REGIONAL REPORT | New York: After the Alley

STARTUP INTELLIGENCE REGIONAL REPORT | New York: After the Alley

Regional report | New York: After the Alley

Introduction » Drivers of Change » Investment Scene » Business Opportunities » Trends » Roadblocks » Mergers and Acquisitions »

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STARTUP INTELLIGENCE REGIONAL REPORT | New York: After the Alley New York: After The Alley INTRODUCTION

• Commercial tech innovation in New York has the energy of late 90s/early 00s, but this time with substance. Companies have more mature products and generate revenue. • Startups are more likely to have a developer or a veteran entrepreneur as a co-founder. • West Coast and New England investors are in New York hunting for opportunities. • A strong focus on consumer web and creative industries as opposed to enterprise software. • New York has a long way to go to catch up with the Valley.

or the last ten years, New York than 20 early-stage venture capital firms now would hardly be considered a place have offices in New York (see poster). Four Fto go to start a tech business. But in major players, Matrix Partners, Canaan Part- three years NY has been reborn as a hot- ners, First Round Capital and Accel Partners bed of internet startups. A high proportion opened offices in New York in the past year. of these are attempts to automate and scale New York’s traditional expertise in crea- he ‘mothership’ tech community tive and financial services. A palpable shift event, the NY Tech Meetup, has in perceptions has made it socially accept- T18,384 online members. About 700 able to leave Goldman Sachs to join or start turn up to each monthly event. Other events a tech company. Professionals in the scene are popping up around the city. Ten incubators agree the atmosphere feels like the late nine- (see poster) are mentoring and launching ties and the numbers bear this out. More new startups in New York. Seven shared

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Below: Number of members in the NY Tech Meetup has increased steadily since 2008

workspaces for entrepreneurs edia hype and easier opened in the last 18 months access to risky seed (General Assembly, Dogpatch Mfunding prompts labs, hiveat55, tech@NYU, fears of a second Silicon Alley Green Spaces, New Work City, tech bubble. But most tech Rose Tech, NYnightowls). companies have a different profile from ones in the late ccess to investment is 90s and early 00s. Startups improving.According now have products and Ato the National services with revenue streams Venture Capital Association and despite some glaring New York-based companies exceptions (Foursquare raised completed 360 deals in 2010 a further $50m in June 2011 at worth $1.9bn. This was the a valuation of $600m without highest deal frequency since approaching break even) there 2001 when investment in the is an increasing awareness of NY region totaled $3.4bn in how important it is to have a 442 deals. Whilst the number sustainable business model.❑ of deals has increased, there hasn’t been a proportional MOST TECH COMPANIES increase in total value. This HAVE A DIFFERENT PROFILE suggests New York startups FROM THE ONES IN THE Silicon Valley New York are increasingly getting Silicon- 90S Valley-style early-stage support. Investors 4,042 3,714 Startups 1,704 897

Above: Number of investors and startups according to AngelList

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Anchor Companies eadline startups like Gilt, Four- (April 16th - 4 squared geddit?). square, Meetup and Tum- Successful exits such as AdMeld (acquired blr have been decisive build- by Google for $400m in June 2011) or H (acquired and shut down by ing blocks of the local startup ecosystem. Drop.io These anchor companies have proved Facebook in October 2010) nurture the that the next Facebook could come from startup ecosystem. Big-ticket exits mean the East Coast and have drawn the eyes more cash in investors’ and entrepreneurs’ of investors. Gilt Groupe, the luxury hands, and slowly builds the community flash-sales company has raised $236m of local 2nd and 3rd generation founders and is valued at $1bn. Foursquare raised who have learnt from their mistakes. a third round of investment in June 2011. This also attracts the attention of These companies generate the critical talented engineers from schools Above: Foursquare, Tumblr mass of investment, experience and in- on the East Coast: MIT, Carnegie Meetup, Gilt Groupe spiration to get smaller ventures going. Mellon, Cornell and Columbia, who Foursquare is the true hub of the booming no longer see Silicon Valley as the within months is a new phenomenon. It theories of clusters, this should improve the NY tech scene. Their API appears in the only place to roll the dice on a startup. requires new skills that old economies comparative advantage of a region like Sili- mashups of most hackdays, they host can’t provide. These companies can face con Valley, locking out other regions from meetups at their offices at 36 Cooper Social Skills competition from anywhere on earth in a areas of innovation. Specialised regions have Square and mentor other entrepreneurs. he tech startup company way that no other industry has had to deal a greater concentration of talent and ex- They’re even idolised by Mayor Bloomberg with the potential to be- with. According to conventional economic pertise and a better integrated community. who named a public holiday after them Tcome a giant multinational Copyright 2011 Startup Intelligence. Intended for Atomico Ventures only. If you would like to share 4 © this document please get in touch with [email protected] or +442032397847 STARTUP INTELLIGENCE REGIONAL REPORT | New York: After the Alley Drivers of Change

Joint marketing and competitive pressure startup teams and tech events are all within drive companies to evolve fast and differ- reach, mostly below Central Park Manhat- entiate. Entrepreneurs create more entre- tan. In a big city with a busy social agenda, preneurs. Innovation is a positive feedback newcomers are easily knitted in. The City loop.This renewable cycle has been essen- That Never Sleeps has its own mentality. tial in the making of a ‘NYC startup com- Local experts in the tech scene agree on a munity’. Luckily for New York, because typical NY founder profile: entrepreneurs tech startups can cycle from launch to exit are driven and focused, they tend to be within months or years, this renewable cy- positive and stay humble, not turning into cle can be generated quickly. It’s clear that ‘rock stars’ as happens in the Bay area. The the NYC startup community is beginning community is cooperative and willing to to enjoy some of the benefits of social help each other since they think of them- re-enforcement. The rapid increase in the selves as the underdogs when compared to number and attendance of events and co- the West Coast. Cliques are slow to form. working spaces displays the increased appetite for knowledge. Accelerators like Gener- ue to the city’s financial exper- al Assembly have demonstrated remarkable tise, NY entrepreneurs tend to results. Within months of opening, resi- Dhave better business skills and dents Nodejitsu and Posling acquired focus more on their product’s business funding and Nodejitsu hired develop- model rather than technical features. What ers from the temporary member’s area. was once was a weakness – as web 1.0 companies in New York struggled to find de- ew York has its core advantages velopment talent – has become a strength when it comes to fostering en- in an era of easy access to cheap pro- Above: NYC is more compact and easier to navigate thaan the Valley Ntrepreneurship. It is compact gramming environments and outsourced and easy to get around, unlike Silicon Val- development. New generation NY start- ley. Many of the tech companies there are ups are finding the right balance between based down south in Palo Alto, a good business-oriented and tech founders. hour’s drive from San Francisco. Investors,

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Cultural shift

s a financial services hub, New York like London provides thousands of Awell-paid jobs for talented developers in major banks. The financial crisis has had a noticeable effect on startup investment activity in New York, although the effect has been less marked than in Silicon Valley (see chart on page 8). More significantly, the financial crisis damaged the social standing of Wall Street bankers just as it did to those in the City of London. Suddenly it has become less trendy to work in Goldman Sachs. Even Mayor Bloomberg, a long-standing ally of tax breaks for the major banks seems to be spending a lot of time hosting panels on entrepreneurship, sponsoring incubators and events through the New York City Economic Develop- ment Corporation and the Department of Infor- mation Technology and Telecommunications (see poster for details of these). New York has been subject to the widening cultural awareness of tech entrepreneurship driven by films like The Social Network and the new medium of mobile, which still belongs in a large part to lean startups.❑

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nvestors of all sizes are flocking Valley and New York has narrowed. The to New York. Venture Capital West Coast is still far ahead in terms IFirms, Corporate Venture Capital of total investments: between 2008 arms, bankers turned micro-VCs and and 2011, VCs invested $9.5bn in NY, entrepreneurs turned angel investors are compared to $48.6bn in Silicon Valley. looking for the next big opportunity. As the But the number of deals completed per poster shows, the epicentre of VC activity is year in NY increased over the past five Manhattan, especially around Park Avenue. years, whilst in Silicon Valley the number declined. In recent years the number of ormer startup founders from the completed deals in New York has risen anchor companies in New York faster than the total amount invested Foften become angel investors, join meaning that investment firms in NY micro VCs or mentor newcomers. Many are focusing on startups and early-stage VC firms with smaller funds and a focus companies, assigning smaller amounts on tech seed funding have set up shop in per deal and widening their portfolio. New York in the last two years, for example Founder Collective, Gramercy Labs, ew York will soon pass Boston Dream IT Ventures and Joshua Kushner’s to become the tech runner- Thrive VC (See poster for details). Nup. Although Massachusetts still beats New York on total value ccording to data from the invested, the gap is closing here too. In THE INVESTMENT GAP BETWEEN SILICON VALLEY AND National Venture Capital 2010 165 internet startup funding deals NEW YORK IS NARROWING DOWN, ALTHOUGH THE WEST COAST IS STILL WAY AHEAD AAssociation, VCs are increasingly were closed in New York, just 113 were investing on the East Coast (see graph closed in Boston. Although both cities are below). The funding gap between the booming, New York is growing faster.❑

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Above: Venture Capital Investment in New York and Silicon Valley 2001-2010 (NVCA)

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State Invest- ment Official policies to encourage innovation already in place include: he State of New • An appeal for a new tech university in New York to be sponsored by local York has been wide- ly criticised for not government Tproviding the infrastructure • A website called the Business Express Wizard, a simplified business incor- for tech innovation. Entre- preneurs say current pub- poration tool with digitally-issued licences and permits lic investment is not tailored • Business training programs for entrepreneurs, FastTrac and JumpStart to them and too top-down. Mayor Bloomberg has been • Six sponsored workspaces and incubators (see poster for details) trying hard to shake this per- • Creation of a $22 million New York City Entrepreneurial Fund (in part- ception. The city’s first Chief Digital Officer, Rachel Sterne, nership with FirstMark Capital) was instigated in January. She • Contests such as NYC Big Apps and NYC Next Idea will direct New York’s digital strategy. The New York City • Open access to NYC Platform, a public set of APIs, and NYC Datamine, Economic Development Cor- a group of 350 sets of local authority data poration funds many of the programmes, but shares efforts and resources with the Depart- ment of Small Business Services, the Department of Information MAYOR BLOOMBERG APPOINTED RACHEL Technology and Telecommu- STERNE AS THE CITY’S FIRST CHIEF DIGITAL nications and the Office of OFFICER Media and Entertainment. Above: Mayor Michael Bloomberg is leading an effort to encourage tech entrepreneurship

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Below: Stanford is willing to build a science campus in New York

Education and Entrepreneurship

ew York doesn’t have an obvious equivalent who are willing to be part of the new NY tech scene. to the famous engineering colleges Stanford The NYCEDC will choose the final candidate later or Berkeley on the West Coast, churning this year (2011) and pay for some of the set up costs. Nout star developers of the future. This could be a major stumbling block for New York; the integration of ithin the city, New York University the large tech corporations in Silicon Valley with the (NYU) is the most active at trying to Stanford Campus is key to the rapid cycling of academic foster tech entrepreneurship. Tech@ innovation to commercial W NYU is a program that connects applications on the West Coast. technologists with entrepreneurs, MAYOR BLOOMBERG APPOINTED promoting startup events and RACHEL STERNE AS THE CITY’S ayor Bloomberg teaching coding skills to those FIRST CHIEF DIGITAL OFFICER has advertised with no technical background. for a university The university is also investing Mto set up a satellite campus significantly in its Polytechnic within the city on a patch of local government land, arm – NYU Poly – as a natural home for startups. The inviting applications from around the country. Polytechnic institute has three incubators and partnered Stanford University has expressed interest in opening with the NYC Seed fund for mentoring and funding. a satellite campus. The university wants to invest in an applied-sciences research campus and replicate vy League Columbia University is still lagging behind their formula out East. The proposal is one of the 18 in terms of web startups. Columbia technology presented to the New York City Economic Development ventures is very successful but focuses mostly on Corporation (NYCEDC). These involve 27 universities Ilife sciences and pharmaceutical ventures. Nevertheless, the university also presented a project to NYCEDC ❑.

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Below: New York is the US media and advertising capital Business Opportunities

system, but moved to New York pivoted this year Creative Industries to white-label content aggregation and distribu- tion (similar to Strategy Eye, but for open sites). ew York startups are currently focusing on what the city is most known part from Marketing and Advertis- for – its creative industry and consum- ing, Fashion is also a trending sector. Ner-facing retail. The city has always been the me- Several startups are shortening the dis- dia and publishing capital of the United States. tanceA from the catwalk to the web, and poten- Media, communications and publishing indus- tially accessing an enormous market: online ap- tries are the second biggest tenant in New York, parel sales were estimated at $26.6B in 2008, accounting for 14 percent of the new leases. up 17% over the previous year (see trends). The music industry is also going through a re- he creative industries are part of the city’s vival as startups reinvent the way people listen to DNA and startups are taking advantage music and watch video. The overall music mar- of it. After all, these are the industries ket is shrinking (total industry sales are estimat- Tthat are being transformed by the Internet. New ed to hit a new low in 2014 at $5.5B, compared internet businesses interacting with traditional to industry sales of $10B in 2008), but digital advertising, marketing or publishing companies music sales are growing. NY-based startups like need to be in the city. It is where potential part- Ex.fm, Dubset, Blurts.com or Broadkastr are ners and clients are and proximity still plays an well-placed to carve a niche from the vacuum important role when establishing partnerships. of the music labels, using semantic search, user- NewsCred is an example of a tech startup in generation and social media tools to deliver and New York working along these lines. NewsCred share music, sound and video in innovative ways. started as a community-curated news ranking

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Trends

Fashion ashion GPS is one of these leading New York fashion innovators that ew York is the country’s fashion could only have come from New capital – a sizeable market that FYork. They developed an inventory man- is still mostly grounded in tradi- agement system that tracks items lent to Ntional supply chains and offline sales chan- stylists and publishers and evaluates the nels. Online fashion sales are increasing relationship between brands and maga- year-on-year, growing zines. Tailor-made faster than personal fi- for the fashion indus- nance, electronics and US ONLINE CLOTHING SALES try, Fashion GPS has healthcare according to GREW 28% DECEMBER 2009 gained a lot of traction data from ComScore. TO DECEMBER 2010 in the last 2 years and Similarly, the Master- has more than 60 cor- card SpendingPulse re- porate clients. On the port shows US online clothing sales grew by same note, startup Joor (see startups to 28% last Christmas compared to December look out for) wants to disrupt wholesaling. 2009. New online tools are optimising the Boutiques can use Joor to scout for new de- fashion market. Naturally, New York is the signers and make their orders online, with- best place for these companies too bloom. out spending time in showrooms, browsing samples or meeting designers individually.

Above: New York Fashion Week Spring/Summer September 8-15

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ashion startups are also working to analyse consumer patterns ing on making luxury items and produce fast fashion forecasts accessible to middle-range us- to merchants. Predicting the next Fers. Startups such as Birchbox and craze based on real-time tracking Edition01 (see startups to look out of online shopping and comments. for) have found new ways to deliver high-value products to online users.

ther fashion projects such as FashionStake or Svp- ply use different web O2.0 techniques like internet crowd sourcing. FashionStake is an online marketplace for users to pre-order collection items and fund alternative designers’ new projects. Svpply is like a search engine for fashion items that adapts results to one needs or taste.

ince it is a market so sensi- tive to trends, innovative data analysis is also starting Sto play a role in online fashion. Startups such as Stylehop are try-

Above: The Chrysler Building

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Trends Analytics brand awareness. The targeted on- tify potential buyers and increase line advertising market is expected sales (see startups to look out for). to grow significantly next five years, orporates are willing to pay advertisers want to identify their au- any startups are also to learn more about their diences beyond the standard demo- building Social Me- clients and to monetise that graphics and startups are answering dia dashboards so that Cknowledge. Startups in New York can those needs by working on hyper- Mbrands can manage their presence leverage Wall Street expertise in real- specialized products, for example on the web and interact with their time data-analytics, and sell to the gi- Stylehop for fashion brands and audiences. Postling is one of the ant retail brands, financial institutions LocalResponse for local-based ser- most talked about in New York. The and advertisers with bases in the city. vices (see startups to look out for). company, founded by ex-Etsy members (another successful NY venture) tartups doing marketing ana- rdergroove and Cognec- gives small businesses a set of tools lytics are leading the trend. tion take analytics a step that allows them to self-manage With the advent of social me- further. Both NY start- their brand on multiple platforms. Sdia, traditional measures of retail Oups offer tools that help brands im- performance: footfall, web traffic proving their customer retention. eyond social media and mar- and voxpop polls, are being out- Ordergroove keting, there are also other performed by tracks individual sectors that could use ana- online tools. STARTUPS IN NEW YORK APPLY user behaviour Blytics tools. Profitably is targeting Companies still WALL STREET ANALYTICS TO on websites and those clients, with its financial met- need to measure RETAIL AND MARKETING suggests monthly rics tools. The startup is developing traffic stats and subscriptions for web-based software for managers, clickthroughs, items that a user bookkeepers and accountants that but they are buys frequently. Cognection digs compiles and analyses customer now looking at more complex fac- deeper into irrational consump- sales, payrolls, employee perfor- tors such as interaction depth and tion behaviour in order to iden- mance and other business metrics. ❑

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Roadblocks

lthough journalists, entrepre- sitions). If Foursquare or tumblr merge neurs and investors highlight New with other internet companies and exit York’s momentum, they agree the quickly, their staff might then play that role. cityA still has many obstacles to overcome Bubbles Failure to reach climax tartups are attracting more funding few successful startup exits have as angels and VCs see them as excit- started nurturing the ecosystem ing bets. Many in the sector deny needed for startups to thrive in the Sthat a second tech bubble is in the mak- city.A But there hasn’t been a ‘Paypal event’, a ing. They argue that the current high valu- huge keystone company that leaves behind ations are simply a product of supply and a mass of skilled and entrepreneurial staff demand. But others on exit who can develop point towards exces- their own startup pro- sive valuations that are jects. The most obvious THERE STILL HASN’T BEEN A feeding an inevitable way New York could ‘PAYPAL EVENT’ IN NEW YORK bubble. A failed IPO hurdle this roadblock Above: There’s still a chance the New York tech or one that does not scene will fizzle out. would be for several meet the current high medium-sized companies to merge. This is expectations could be the needle that pops the most promising route to a blockbuster the bubble, deflating the party atmosphere. M&A market too (see Mergers and acqui-

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Moving West vices and corporate jobs become he NYC startup scene is more attractive again and fewer undeniably immature. will prefer the thrills of a startup Despite the sheer num- to the comfortable bonuses of Tber of events and VC firms there Wall Street. Universities in the are few mid-stage funds. There is area are not doing enough to at- a clear trend for startups to move tract students into technical ca- headquar- reers. NYU ters to series is primar- Silicon Valley THERE IS A CLEAR TREND FOR ily an arts when they STARTUPS TO MOVE WEST FOR A school. The approach SERIES B ROUND area needs a B rounds whole new of fund- generation ing (see Mergers and Acquisi- of highly skilled technical staff tions). It’s still fastest to raise fi- with knowledge of fast-growing nance in the Valley. We do not and scalable businesses, who un- expect mid-market mergers and derstand how startups work. acquisitions in the next three years, mostly for this reason. ew York will not approach Silicon Valley as Lack of talent a tech hub within three Nyears. But that does not mean New shortage of skilled de- York can’t be successful. Focusing velopers could still hold on the right industries, NY start- Below: Westward Ho! back New York. As the ups can still change the world. ❑ economyA recovers, financial ser-

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Mergers and Acquisitions

ince 2009, 60 New York-based software Announcement Bidder Target Company Seller Company Deal Value companies were acquired, for a total Date Company (US$m) amount of $2.8bn. Half of the deals’ val- 24-Mar-09* Victory TouchTunes Music 318 Sues were undisclosed but we can see that most Acquisition Corporation of them were under $100m (see next page). Corp There is a conspicuous gap between the small- 05-Aug-09 Google Inc On2 Technologies 132 est exits and the largest. Only four companies Inc were bought for around the $100m mark. 31-Jan-11 KIT Digital Inc KickApps North Atlantic Capital Corporation; Prism Venture 45 Corporation Partners; Softbank Capital Partners; and Spark Capital acebook and Google were among the 21-Dec-09 Synnex Jack of All Games Take-Two Interactive Software Inc 43 shoppers in NY. The social network Corporation Inc acquired cloud storage startup Drop. 29-Oct-10 Facebook Inc Drop.io Inc RRE Ventures LLC; and DFJ Gotham Ventures 17 Fio for $17m. Google acquired advertising startup Invite Media for $40m and video 21-Jan-11 Zynga Inc Zynga New York - startup On2 for $132m - one of the most 20-Oct-10 SG Growth Voyetra Turtle - expensive deals within the internet sector. Partners I Beach Inc (Majority Stake) ther web/mobile exits included ap- 12-Jul-10 SAC LLC Motionbox Inc Constellation Growth Capital; Canaan Partners; and - plication developers AppSense, SAS Investors KickApps and Wimba, gaming 22-Jun-10 4Info Inc Butter Inc - Ocompany Boonty and Jack of All Games. ❑ 12-Jan-09 Nexway SA Boonty Inc Weka Entertainment -

Above: Select deals in web/mobile application space. * represents lapsed deal

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Announcement Bidder Company Target Company Seller Company Deal Value (US$m) Date 26-Oct-09 Dassault Systemes IBM Corp (Product Lifecycle IBM Corporation Users/Contracts Signed600 and Projections SA Management) 23-May-11 Kohlberg Kravis Ipreo Holdings LLC Veronis Suhler Stevenson 425 Roberts & Co 22-Nov-10 News Corporation Wireless Generation Inc (90% Stake) 360 24-Mar-09* Victory Acquisition TouchTunes Music Corporation 318 Corp 26-Apr-11 Pearson Plc Schoolnet Inc The Carlyle Group LLC 230

05-Aug-09 Google Inc On2 Technologies Inc 132 27-Aug-09 NYSE Technologies NYFIX Inc Warburg Pincus LLC 106 Inc 31-Aug-09 NICE Systems Ltd Fortent Inc Warburg Pincus LLC 74 23-Feb-11 Goldman Sachs AppSense Inc (Undisclosed Economic 70 Interest) 07-Jul-10 Blackboard Inc Wimba Inc 60 04-Feb-10 Industrias Romi SA Hardinge Inc (49.3% Stake) 57 31-Jan-11 KIT Digital Inc KickApps Corporation North Atlantic Capital Corporation; Prism Venture Partners; Softbank Capital 45 Partners; and Spark Capital 21-Dec-09 Synnex Corporation Jack of All Games Inc Take-Two Interactive Software Inc 43 02-Jun-10 Google Inc Invite Media Inc Comcast Ventures; First Round Capital; and Genacast Ventures 40 24-Mar-11 R R Donnelley & Journalism Online LLC News Corporation; Steve Brill (private investor); L Gordon Crovitz (private 35 Sons Company investor); and Leo Hindery Jr (private investor) 28-Jul-09 Vista Equity Partners MicroEdge Inc Advent Software Inc 30 19-Jan-10 InterCall Inc Stream57 LLC 28

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Announcement Bidder Company Target Company Seller Company Deal Value Date (US$m) 24-Aug-09 TIBCO Software Inc DataSynapse Inc Goldman Sachs; Intel Capital; Bain Capital LLC; WandCaptial Partners Intensity/Shareholder Inc.; Wachovia 28 Details Strategic Ventures; NeoCarta Ventures Inc; Stonehenge Capital Company, LLC; New York City Investment Fund; and Silicon Alley Venture Partners LP 26-Aug-09 Instinet Incorporated TORC Financial LLC JDI Financial 21 09-Mar-11 Syntellect Inc CosmoCom Inc 20 22-Jun-10 TIBCO Software Inc Proginet Corporation 18 29-Oct-10 Facebook Inc Drop.io Inc RRE Ventures LLC; and DFJ Gotham Ventures 17

02-Feb-11 Savoye Inc Retrotech Inc 14 17-Sep-09 RuggedCom Inc WiNetworks Inc Columbia Capital; Rho Capital Partners Inc; Cedar Fund; and Evergreen Venture 14 Partners 05-Jan-10 Dot Hill Systems Corp Cloverleaf Communications Inc BancBoston Capital Inc; Genesis Partners Ltd.; Hyperion Israel Venture 12 Partners; and Catalyst Investments LP 05-Oct-09 KIT Digital Inc The FeedRoom Inc Velocity Equity Partners LLC; BEV Capital; and NewSpring Capital 10 17-May-10 RTN Stealth Software Inc Market Guidance Systems Inc 7 25-Jan-10 VistaPrint NV Soft Sight Inc High Peaks Venture Partners 7 12-Aug-09 CIBC Capital Partners; Digital Mandate LLC 6 and ABS Capital Partners 09-Nov-09 GTCR Golder Rauner LLC NYFIX Inc(Transaction Services NYFIX Inc 5 business) 21-Jun-11 Oracle Corporation FatWire Corporation - 12-May-11 Updata Partners CA Technologies (Internet Security CA Technologies - Business Unit) 21-Apr-11 ION Trading Wall Street Systems Warburg Pincus LLC - 12-Apr-11 Baymark Partners Computer Integrated Services Company - of New York LLC

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Announcement Bidder Company Target Company Seller Company Deal Value (US$m) Date 21-Jan-11 Zynga Inc Zynga New York -

18-Jan-11 Adobe Systems Incorporated Demdex Inc -

07-Jan-11 Wall Street Systems Thomson Reuters Corporate Treasury Thomson Reuters Corporation - Manager 07-Jan-11 DRS Sonar Systems LLC Advanced Acoustic Concepts LLC - 30-Dec-10 WPP Digital Blue State Digital LLC -

06-Dec-10 AT&T Inc Xanboo Inc - 03-Dec-10 BMC Software Inc GridApp Systems Inc - 08-Nov-10 Undertone Inc Jambo Media LLC - 20-Oct-10 SG Growth Partners I Voyetra Turtle Beach Inc (Majority - Stake) 08-Oct-10 Hellman & Friedman LLC Wall Street Systems - 05-Oct-10 Oracle Corporation Passlogix Inc - 10-Aug-10 IBM Corporation Datacap Inc - 28-Jul-10 StrongMail Systems Inc Conversa Marketing LLC; and Magnetik - Communications LLC 12-Jul-10 SAC LLC Motionbox Inc Constellation Growth Capital; Canaan Partners; and SAS - Investors 01-Jul-10 Zumasys Inc Choice Computing Inc - 23-Jun-10 Algorithmics Inc VIPitech Towers Watson & Co - 22-Jun-10 Genstar Capital LLC Netsmart Technologies Inc (Undisclosed Bessemer Venture Partners; Insight Venture Partners; and - Stake) Salmon River Capital LLC 22-Jun-10 4Info Inc Butter Inc -

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Announcement Bidder Company Target Company Seller Company Deal Value (US$m) Date 09-Feb-10 Thomson Reuters Corporation Aegisoft LLC -

04-Jan-10 FXall Ltd Lava Flow Inc Citigroup Inc -

09-Nov-09 Carlyle Partners V LP Open Link Financial Inc TA Associates Inc - 22-Oct-09 Edline LLC SchoolWorld RMK Holdings LLC - 15-Sep-09 Rocket Software Inc IBM Corporation (U2 Data Servers and IBM Corporation - Tools) 04-Mar-09 Marlin Equity Partners LLC MDeverywhere Inc - 25-Feb-09 CDNetworks Co Ltd Panther Express Greylock Partners - 12-Jan-09 Nexway SA Boonty Inc Weka Entertainment - 05-Jan-09 CA Technologies Orchestria Corporation Goldman Sachs; Benchmark Capital; Paladin Capital Group; - Constellation Growth Capital; RRE Ventures LLC; Focus Ventures; Doughty Hanson Technology Ventures; and New York City Investment Fund

Copyright 2011 Startup Intelligence. Intended for Atomico Ventures only. If you would like to share 22 © this document please get in touch with [email protected] or +442032397847 STARTUP INTELLIGENCE REGIONAL REPORT | New York: After the Alley Startups to look out for Startups to The Hyped • Group.me Group.me is group texting application. Creat- • Postling ed in October 2010, it recently launched version 2, including location-awareness and photo-sharing. look out for Postling is a social media management tool for small businesses. Brands can monitor and manage their presence on dif- Co-founders Jared Hecht and Steve Martocci developed ferent social networks through Postling’s dashboard where all Group.me at a TechCrunch disrupt Hackathon. The brand mentions are compiled and analysed. Users can post up- NY startup has secured $11.5m in two rounds of fund- dates across different platforms, see reviews that mention the ing. It raised an initial round of angel funding ($850K) company, track influential advocates among other features. with Betaworks, First Round Capital and Thrive VC, among others. In the beginning of 2011, a series B The company was founded in June 2009 by former Etsy staff round of $10.6M brought Khosla Ventures, Lerer Ven- David Lifson (CEO), Chris Maguire (VP of Engineering) tures, General Catalyst and Founder Collective on board. and Haim Schoppik (CTO) and launched at the incubator Dream IT Ventures. Since then, it raised $700k in two rounds By May 2011, it had sent 100 million messages. The com- of investment. Currently it has 21,000 users who account for pany was recently on the news again after acquiring black- 10,000 businesses and is aiming at a $3m Series A round. berry application developer Sensobi for an undisclosed sum.

The Marketing analytics sector is quite crowded with There is a lot of competition in the group texting sector. tools like Tweetdeck or Hootsuite. New startups such Fast Society targets parties and concerts’ fans. Yobongo fo- as Comufy, Brizzly, CoTweet, MediaFunnel, Spred- cuses on geo-located chat rooms. Instant messaging Kik also fast, Netvibes or Threadsy are also going after small provides group-texting features and Beluga was recently businesses for their social media and marketing strategy. acquired by Facebook. Group.me’s new features also point towards a more comprehensive ‘private network’ like Path.

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The Fashionable • Edition01 • Birchbox • ClothesHorse

• Joor Edition01 is a fashion startup that sells Birchbox is a monthly subscription service ClothesHorse is an online shopping limited edition and luxury items online. that delivers luxury beauty samples. Users tool that helps users find clothes that fit The startup was founded in 2010 and it is get a box every month with a selection of 4 them best. It works as a tool on retailers’ Joor is a private network for fashion design- launching officially in September 2011. to 5 products for $10 per month. The web- websites that helps them decide which ers and retailers. Boutiques can use the plat- site is also an online beauty store where it is size to choose. On ClothesHorse web- form to browse through designers’ collec- possible to buy the actual product. It features site, users can also browse and find new tions, find new brands and place their orders. editorial content on beauty and lifestyle. designer clothes based on their taste.

Mona Bijoor founded the company after her Harvard alumni Katia Beauchamp and The startup was founded by Dave Whit- experience as a fashion buyer in tradeshows Hayley Barna founded the company in Sep- temore, who had experience in the and showrooms. The online wholesale plat- tember 2010 and have more than 20,000 clothing business after his first ven- form already has 200 brands and 1500 re- subscribers. Investors include First Round ture Started a custom clothing com- tailers and is aiming at 1000 designers and Capital and Accel Partners who led a Seed pany, V Bespoke. Dave is also the 7500 stores globally. It focuses exclusively round of $1.4m. Other individual investors President of Columbia Ventures Commu- on women’s wear and contemporary brands. are Sam Lessin (founder of drop.io), Dave nity and New York Ventures Community. Morin (founder of Path), Michael Dear- Joor faces competition from other whole- ing, Kirsten Green and Gary Vaynerchuk. ClothesHorse is ‘launching soon’. sale platforms, such as retourware24, but none focuses solely on high-end fashion. There are many online beauty stores, Fashionstake is also in the same market, as THERE ARE MANY ONLINE such as feelunique.com, but most rely an alternative crowdfunding platform for BEAUTY STORES, BUT MOST RELY on more traditional ecommerce solu- fashion designers. Eventually, other online ON TRADITIONAL ECOMMERCE tions. Yellow Box Beauty is also on retailers such as net-a-porter or ASOS could the samples by subscription market. go into the professional market as well.

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The Musical • Exfm The Analytical • Gamechanger

Exfm is a Chrome extension that turns the • Cognection Gamechanger is an application pro- • Dubset web into a personal music library. This social viding aamateur sports statistics. For media discovery platform gathers every MP3 Cognection is an online retail tool now, it focuses only on baseball and This Internet radio allows you to discover file as you browse the web, building a music that wants to quantify and analyse ir- softball but the team is working on its new music recorded live at clubs and events, library and simultaneously checking all the rational consumption behavior. Its aim proprietary agnostic ‘stat engine’ in or- and create your own custom channel. sites visited, adding new music every day. is to turn that datainto valuable infor- der to expand to other sports easily. mation for retailers in order to increase David Stein, CEO and found- The company was founded in March 2010 their sales and customer retention rates. The free application was created by Ted er of the company who worked as a in New York City by Dan Kantor. Previ- Sullivan (CEO) and Kiril Savino (CTO), club promoter in a previous life. He ously, he founded Streampad, a social music The startup was founded by Paul M. Co- an ex-doubliclick developer. Founded launched the company in February. service that was acquired by AOL in 2008. hen (CEO) who has a background in cog- in January 2009, Gamechanger already nitive science and behavioural econom- lists 24,000 teams. Recently, it landed a Dubset has developed a music fingerprint- In October 2010, the company raised ics, as well as professional experience on partnership with CBS high school sports ing technology called MixScan to identify $1.25m in seed funding that includ- online retailing. Warren Samlin (COO), website MaxPreps.com and with startup multiple songs in a mix and then accurately ed Spark Capital Partners, Betaworks, Jeff Shaffer (CTO) and Rogerio Can- Narrative Science, which automatically reports them licensing organizations to pay Dave Morgan and Founder Collective. deias (Chief Scientist) complete the team. transforms raw data into journalistic reports. royalties to artists. This technology is the It was launched in March 2010 under Cognection was launched and funded by main factor that separates Dubset from its the name of ExtensionFM but in ad- Dream IT Ventures ($25k). It is now ac- The startup faces competition from other most similar Austrian competitor, Play.fm. dition to the name change version 2.0 cepting applicants for its beta program. scorekeeping tools such as ESPN iScore. of the plugin has now been launched Also, many specialized social networks The platform works as a market- with new features, including integra- Other companies are looking at on- could go after the amateur sports’ stats mar- ing tool for DJs and the venues that tion with Twitter, Facebook and Tumblr. line consumption patterns, such as ket such as Pitchero or Bluefields. Other they play at. About 500 DJs have set It has recently launched its first mobile app Ordergroove but Cognection’s ap- sports have their own apps, as ShotView up profiles. The self-funded startup is for iOS and now has around 50K users. proach to irrationality is very innovative. does for Golf. Since 2009, it has raised still exploring its monetising options. $1.06m in three angel investment rounds.

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Profitably is a web application for small Ordergroove is a client-retention platform This free application is a platform for real- Enterproid’s application – Divide – splits businesses where managers and account- for ecommerce merchants that provides a time and user-generated feedback on other mobile phones in two separate environ- ants can keep track of their financial sort of ‘RSS feed for online products one users’ questions. Created in May 2010, ments, where users can have their work and data. Users can analyse metrics on pric- can subscribe to’. It tracks repeated pur- it generated 90 million responses to over leisure data stored on the cloud. Enterproid ing, sales or payrolls and get recom- chases, proposing then a subscription op- 1.2 million user questions in its first year. is targeting corporate clients by providing mendations on which areas to act first. tion for the most purchased products. them an alternative to RIM Blackberry Dan Kurani is the startup’s founder and where users can still keep their personal data Adam Neary (CEO) founded the com- The company was founded in 2008 by Greg CEO. In March 2011, he raised $1.2m in private and their professional info secure. It pany in March 2010 with Francis Hwang Alvo, who had experience in online retail- an Angel round that included General Cat- launched its private beta in March 2011. (CTO). Graham Siener and Chad Pugh ing after working at Liquidation.com. The alyst, SoftBank Capital and Draper Fisher complete the founding team. The com- team includes Scott Simonelli (VP of Sales Jurvetson. The applications is now on its The company was founded in Janu- pany is hosted at the incubator General As- and Services), Jorge Escobar (VP of Engi- version 3.0, which includes new customiza- ary 2009 by former Morgan Stanley staff sembly and it has raised a total of $1.4m neering) and Eric Stucki (VP of Marketing tion features, beyond voting and comenting. Alexander Trewby, David Zhu and An- in two rounds of funding. Main Inves- and Optimization). Peter Fader sits on the drew Toy. It is headquartered in New tors include North Bridge Venture Part- Board of Advisors next to Julie Constan- Question-based service Quora and, to a cer- York but it has offices in Hong Kong ners, David Tisch and White Owl Capital. tin, Michael Goldstein and Mark Wachen. tain extent, Twitter operate in the same mar- (where the technical development is) This SaaS solution works as a self-service ket. Other websites with ‘how-to’ features and in London. Since January 2010 it The company faces competition from platform where clients (online retailers) can also go for the question and answer model, has raised $1.8m in two rounds of fund- other financial metrics dashboards, such as monitor and change their subscription op- such as Chacha or Mahalo. Younger starting. Comcast Capital is a main investor. 60mo, Star analytics and most Customer tions, as well as manage inventory and cus- ups Snaptag and Fashism also rely on the Relationship Manager (CRM) services. tomer service. Ordergroove faces competi- same crowdsourcing principle of instant us- tion from any customer loyalty solution and er-generated comment, helping users to de- from many CRM systems. Others in the cide on purchases and outfits, respectively. client-retention sector include RightNow, Loyalty Bus or Cognection, although they all approach the sector differently.

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The rest • SeatGeek • Hoot.me • Selfey

• Broodr SeatGeek is a ticket search engine for Hoot is a Facebook application that Selfey is a marketplace where users can sports, music and culture. It focuses adapts the social network to ‘study buy and sell their spots in a queue. The Broodr is an online marketplace where users on the ticket secondmarket, aggregat- mode’. Users – teachers and students application tells users who else in line and can sell their inventions. The platform show- ing data from different sources. Seat- – ccan collaborate on school projects if someone is willing to sell their place. cases unique objects and toys and collects a Geek also uses data analysis to fore- via Facebook, through features such 5% fee for every transaction. It launched cast tickets’ prices and spot good deals. as screen sharing or video conference. The startup pitched at NYC Start- its private beta in April 2011 and it is aim- up Weekend and it plans to launch ing to reach 500 sellers by the next month. Darthmouth alumni Jack Groetzinger and The company was founded by Gaurav a beta testing in the near future. Russell D’Souza co-founded SeatGeek Sanghani (Senior Developer), Michael Jason Blanck founded the startup in the in May 2009, during the first Dream IT Koetting (CEO) and Sid Upadhyay beginning of 2010 after winning the 2011 Ventures incubator in New York. Since (CTO) in June 2010. Recently it $25k NYS Business Plan Competition and has then, they have raised $2.12M from a in seed funding from Dream IT Ven- recently moved to New York for a resi- large group of investors including Stage tures and moved from Texas to New York. dency at OMD incubator. The company is One Capital, Founder Collective, NYC also planning a seed round of investment. Seed, Lerer Ventures and Ashton Kutcher.

Broodr faces competition from well es- The startup uses a similar process to flights tablished ecommerce platforms like eBay search engine such as kayak or Orbitz or Amazon where one can buy virtu- and its main competitors are FanSnap ally anything and other gadgets’ websites and sellers such as Ebay or Ticketmaster. such as iwantoneofthose.com or firebox.

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• Broadkastr • Guyhaus • Newscred • Brandpulsar • Snaptag

Broadkastr is a social discovery Guyhaus is a service of monthly Newscred is a content platform Brandpulsar is a brand-recogni- Snaptag is an iPhone applica- tool for video that uses differ- delivered house supplies for men. that aggregates and provides tion advertising tool. It recognizes tion for social shopping. Users ent APIs to source video, just as The company was founded in news content to corporate clients. brands’ logos in photos and it dis- take a picture of the item they Turntable.fm does for music. April 2011 and is launching an The company was founded in plays interactive advertising relat- want to buy and enter price de- alpha testing next month. The 2007 by Shafqat Islam, who pivoted to the brand. The service is tar- tails. The application posts it on Founder Nayan Behal got four startup is also planning a simi- ed from his initial idea of finding geting publishers and brands, who the snaptag platform and other other members on board and lar service for women – galhaus. rating and voting news sources. can also use non-branded images social networks, where users can the team is now working on Investors include Floodgate Fund, to advertise their related prod- rate and comment on the deal. the application development. Founder Jesse Middleton has IA Ventures and Naval Ravikant. ucts (for example, a car brand can They pitched at NYC Start- a background in entrepreneur- use all car pictures to advertise) Snaptag was founded by Ayal up Weekend and are planning ship and startups. He previously Newscred offers both a free and Ebert and launched official- to launch a beta testing soon. founded ChefAme, an online a pro version, where users can The founding team of Brand- ly in June 2011. Other social community for local chefs. An- edit their newspapers, write edi- pulsar is made by Etienne De- shopping tools include Bar- drew Sternthal, Michael Oliver torials and monetize their outlets. paulis, Addy Feuerstein, Court- code Hero and TreatFeed. complete the founding team. ney Davis, Hadrien Kulik, There are many players in the Nicolas Desjardins and Nico- niche news and DIY news mar- las Kiehl. The team pitched at ket. Meehive, a similar service NYC Startup Weekend and test- from Kosmix, was shut down last ed its product on Techcrunch. year. Outbrain also refocused its service. Tabbloid and Feedly are applications that provide similar services. StrategyEye is the most direct competitor, since it targets the corporate market as well.

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• HiddenLevers • Tagify.us • Art.sy • Class.io

HiddenLevers is a financial startup that Tagify is an online application that Art.sy is a platform where users can browse Class.io is a platform where teachers analyzes macroeconomics factors and manages personal contacts, according to art from museums, galleries and private and students can communicate and their impact on individuals’ portfolios. Its their professional expertise. The application collections. It uses The Art Genome Project share resources. It includes features such products include trends setting, risk analysis crowdsources the needed info in order as a reference to describe and connect art as homework management, facebook and economic data. The startups targets to make a contact’s profile more accurate. pieces, providing new art recommendations. alerts, course timeline and it integrates private equity firms, traders, advisors and with Google Apps for Education. investors in general as their main clients. It The founding team pitched at NYC Art.sy was founded in 2009 by Carter also established partnerships with Business Startup Weekend and took the first place Cleveland and Sebastian Cwilich, who The company is currently part of Insider, CNN Money and Morning Start, of the competiton. Co-founders Kelsey have a mixed background of art and incubator DreamitVentures. It will which feature HiddenLevers commentary. Falter and Niko Pipaloff are working with Computer Science. The startup has raised have to compete with other educational Corbin Fields, Justas Janauskas, Steve Liu $1.41m in angel funding. Jack Dorsey, management tools such as blackboard or The company was founded by ex-Wall and Cavaughn Noel to mature the product. from Twitter, Eric Schmidt (Google) moodle and also with startup Hoot.me. Street traders Praveen Ghanta and Raj and Wendi Murdoch (News Corp) Udeshi in October 2009 and it was part are some of the high-profile investors. of FinovateSpring2010. It competes with traditional financial terminals such Currently, Art.sy is available by invitation as Bloomberg or Reuters. Brightscope only. The company faces competition operates a similar model, but it focuses from other Art browsing platforms such as only on retirement savings plans. DeviantART, ArtFinder or ArtCalendr.

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DATA SOURCES

• Comscore - State of the U.S. Online Retail Economy in Q3 2010 - http://www.comscore.com/layout/set/popup/request/Presentations/2010/State_of_ the_U.S._Online_Retail_Economy_in_Q3_2010_Video_Archive_Request?req=presentation&pre=State+of+the+U.S.+Online+Retail+Economy+in+Q3+2010 • Celent: “IT Spending in Financial Services: A Global Perspective,” January 2010 RMARKET • Mergermarket - New York M&A data • MasterCard Advisors’ SpendingPulse report - http://www.mastercardadvisors.com/us/advisors/en/information_analytics/spendingpulse.html • NVCA - Industry Stats - www.nvca.org/ • NYC - Road Map for the digital city - http://www.nyc.gov/html/mome/nycodc/90dayreport.html • Nielsen - Driven by Digital, Music Sales up in 2011 - http://blog.nielsen.com/nielsenwire/consumer/cue-the-music-driven-by-digital-music-sales-up-in-2011/ • Porter, M. - “Location, Competition and Economic Development: Local Clusters in a Global Economy.” Economic Development Quarterly 14, no. 1 (February 2000): 15-34. • Porter, M. - Clusters and the New Economics of Competition - HARVARD BUSINESS REVIEW - Nov 01, 1998.