TECH TRENDS & INSIGHTS Analysis of the Tech Sector in

Q1 2015 ANALYSIS | JUNE 2015

Highlights

P.1 New York VC funding up 33% from Q4 2014

P.2 Internet sector takes in 80% of total NY VC funding

P.3 Average Early Stage deal size in NY increases to $5.3 million

P.4 NYC digital employment up 3.4% from Q4 2014

P.5 Telecommunications establishments up 9.2% in ten years

Center for Economic Transformation Highlights from Q1 2015

• The NY Metro area saw deals fall 3.7% to a Q1 2015 total of 103, down from 107. Total funding increased 18.5% in Q1 2015, up to $1.39 billion from $1.18 billion in Q4 2014. NOTABLE NYC DEALS (IN MILLIONS) IN Q1 20153 • Total funding for the NY Metro region was up 45.2% compared to Q1 2014, while deals were down 13.4%.1 Dataminr $130.0 • New York State saw 88 deals in Q1 2015 for a total of $1.33 billion in funding. Deals were down 15.4% from 104 in Q4 2014, while total Taboola $117.0 2 funding rose 33% from $1.0 billion in the previous quarter. MongoDB $80.0 • Deals were down 15.4% compared to Q1 2014, while total funding Moda Operandi $60.2 was up 36.1%. • New York’s average deal size in Q1 2015 was $15.1 million, up 57% Betterment $60.0 from Q4 2014 ($9.6 million) and up 61% from Q1 2014 ($9.4 million). Gilt Groupe $50.0 • New York ranked third behind California and Massachusetts in terms Sprinklr $46.0 of deals and total funding. Stack Exchange • New York took an 11% share of all national deals and a 12% share $40.0 of all funding. ClassPass $40.0 • In the as a whole, there were 805 VC deals for a total of Booker Software $35.0 $11.3 billion in funding. Total VC funding decreased 18% compared to Q4 2014. Relationship Science $31.3 • Investments from hedge funds, mutual funds, and Datadog $31.0 investors are on the rise, accounting for an estimated $6.4 billion in FiftyThree $30.0 funding to private companies nationwide in Q1 2015. Kids Sports Entertainment $28.0 MOST ACTIVE NEW YORK VC FIRMS, Conductor $27.0 6 Q1 2015 Artsy $25.0

BetterCloud $25.0 Bessemer Venture Partners (Larchmont, New York) The Business Insider $25.0 RRE Ventures LLC (New York, New York) Partners LLC (New York, New York) Source: CB Insights Deal Search; includes all Lettered Series, Growth Equity, and Other Source: PricewaterhouseCoopers/National Venture Capital Association Moneytree, Venture Capital data from Thomson Reuters

Venture Capital Trends in New York, California, and Massachusetts

$9,000 500

$8,000 450 NY$

$7,000 400 NY# 350 $6,000 MA$ 300 $5,000 VC Deals (# ) 250 MA# $4,000 200 CA$ $3,000

VC Investment (Millions $) 150 CA# $2,000 100

$1,000 50

$0 0 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Source: CB Insights data June 2015 | 2 Venture Capital Sector and Series Trends

SECTOR TRENDS

• The Internet sector took 69% of deals and 80% of total funding that • Mobile & Telecommunications was the second largest sector for deals went to New York companies in Q1 2015. Internet companies took in and funding, taking in 15% of VC deals and 7% of VC dollars in more than $1 billion for the quarter. Q1 2015. • New York companies garnered 17% of all Internet VC deals and 19% • Combined, Internet and Mobile & Telecommunications accounted of Internet VC funding nationally. for 84% of all VC deals and 87% of dollars invested in New York in • New York recorded over twice as many Internet deals and nearly 2.9x Q1 2015. the amount of Internet funding as Massachusetts. • The Internet sector accounted for 44% of deals and 49% of total 4 •  was the second-ranked city in terms of Internet deals funding nationwide in Q1 2015. and funding, behind only San Francisco.

New York Deal Volume by Sector, Four Quarters Ending Q1 2015 New York Deal Value by Sector, Four Quarters Ending Q1 2015

Internet 291 (64%) Internet $3,616 (74%)

Mobile & Telecom 83 (18%) Mobile & Telecom $410 (8%)

All Other 44 (10%) All Other $575 (12%)

Healthcare 14 (3%) Healthcare $124 (3%)

Software $168 (3%) Software 20 (4%) (non-internet/mobile) (non-internet/mobile) 050 100 150 200 250 300 350 $0 $1,000 $2,000 $3,000 $4,000

Number of Deals VC Investment (Millions $)

Source: CB Insights data “Other” sectors include, but may not be limited to, Business Products and Services, Computer Hardware & Services, Energy & Utilities, Food and Beverages, Industrial, and Media (Traditional)

CORNELL TECH’S INAUGURAL STARTUP AWARDS

Five startups founded by students have each received $40,000 in seed funding as part of an inaugural Startup Awards program at Cornell Tech. The Awards program represents the culmination of a Startup Studio class taught by investor and entrepreneur David Tisch and Cornell Tech Chief Entrepreneurial Officer Greg Pass. The five winning companies – Dogstar, Epicure, Mynd, Pace, and Trigger–will also receive co-working space in The New York Times Building from Forest City Ratner. The funding for the awards comes from a $200,000 grant from the Blackstone Charitable Foundation. According to Cornell Tech Dean Daniel Huttenlocher, “The Startup Awards are a transformative opportunity to level the playing field and remove considerable barriers to entry for some of the best startups coming out of Cornell Tech.” Cornell Tech’s program is currently located in the Google building in Chelsea and will move to Roosevelt Island when a new permanent campus opens in 2017.

Sources: Tech Crunch13 , Cornell Chronicle 14

78,096 websites registered with a .nyc domain (as of 5/27/15)

Source: Domain Punch16

June 2015 | 3 SERIES TRENDS TECH EMPLOYMENT TRENDS • 57% of deals in Q1 2015 went to early-stage startups (Seed and Series • According to ON Search Partners’ Digital Jobs Index, New York City A), down from 76% in Q4 2014. Seed deals represented 26% of total digital employment increased by 3.4% as the city added 1,520 jobs deals for the quarter, the lowest share for seed deals since Q4 2011. in Q1 2015. Boston added 300 jobs for a 1.6% increase in digital Early-stage funding represented 20% of Q1 2015 investment dollars, employment. New York’s quarterly employment growth has been down from 22% in Q4 2014. greater than Boston’s for 11 of the past 13 quarters. • Late-stage (Series B and later) deals accounted for a 43% share of total • New York City now has 109 digital companies with 100+ employees deals and 80% of total VC funding. and 398 companies with 10+ employees. • The average deal size for Early Stage deals (Seed and Series A) rose to • Companies with the largest Q1 headcount gains include Amazon, $5.3 million, up from $2.8 million in Q4. Google, LinkedIn, Facebook, and BuzzFeed. • Early-stage investments accounted for 55% of deals and 20% of total • Google now employs over 5,000 people in New York City. 5 funding nationwide in Q1 2015. • Wired, Wireless and All Other Telecommunications establishments increased by 9.2% between 2003 and 2013, while employment decreased by 3.9%.

New York Deal Volume by Series, Four Quarters NYC Employment & Establishments: Wired, Wireless, and Ending Q1 2015 All Other Telecommunications 7

Establishments

Annual Average Employment 185 (41%)

25,000 $1,177 900 (24%) $1,033 $1,004 121 (21%) (20%) 800 (27%) $797 20,000 700 (16%) $648 VC Deals 70 (13%) Establishments 600 (16%) 15,000

34 VC Investment (Millions $) $242 500 (7%) 20 22 (5%) (4%) (5%) Employment 400 10,000 300 Seed Series ASeries BSeries CSeries DSeries E+ Seed Series ASeries BSeries CSeries D Series E+ 200 5,000

100

0 0 New York Deal Value by Series, Four Quarters 3 6 7 0 1 200 200 200 201 201 Ending Q1 2015 20 04 20 05 20 08 20 09 20 12 20 13

Source: NYS Department of Labor, Quarterly Census of Employment and Wages 185 (QCEW); NAICS codes 517110, 517210, 517410, 517919 (41%) $1,177 (24%) $1,033 $1,004 121 (21%) (20%) (27%) $797 (16%) $648 VC Deals 70 (13%) (16%)

34 VC Investment (Millions $) $242 (7%) 20 22 (5%) (4%) (5%)

Seed Series ASeries BSeries CSeries DSeries E+ Seed Series ASeries BSeries CSeries D Series E+

Source: CB Insights data

44,065 members of NY Tech Meetup (as of 5/27/15)

Source: NY Tech Meetup17

June 2015 | 4 DATAMINR: NYC’S TOP DEAL IN Q1 2015

Dataminr’s $130 million Series D deal was the largest VC deal in New York City in Q1 2015. Led by Fidelity, the funding round took Dataminr’s total funding to $180 million and valued the company at $700 million. Dataminr analyzes information from social media sites such as Twitter to deliver news alerts to customers. Founded in 2009 by Ted Bailey, Jeff Kinsey, and Sam Hendel, Dataminr uses its algorithms to identify patterns and extract information that the company deems important and credible. Dataminr’s customers come from a variety of sectors such as finance, government, media, and public safety. The company has over 150 employees and is headquartered in Manhattan, with offices in Washington D.C., London, San Francisco, and Montana.

Sources: TechCrunch10, WSJ11, Dataminr12

ANGEL FINANCING HIGHLIGHTS IN NEW YORK • According to the year-end 2014 Halo Report, the most recent available, Venture Capital Investments in Tech, Q1 2014 to Q1 2015 New York State accounted for 10.7% of the nation’s Angel/Seed series

deals in 2014, down from 12.9% in 2013. NY Tech $ MA Tech $ CA Tech $

NY Tech # MA Tech # CA Tech # • Those deals accounted for a 14.3% share of the nation’s total $7,000 350 Angel series funding, up from 13.5% in 2013 and representing a five year high. $6,000 300

• Nationally, the internet sector took a 34.6% share of all Angel deals in $5,000 350

2014, down from a 42.6% share in 2013. T ech VC Deals (#)

$4,000 200 • Two New York City-based Angel groups were among the six most 8 active nationally in 2014: Golden Seeds and . $3,000 150 ech VC Investment (Millions $)

T 100 EXIT HIGHLIGHTS $2,000 • There were no IPOs for New York tech companies in Q1 2015. New York $1,000 50 has seen a VC-backed IPO in only two of the past five quarters. $0 0 Q1 2014Q2 2014 Q3 2014Q4 2014 Q1 2015 • Nationwide, there were 12 VC-backed IPOs compared to 24 in Q4 2014. There were 138 total VC-backed exits in Q1 2015, down 19% from the previous quarter. “Tech” includes CB Insights categories Internet, Mobile/Telecom, and Software • New York took a 26% share of the nation’s 126 total M&A exits, with (non-Internet/mobile) large acquisitions including LearnVest, eXelate, and Sunrise. New York saw the second highest amount of M&A exits, behind California.9 TECH VENTURE CAPITAL FUNDING • New York tech companies took in an estimated $1.24 billion in total VC funding over 77 deals in Q1 2015. • Total funding for tech companies increased 117% quarter to quarter, while deals decreased 14%. • California tech companies closed an estimated 254 deals for $4.07 billion in funding, while Massachusetts tech companies took in $0.67 billion over 52 deals.15

661 internet companies in NYC (as of 5/27/15)

Source: NY Tech Meetup; Made in New York City18

June 2015 | 5 Sources 1 PricewaterhouseCoopers/National Venture Capital Association 10 Tech Crunch, “Dataminr Confirms $130M Raise to Take Its Moneytree, data from Thomson Reuters (https://www. Social Media Data Analysis to New Verticals” (http://techcrunch. pwcmoneytree.com/Reports/FullArchive/National_2015-1.pdf) com/2015/03/17/dataminr-confirms-130m-raise-to-take-its-social- 2 CB Insights, The Q1’15 U.S. Venture Capital Report: Financing and media-data-analysis-to-new-verticals/) Exit Analysis, April 2015, available at (https://www.cbinsights.com/ 11 The Wall Street Journal, “Tweet-Analysis Firm Dataminr Raises research-venture-capital-q1-2015) Funding” (http://www.wsj.com/articles/tweet-analysis-firm-dataminr- 3 CB Insights, Deal Search (account required), raises-funding-1426564862) (https://www.cbinsights.com/search/deals/) 12 Dataminr (https://www.dataminr.com/) 4 CB Insights, The Q1’15 U.S. Venture Capital Report: Financing and 13 Tech Crunch, “With Its First Startup Awards, Cornell Tech Turns Exit Analysis, April 2015, available at (https://www.cbinsights.com/ Class Projects Into Companies” (http://techcrunch.com/2015/05/20/ research-venture-capital-q1-2015) cornell-tech-startup-awards/) 5 CB Insights data 14 Cornell Chronicle, “Cornell Tech student startups receive $40k 6 PricewaterhouseCoopers/National Venture Capital Association awards” (http://www.news.cornell.edu/stories/2015/05/cornell-tech- Moneytree, data from Thomson Reuters (https://www. student-startups-receive-40k-awards) pwcmoneytree.com/Reports/FullArchive/National_2015-1.pdf) 15 CB Insights data 7 NYS Department of Labor, Quarterly Census of Employment 16 Domain Punch (https://domainpunch.com/tlds/) and Wages 17 NY Tech Meetup (http://www.meetup.com/ny-tech/) 8 Angel Resource Institute Halo Report 2014, available at 18 NY Tech Meetup; Made in NYC (https://nytm.org/made) (http://angelresourceinstitute.org/research/halo-report.aspx) 9 CB Insights data

June 2015 | 6 About NYCEDC The New York City Economic Development Corporation is the City’s primary engine for economic development charged with leveraging the City’s assets to drive growth, create jobs and improve quality of life. NYCEDC is an organization dedicated to New York City and its people. We use our expertise to develop, advise, manage and invest to strengthen businesses and help neighborhoods thrive. We make the city stronger.

About NYCEDC Economic Research & Analysis The Economic Research and Analysis group from NYCEDC’s Center for Economic Transformation conducts economic analysis of New York City projects, performs industry and economic research on topics affecting the city and tracks economic trends for the Mayor, policy-makers and the public as a whole. As part of its goal of providing up-to-date economic data, research and analysis to New Yorkers, it publishes a monthly New York City Economic Snapshot as well as the Trends & Insights series of publications covering such topics as Tech Venture Capital Investment, Borough & Local Economies, and Industry Economic Sectors. It also sponsors the Thinking Ahead series of events that brings together thought leaders and stakeholders to discuss and debate key issues shaping New York City’s economic future.

Economic Research & Analysis Group Michael Moynihan, PhD, Chief Economist & Senior Vice President Eileen Jones, Vice President Kristina Pecorelli, Senior Project Manager Kyle Marks, Project Manager

For more information, visit nycedc.com/NYCeconomics Contact us at [email protected]­

June 2015 Tech Trends & Insights, authored by Kyle Marks Center for Economic Transformation