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VC Investment Powers the Transformation of the New York City Economy

Venture Capital in New York City's Economy

Last month, my office published an analysis of the global venture capital ecosystem from a New York City oriented perspective using data provided by Crunchbase.  Our paper drew two major conclusions. First, we affirmed that companies headquartered in New York have made the City one of the world’s most competitive venture capital destinations, echoing the findings of researchers before us.  Companies headquartered in New York City boast some of the largest dollar amounts raised and some of the greatest numbers of jobs supported compared to other major venture capital destinations. Second, and most interesting, we found that venture capital often clusters around New York City’s legacy industries, building new innovations from strong, pre-existing foundations to reshape and modernize the ways that those industries will do business in the 21st century.       

Tech in legacy industries

Our report shows that many of the burgeoning clusters of local, venture backed activity that we identified revolve around the City’s long established industries and sectors such as business and financial services, media, culture and entertainment, advertising and real estate.  Of course the technology sector has played a large role in New York City’s venture capital ecosystem given that new technologies are ubiquitous across nearly every type of job in the knowledge economy.

Tech companies tallied the highest amounts of venture capital backing from 2013 – 2017 and there is every reason to believe that trend will continue given the cross-over between new technologies and the disruption of traditional New York City industries.  However, our research suggests that well-established industry strongholds in New York City have become magnets for creative start-ups that develop new efficiencies and create new jobs. The City’s legacy industries have opened up a diverse range of opportunities for locally based startup enterprises to leverage venture capital backing to innovate and grow.  

Influence of investor proximity

Another factor that has influenced the City’s ability to attract venture capital is that many institutional venture capital investors already have deep roots in New York, thanks again to our robust finance industry clusters.  My office’s analysis found that the New York Metropolitan Area is home to one of the world’s thickest concentrations of institutional venture capital investors, second only to the San Francisco Bay Area. Our start-ups, and by extension our industry clusters, benefit tremendously from their proximity to people and groups who have their fingers on the pulse of our local economy and understand the types of new business ideas that will work in New York City.

The rise of “supergiant” venture capital rounds

Finally, our robust industry clusters have helped to facilitate the receipt of a large number of “supergiant” venture capital rounds in New York City, which we define as venture capital rounds of $100 million or more.  Supergiant rounds helped to propel venture capital activity in a number of New York City’s key industries. From 2013 to 2017, our research found that companies in ten different industries had accumulated $1 billion or more in venture capital backing – advertising, fintech, property development, fashion, marketing, digital media, video, lifestyle, content and publishing – and that at least one company in each of these industries had obtained a supergiant round.

New York City’s innovative prowess, as measured by venture capital backing obtained by companies headquartered here, is as strong as ever. We know that venture capital activity has helped to fuel a dynamic local economy that provides opportunities for entrepreneurs and skilled workers. However, New York City’s successes in the venture capital arena must also prompt City leaders to advance policies that ensure that our economic growth is inclusive.  We need to ensure that the knowledge jobs that often follow venture capital investment spillover into groups that haven’t been proportionally represented in the some of the City’s high-growth industries and sectors.  As our talent pool deepens and as start-ups continue to lay down roots here, our challenge will be to ensure that the benefits of venture capital investment, beyond the dollars and cents of the deals themselves, are spread across a five borough economy that lifts up as many New Yorkers as possible.

Click here to read the full report.

 

Scott M. Stringer, New York City Comptroller

About Scott M. Stringer