After Wayfair’s successful IPO which valued the the Massachusetts-based company north of $3 billion, Fortune’s Dan Primack wrote a love letter to New York City calling out its technology success – or lack thereof. Primack wrote:
“When it comes to technology success, would you mind waiting a bit longer before adopting the mantle of “next Silicon Valley” or “Silicon Valley of the East?”…At this moment, New York is not the next Silicon Valley. It’s not even the next Seattle.”
Of course, Primack’s post elicited responses. Via Twitter, Shai Goldman of Silicon Valley Bank made a fair comment pointing out that NY’s tech scene is still relatively nascent so it’s hard to judge it yet especially versus Massachusetts with its longer history. He commented:
— Shai Goldman (@shaig) October 3, 2014
So naturally, we wanted to to dig into the financing and exit data for the east coast tech ecosystems to compare them side-by-side. Now, those on both sides of the argument have data to help make their case. We dig into the following VC stats for each market:
- Tech financing totals – NY wins
- Deal activity totals – NY wins
- Most well-funded companies – NY (sort of) wins
- Number of VC-backed exits – Tie
- Largest recent VC-backed exits – Massachusetts wins
The data below.
[Tweet “Based on the size of VC-backed exits, NY doesn’t compare to Massachusetts”]
Dollars invested – NY wins
The money isn’t drying up in New York. In fact, it’s established a firm lead over Massachusetts after jumping out ahead for the first time in 2010. So far, in 2014, NY has increased its overall funding in the state by 29% versus all of 2013. Both Massachusetts and NY are up vs 2013 already through just the first 9 months of 2014. NY’s 2014 VC tally has clocked in at $3.5B. 2013 saw NY VC-backed companies raise 197% more than their Massachusetts counterparts. 2014 has seen the gap persist but shrink a bit with 143% more funding to NY companies versus Massachusetts.
Number of deals – NY wins (but Massachusetts is growing faster)
Though they may have started at the nearly the same place in 2009, the number of financing deals in New York has grown much more rapidly than Massachusetts. Last year, New York had 178% more deals than Massachusetts. In 2014, Massachusetts’ deal activity, however, has grown at a quicker rate than New York.
If we assume that the pace of deals through the first 9 months continues through the end of the year, NY’s deal run rate for the year is 451 deals while Massachusetts would hit 272. So NY retains its lead on absolute deal counts, but if the run-rate holds, Massachusetts will have grown 16.7% YoY vs NY at 8.3%.
Of course, NY is growing off a much larger base so the disparity in growth rates might be expected.
Most well funded companies – NY wins but with a big asterisk
Vice recently locked down $250M from Technology Crossover Ventures and a stake of the same amount from A&E Networks to secure its top spot as the most well funded company in New York. This is more than double the funding of Actifio, the most well-funded company in Massachusetts. Even Gilt, which rounds out the New York list, has raised more money than Actifio.
But, it is worth noting a few things about this list:
- This is an instance where quality of companies may not translate well to quantity of funding.
- Fab raised a ton of money and generated a ton of hype, but the company is clearly floundering (borderline deadpool) after a series of major layoffs and product mishaps.
- Gilt has also not been immune from its own travails. As Primack points out on his missive “But paper valuations are not etched in stone. Just ask Foursquare, Fab and Gilt Groupe.”
A quick look at the companies also highlights the difference in industry focus areas for the two markets with Massachusetts well-funded companies being more enterprise-y (technical term) while NY is dominated by the usual suspects (media, fashion, ad tech). MongoDB is the outlier within NY. We’ve heard that Massachusetts companies focus on “harder problems” and this cross-section of well-funded companies gives some credence to that.
Number of Exits – Tie but Massachusetts is winning in 2014
The two states seem to be in a constant flux when it comes to who has more exits. In 2012 and 2013, New York took the top spot by a considerable margin. However, Massachusetts has retaken the lead by a slight margin in 2014 with 47 exits this year.
Biggest Exits – Massachusetts wins
We examined the five largest exits in the past two years for each market to understand the size of more recent VC-backed exits. Wayfair, with its $3B+ valuation, is bigger than all of NY’s top 5 exits combined. Tumblr’s acquisition was a big exit for the New York tech scene as it was the first NY exit above a billion dollars, but the next largest acquisition is less than half of the size.
On the other hand, Massachusetts has 4 companies with $500M+ exit valuations.
Of course, post-IPO performance varies significantly among these players. Tremor Video has plummeted and is worth a fraction of it’s IPO day valuation and might be trending towards delisting unless it can right the ship.
[Tweet “Wayfair’s exit valuation is greater than NY’s 5 largest VC-backed exits combined”]
What do you think? Is NY overhyped given its lack of massive exits or is this just a function of NY’s relative immaturity as a tech ecosystem? Leave a comment and let us know what you think.
Want to track NY and Massachusetts venture capital deals real-time? Check out CB Insights venture capital database. Sign up below.
Feature photo credit to Kyle AlveyIf you aren’t already a client, sign up for a free trial to learn more about our platform.