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VENTURE CAPITAL

Silicon Alley on Track to Hit Funding High

According to a new report, New York is on pace to hit a five-year high in deal and fundings levels, helped largely by a few big-ticket exits.

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Step aside, Silicon Valley. Silicon Alley is on pace to hit a five-year high in deal and funding levels--$2.66 billion this year, up from $1.97 billion last year. 

That's according to the NY VC Almanac, sponsored by Silicon Valley Bank, Orrick, and CB Insight, which tracks how the venture community has grown since 2009, both on the company and investor side. 

A number of factors have helped, of course--starting with New York's diverse talent pool and Google's expansion in the city--but Michael Moretti, chief executive of Silicon Alley Bank, wrote that perhaps the biggest contributor was several high-profile exits:

Yahoo’s $1.1 billion acquisition of Tumblr, New York’s first billion dollar acquisition since Google bought DoubleClick in 2007, was definitely a highlight and Brooklyn’s Makerbot was acquired for $403 million too. Even the suburbs contributed significantly with Priceline’s $1.8 billion acquisition of Norwalk, CT-based Kayak.

Moretti suggests the good times will keep rolling. Here are some charts that may prove him right.  

See this chart? That's Silicon Alley enjoying some killer momentum. CB Insights co-founder Anand Sunwal said 191 refers to the actual number of deals made so far this year, while the dashed line indicates the projected number of deals for 2013. To come up with those stats, Sunwal simply looked at the number of transactions in the first half of the year and doubled it. "It's a simplistic assumption, but if it continues at the pace it had in the first half of the year, we're looking at a multi-year high in terms of funding amounts and deals--a good thing for entrepreneurs," he said. 

"It's been a long time since we've seen these kinds of levels," Sunwal said referencing the above chart, which breaks down the number of deals by each quarter since 2009. "It's the highest for New York since the Dot Com boom in 2001." 

This chart reflects the size, or actual amount of funding given to entrepreneurs. Conversely, deal share (below) reflects the number of deals, or financing transactions. 

"What's been interesting is that New York has become this destination for early-stage investment, which you see in the Series A capitals," said Sunwal. "A concern was, will there be follow-on money as companies need larger amounts? But what we're seeing is actually a bit of a balance: The early-stage funding has declined a bit, but there's a lot more funding going to mid- and later-stage companies." 

That's partly because a lot of "seeds were planted over time in New York City, and some of those companies are hitting their stride," he said. "Investors are obviously noticing that and are investing more to assist in those companies' growth." 

Sunwal wasn't surprised by this chart, given New York's strong ties to the media: "Unlike other venture hubs like Silicon Valley and Massachusetts, which have exposure to other sectors, New York is very much a tech hub." However, the scant Series D funding may reflect the trend of companies taking longer to go public. These days, entrepreneurs are raising more from private investors in order to keep growing.  

IMAGE: Shutterstock
Last updated: Sep 12, 2013

JILL KRASNY is the associate editor for Inc. Prior to this position, she was editor at Business Insider. Previously, she held positions at TheStreet and Reader's Digest. Krasny is a graduate of the University of Southern California, holding a degree in Communication.
@jillkrasny




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