NY area firms land most VC money since recession

Emily Laermer

- Last year, firms in the New York metro area garnered the greatest amount of venture capital dollars since before the bubble burst.

Despite a 12% drop in the fourth quarter from the same period a year earlier, 82 area firms still received $545.1 million in VC funding, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. For the year as a whole, a total of 379 firms in the metro area received $2.72 billion.

“This quarter was down, but it's still strong compared to historical standards,” said David Silverstein, a managing partner at PricewaterhouseCoopers' New York metro emerging company practice. “There's a tremendous amount of entrepreneurs and venture capitalists melding together in New York, and we are seeing the results are taking off.

One sector, that is especially hot with VC investors is media and entertainment. A total of 18 such outfits raked in $109.5 million—the most of any sector by both measures.

“If you have a great product that people want to use, especially if they are willing to pay for it, then there is still money out there to fund your venture,” said Brian Schechter, the co-founder and co-CEO of dating website HowAboutWe.com. Its Brooklyn-based parent company, This Life Inc., received $15 million in venture capital funding in the fourth quarter, and ranked third in the media/entertainment sector in terms of dollars.

HowAboutWe.com will use its funding to expand its website and set up a new place on its website to help people in relationships plan dates. The company has also partnered with several others to create co-branded dating website. The latest, announced Wednesday, is a dating website within restaurant and nightlife blog Eater. The company plans to add 10 employees to its existing staff of 15 by the end of next month.

The top media company for the region was Fab.com, which received $40 million to launch a shopping livefeed on its website and acquire Fashion Stake, an indie fashion shop. Another regional leader was L18 Holdings Inc., which received $33.6 million to expand its online winery Lot 18 and acquire a French wine and commerce company.

Rounding out the top three sectors in terms of the number of firms receiving funding were software and IT services, each with 15.

VC activity in the New York metro area peaked in the third quarter, when 100 companies receiving a total of $909.2 million.

Nearly half of the 82 companies—39—were in their early stages. This is because many of the founders of these companies that have received funding are people who have proven themselves in the past, said Mr. Silverman.

“Entrepreneurs come in with knowledge from prior companies and build new companies. We are seeing not only founders from older companies, but senior executives with experience are becoming key founders in new companies,” he said, adding that the startup community is starting to become self sustaining.

The drop off in the New York area’s funding in the fourth quarter pushed it back to third place nationally for the period, behind the top-ranked Silicon Valley and second-ranked Boston in terms of the number of companies funded. In the final quarter Boston saw 107 companies attract $777.4 million, totals which also brought Boston ahead of New York for the year—with 441 companies receiving $3.2 billion.