub for venture activities because it attracts a vast amount of customers, talent, and capital."