Tech investments in N.Y. top Mass.
But Bay State still ahead overall in venture deals
Is New York leaving Massachusetts in the dust?
That’s part of the story told in a report being released today on venture capital investments in start-up and growth companies.
After leading New York for years in the number of technology start-ups that attract venture capital, Massachusetts is falling further behind its familiar rival. The cause: New York has become a more fertile launching pad for new, technology-based companies.
The data being released today by New York investment research firm CB Insights show that New York has had 261 technology deals over the last six quarters, versus 250 for Massachusetts. New York tech companies received investments worth a combined $1.6 billion. Massachusetts companies got $1.4 billion in the same period. Both are behind California’s Silicon Valley, which has a firm grip on the number one position by a wide margin.
New York’s growth is fueled by the kind of technology start-ups that venture capitalists currently find attractive: digital media and advertising companies, which build on Manhattan’s base of older-technology firms in the same fields.
“There’s no disputing that New York is on fire now. It’s a very hot market,’’ said Michael A. Gree ley, general partner at Flybridge Capital Partners in Boston and past chairman of the New England Venture Capital Association. “Massachusetts investors now have a new respect for Manhattan.’’
The first indication that New York was challenging Massachusetts came at the beginning of this year, as the venture capital industry was starting to process investment data from 2010. On the eve of releasing last year’s venture capital investment numbers, CB Insights posted a preview of a “trend that caught our eye.’’
In the area of Internet technology, “N.Y. is starting to credibly close the gap between itself and its northern brother, Massachusetts,’’ the firm stated.
Massachusetts still beats New York by a significant margin in total venture funds invested, CB Insights acknowledged. New York has very few life sciences start-ups, for example. That sector generally demands significant investments from venture capitalists. Life sciences start-ups in Massachusetts attract millions of dollars in investment every quarter.
But in hot investment sectors such as the Internet, mobile technology, and social media, New York really had caught up to Massachusetts.
“Sentiment is very bullish in New York right now,’’ said Anand Sanwal, cofounder of CB Insights, “so we thought it was worth noting.’’
The headline in the next day’s New York Post was less subtle.
“Boston $uck$: In first, NY tops Beantown in raising tech funds.’’ The illustration was a photo of a
The new data trace the same trajectory: Massachusetts still leads New York in the number of start-ups funded and the total cash value of venture investments. In the first three months of this year, Massachusetts had 85 venture capital deals of all kinds, for a total of $719 million; New York’s 72 deals were worth $447 million. But in the technology sector, New York landed 53 technology investments totaling $379 million, versus 43 investments and $228 million for Massachusetts.
The National Venture Capital Association, which will publish its own venture capital numbers tomorrow in association with PricewaterhouseCoopers LLP, would not reveal what its upcoming report adds to the New York/Massachusetts rivalry. However, association president Mark Heesen said that data released earlier this year showed that the New York metropolitan area surpassed Boston in number of venture investments made, although it trailed Boston in the total amount invested.
Heesen said that all taunting aside, New York’s start-up surge has everything to do with hot tech sectors.
“Social media is very hot right now, and that plays well in New York,’’ he said.
Heesen added, however, that “Boston’s strength in life sciences will ensure its continued superiority over New York in total venture capital raised.’’
That discrepancy highlights the different start-up cultures in the two regions: small, Internet-based start-ups in New York; and more capital-intensive deals in Massachusetts.
CB Insight’s Sanwal said that New York’s technology numbers in the last quarter were bolstered by investments in companies such as AdKeeper Inc., which allows Internet users to save online advertisements for later viewing, and Kaltura Inc., a video platform for online publishers.
“Those are typical New York companies,’’ he said.
Sanwal said that New York start-ups also benefit from a large cohort of wealthy investors, so called super angels, who enjoy investing in media start-ups.
Kevin Shaw, head of the PricewaterhouseCoopers’ emerging company services practice in Boston, has also noticed the rise of technology start-ups in New York. Although he appreciated the “sports-related, clam-chowder rivalry thing,’’ New York’s growing profile could also be the result of Boston venture capitalists branching out and prospecting for deals in nearby markets, he said.
Venture capital “funding is not necessarily geographically siloed,’’ he said. “If there’s a promising company in New York, it’s likely that some of the Boston VC firms would be interested.’’
Flybridge Capital Partners’ Greeley confirmed that his firm is spending more time in New York. “One of our partners is in New York every week,’’ he said. “We also have a junior guy down there two days a week, scouting for deals.’’
Tim Rowe, a venture capitalist and chief executive of the Cambridge Innovation Center, which houses around 170 start-up businesses in Kendall Square, said that New York has a long way to go to surpass Massachusetts in total venture capital investments.
“New York is a cyclical market. When finance jobs are paying $700,000 a year, no one in New York wants to be an entrepreneur,’’ he said. “It’s only when those jobs dry up that people begin thinking about starting a company.’’
The current fascination with digital media start-ups could also fade, he said. “New York is benefiting from the terrible tumult in the media sector,’’ Rowe said. “That causes innovation, that’s going on now, and that’s to New York’s advantage.’’
When it comes to big, expensive, difficult technology projects, though, Massachusetts has nothing to worry about, he said.
“You’re not going to see a new kind of nuclear reactor invented in New York,’’ Rowe added. “That’s always going to be more of a Boston thing.’’
D.C. Denison can be reached at email@example.com.