Let me make this clear: There's no shortage of money in NYC.
A lot of deals get funded by random groups of angels, hedge fund managers, and other out of the way pockets of cash.
There is, however, a shortage of experienced, local venture capital firms actively putting money to work here. I'm sure people will disagree about the value that a VC can bring to a deal, but in my mind, they bring significant value to the community.
I was talking with a banker today about it, and there's definitely something to the "Silicon Valley VC mafia" phenomenon--that they all know each other and do deals together. What they also do, which is incredibly valuable, is work with local universities, tech counsels, entrepreneur groups, etc., and actively participate in the community. Their deals get huge press at funding time. Their reputation of success is the community's reputation.
By being consistantly active, they draw startups closer to them geographically. That doesn't happen when a random hedge fund guy and his buddies put two million in a startup here in New York, because only that startup knows them. That money builds a company, not a community. Sure, money is nice, but VC's provide glue for the community in terms of the networks formed among deals they've invested in and support of the local community.
Unfortuately, we don't have much of that in NYC. If you're an early stage technology company, you're going to Union Square Ventures, Greycroft, Venrock, DFJGotham, SAVP, RRE, Softbank...and... and who else? These are good firms, but they don't represent enough of a critical mass--a mafia, if you will--to attract companies and talent here from the outside the way VC firms in the Valley do. To be honest, USV and Greycroft haven't even been around for that long, even though their partners have. RRE, which is a good firm with a successful record, says they generally invest between $5-10 million on their site, although they did less than that in drop.io. I do hear they're looking to go earlier and smaller, so that's good. Plus, I suppose Bessemer is in Larchmont and Canaan is in Connecticut. These are clearly top tier firms, but if you can't go to the Shake Shack for lunch on a regular basis, are you really in the middle of this community?
Comparatively, I'm going out to the Valley for VC meetings in mid-September, and I've got meetings with a dozen firms in three days--basically within blocks of each other in SF and then two days in similar proximity down in the Valley. I know there are just a ton more firms out there, but it shouldn't be that there's such a difference in experience for an entrepreneur.
One major difference is community presence. A lot of NYC-area entrepreneurs can't name more than a handful of NYC area funds and have never met a VC in person at a startup event. I think a lot of NYC-area VCs could stand to be a lot more visable--attracting more deal flow by participation the way Union Square Ventures does. Two or three NYC firms blogging and being transparent they way they are would count like 8 more firms doing deals here.
In terms of other firms, there's one firm not listed here that you might not realize that has done 10 technology deals right here in NYC since October of 2005.
Take a guess.
Figured it out yet?
It's Spark Capital. Ten out of their twenty-two deals have been done right here in the Big Apple--the most they've done in any city. Spark has invested in 10 New York companies: 5min, AdMeld, Bug Labs, Covester, iminlikewithyou, Inform, KickApps, Next New Networks, Tumblr, and Clear. Perhaps Spark should open an office here. I, for one, would welcome another firm with a presense right here in the city. Frankly, it surprises me that there aren't more, given the number of deals that get done here. Even if you didn't plan on making all your investments in NYC, it's pretty centrally located on the east coast to do deals in DC, Boston, even Toronto.
And it's not like deals aren't getting done here--but by out of town firms. Redpoint did Right Media. Accel put a bunch of cash into Etsy. Emergence Capital just invested in Lotame. Again, this helps the individual companies, but doesn't really help the community at large as would more early stage players doing similar kinds of tech deals with each other.
So who here is actually doing deals here in the New York Metro area? I went into Thompson's VentureXpert database and ran some numbers on which firms have done "Early Stage", "Information Technology" deals in the last 5 years. I'm sure some of the numbers are off (like Spark's number, which would seem to make it the 2nd most prolific NYC investor), but here's a list below of all the firms that had done two or more deals. I don't have much more to say about the topic... hopefully you guys have some interesting takes on the situation...
| Venture Firm | Total |
| Union Square Ventures | 13 |
| RRE Ventures LLC | 9 |
| Spark Capital | 7 |
| SOFTBANK Capital Partners | 7 |
| General Catalyst Partners (FKA: General Catalyst Group LLC) | 7 |
| Draper Fisher Jurvetson (FKA: Draper Associates) | 7 |
| Trident Capital | 6 |
| SAS Investors | 6 |
| Milestone Venture Partners | 6 |
| Accel Partners | 6 |
| FirstMark/Pequot | 6 |
| Draper Fisher Jurvetson Gotham Venture Partners | 6 |
| Connecticut Innovations | 6 |
| Village Ventures | 5 |
| Silicon Alley Venture Partners LLC (AKA: SAVP) | 5 |
| New Jersey Economic Development Authority | 5 |
| Masthead Venture Partners | 5 |
| Kodiak Venture Partners | 5 |
| Greycroft Partners | 5 |
| Bessemer Venture Partners | 5 |
| Bain Capital Ventures | 5 |
| 3i (US) | 4 |
| Rho Ventures (AKA: RHO Management) | 4 |
| New Jersey Technology Council (AKA: NJTC) | 4 |
| Longworth Venture Partners | 4 |
| Intel Capital | 4 |
| First Round Capital | 4 |
| Edison Venture Fund | 4 |
| Canaan Partners | 4 |
| Oak Investment Partners | 3 |
| New Enterprise Associates | 3 |
| NeoCarta Ventures | 3 |
| BEV Capital (FKA: Brand Equity Ventures) | 3 |
| Lightspeed Venture Partners | 3 |
| Battery Ventures | 3 |
| Greylock Partners | 3 |
| Gemini Capital Fund Management | 3 |
| European Founders Fund GmbH | 3 |
| Draper Fisher Jurvetson New England (AKA: DFJ/NE) | 3 |
| Contour Venture Partners | 3 |
| Carmel Ventures | 3 |
| Constellation Ventures | 3 |
| Charles River Ventures | 3 |
| Amazon.com | 2 |
| Ventech | 2 |
| Venrock Associates | 2 |
| Velocity Interactive Group (FKA: ComVentures) | 2 |
| Valhalla Partners | 2 |
| Updata Partners | 2 |
| Tudor Ventures | 2 |
| Trilogy Equity Partners | 2 |
| Time Warner Investments (FKA: AOL Time Warner Ventures) | 2 |
| SVM STAR Ventures Management | 2 |
| Azure Capital Partners | 2 |
| Sony Corporation | 2 |
| Sevin Rosen Funds (AKA: Sevin Rosen Management Co.) | 2 |
| Scale Venture Partners (FKA: BA Venture Partners) | 2 |
| Advantage Capital Partners | 2 |
| Redpoint Ventures | 2 |
| Prism VentureWorks (FKA:Prism Venture Partners) | 2 |
| Polaris Venture Partners | 2 |
| Pennell Venture Partners | 2 |
| Paladin Capital Management | 2 |
| NewSpring Capital | 2 |
| New York Times Company | 2 |
| Apropos IT Ventures | 2 |
| Meritech Capital Partners | 2 |
| DN Capital | 2 |
| Battelle Ventures | 2 |
| Ackerley Partners | 2 |
| L Capital Partners | 2 |
| Inter-Atlantic Group | 2 |
| Hudson Venture Partners | 2 |
| Highland Capital Partners LLC | 2 |
| Easton Hunt Capital Partners | 2 |
| High Peaks Venture Partners | 2 |
| BRM Capital | 2 |
| Ascend Venture Group LLC | 2 |
| Goldman Sachs | 2 |
| Gold Hill Capital Management | 2 |
| Founders Fund | 2 |
| ETF Venture Funds | 2 |
| Allen & Company | 2 |