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The 2015 NYC Venture Capital Analysis

 

The 2015 NYC  Venture Capital  Analysis.001

Yesterday, I provided some cold, hard numbers into what transpired in the startup funding world last year both in New York and nationally – The NYC Venture Capital Year in Review: 2015.

Today, I’ll delve into an analysis of the funding from a growth perspective thanks to data from our friends at Crunchbase. Later this month, I’ll look into the funding environment in NYC from a vertical perspective.

Now onto the numbers…

Venture capital and early stage funding were booming both in NYC and the US in 2015 as $72.7 billion was pumped into startups nationally across 6683 deals and $7.3 billion was injected into NYC startups across 784 deals. The number of startups funded both nationally and NYC fell despite the increase in total funding in both regions – obviously indicating an increase in deal sizes.

NYC Startup Funding on Fire but is that Fire Sustainable?

Startup funding in NYC in 2015 was up 46% YoY while the number of deals fell 12%. The NYC market is maturing, as later stage rounds were a significant factor in the growth.

Early Stage Seed and Angel Funding in NYC

$393 million was invested in aggregate in early stage funding in 2015 and this marks a 22% decrease from 2014 levels. The number of deals fell 27% and the average early stage funding increased a modest 7% as the average deal size was $1.1 million.

Series A Funding in NYC

$1.02 billion was invested in aggregate in Series A funding in 2015 in NYC and this marks a modest 2% increase from 2014 levels. The total number of deals fell 24% and the average Series A funding increased an impressive 34% as the average deal size for a Series A round in NYC increased to $9.5 million from $7 million in 2014. 

Series B Funding in NYC

$1.6 billion was invested in aggregate in Series B funding in 2015 in NYC and this marks a massive 58% increase from 2014 levels. The total number of deals also increased an impressive 29% and the average Series B funding round increased 23% as the average deal size for a Series B round in NYC increased to $19.5 million from $16 million in 2014. 

Series C+ Funding in NYC

$3.9 billion was invested in aggregate in Series C+ funding in 2015 in NYC and this marks a massive 80% increase from 2014 levels. The total number of deals also increased an impressive 41% and the average Series B funding round increased 28% as the average deal size for a Series C+ round in NYC increased to $40.7 million from $31.7 million in 2014.

US Startup Funding

US startup funding was up 39% YoY from 2014 levels and 46% while the number of deals fell 8% YoY.

Early Stage Seed and Angel Funding in US 

$2.9 Billion was invested in aggregate in early stage funding in 2015 in the US and this marks a modest 1.42% increase from 2014 levels. The number of deals fell 31% and the average early stage funding increased a whopping 48% as the average deal size pushed $1.3 million.

Series A Funding in US

$8.9 billion was invested in aggregate in Series A funding in 2015 in the US and this marks a 24% increase from 2014 levels. The total number of deals fell less than 1% and the average Series A funding increased 25% as the average deal size for a Series A round in the US increased to $9.1 million from $7.3 million in 2014. 

Series B Funding in US

$13.8 billion was invested in aggregate in Series B funding in 2015 in the US and this marks a massive 50% increase from 2014 levels. The total number of deals also increased 22% and the average Series B funding round increased 24% as the average deal size for a Series B round in the US increased to $22 million from $17.9 million in 2014. 

Series C+ Funding in US

$42.9 billion was invested in aggregate in Series C+ funding in 2015 in the US and this marks a massive 44% increase from 2014 levels. The total number of deals also increased 17% and the average Series C+ funding round increased 24% as the average deal size for a Series C round in the US increased to $44 million from $36 million in 2014. 

Looking forward – is the NYC funding landscape in scale mode? 

My time on Wall Street ingrained in my head that “past performance is not an indicator of future results” so who knows that 2016 will hold in terms of the funding landscape. Though, of particular note is that the national market was very strong in Series A growth where aggregate funding increased 25% but NYC did not share in this growth. The fact that there were decreases in funding for early stage deals and the minuscule increase in series A deals indicates that the tightening may continue moving forward in terms of early stage ventures’ ability to raise capital and subsequent rounds in NYC.

The massive increases in Series B and beyond funding in NYC indicates that there may be liquidity coming in the coming years as companies mature and are ready for IPO or acquisitions. This is further solidified by the fact that the growth in the NYC market outpaced the national market in terms of Series C+ deals, average deal sizes, and aggregate amount invested. It will be interesting to see if that imminent liquidity is reinvested into earlier stage deals to keep the pipeline for the future robust.   Given the larger average rounds sizes at the Series A, B, and C+ levels indicates that startups that are able to “nail it and scale it” will continue to garner capital in NYC.

When using an IRR of 13% and a conservative timeframe of 10 years, the capital deployed in 2015 in NYC should yield close to $20 billion in 2025 with the assumption there are no returns or cash flows over the next few years. While this scenario is unlikely, given that 75% of the funding was in NYC was in later stage funding and liquidity will likely occur prior to the 10-year time frame, it adds to the conservative nature of the estimate.

While NYC’s place (10.1%) in the total funding landscape is impressive for 2015, there are other markets that are garnering capital and fast. While conducting a similar analysis for our sister LA-focused site LA TechWatch, I discovered that the Los Angeles market raised 43% of the total funding in NYC. This was quite astonishing and is quite impressive given that the tech scene in Los Angeles is still in its early stages. Entrepreneurs be advised that raising capital will be challenging because you are not only “competing” against startups in NYC but globally as other ecosystems undergo tech-fueled “renaissances”. Investor capital flows are already pouring into other markets and this will continue as the global startup ecosystem further flattens.

About the author: Reza Chowdhury

Reza Chowdhury is the CEO and Founder of AlleyWatch, the largest media property focused on the NYC tech and entrepreneurial ecosystem. He is also the Founder of New York Startup Lab, a software development firm with a specific focus on early stage companies. Previously, Reza was involved with several entrepreneurial ventures and began his career as securities trader on Wall Street. Recognized as a global thought leader, Reza was recently named as one of the 100 most influential people in NYC Tech by TechWeek and is a 2015 NYC Venture Fellow, a world-class, year-long fellowship program designed to help high-potential entrepreneurs scale their ventures. Reza routinely speaks on the global startup ecosystem and is an advisor to advisor to SD Asia and Dublin Globe, two organizations that are fostering the growth of local entrepreneurial ecosystems.

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