The Big Apple held on to third place nationwide in venture capital funding in the first quarter, boosted by a jump in early-stage financings.
Venture investors put a total of $838 million to work in New York City businesses, up 21% from $693 million in the same quarter of 2013. The number of companies funded, however, was unchanged at 93.
Only perennial leader Silicon Valley and the Boston area ranked higher in dollars invested in the quarter.
Some venture investors found more to like among relatively untested businesses in New York than among more seasoned firms: Early-stage financings – meaning initial seed capital and Series A fundings – accounted for 30% of total dollars invested in New York last quarter, up from just 16% a year earlier.
By contrast, early-stage funding made up just 18% of the $10 billion in venture money invested nationwide last quarter.
In New York, the quarter's second-biggest venture investment last quarter was a $75 million Series A funding deal for Harry’s Razor Co.
The start-up, which used its initial round of financing last year to buy 93-year-old German razor manufacturer Feintechnik, aims to take on razor giants Schick and Gillette by offering shavers by mail: You order the kind of razor and other shaving products that fit your needs, and it delivers them to your door – and reminds you when it’s time to reorder.
Harry’s, whose venture investors include Highland Capital Partners and Tiger Global Management, has a West Coast rival in Dollar Shave Club, another venture-financed company launched in 2011 in Venice, Calif.
Robin Gill, a tech banker for City National in New York, said venture investors are looking for business ideas that shake up industries potentially ripe for change.
“VCs are looking for opportunities to disrupt industries that have been dominated by a few players,” Gill said. Also attractive was the opportunity for Harry’s to control quality by owning its factory.
To some venture investors, the financial services business also appeared ready for change, after the financial meltdown of 2008. The biggest venture deal in New York last quarter was a $77 million Series E investment in OnDeck Capital, a company formed in 2007 to make small-business loans of between $5,000 and $250,000.
OnDeck says it has lent $1 billion across 725 industries nationwide since its founding. Its latest investors include Google Ventures.
Also on the list of top 10 New York venture deals last quarter: a $35 million infusion for General Assembly, a company created in 2011 to offer classroom and online education in technology, business and design. The company’s venture backers include Institutional Venture Partners, which has previously helped fund companies including Netflix, Twitter and Kayak.
EQUITY FINANCINGS FOR NEW YORK CITY VENTURE-BACKED COMPANIES*
|1 Q 2014||4 Q 2013||3 Q 2013||2 Q 2013||1 Q 2013|
|Number of Financing Deals||93||96||92||82||93|
|Amount Invested ($MM)||$837.9||$876.4||$635.9||$597.9||$693.4|
TOP 10 DEALS IN NEW YORK CITY
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|OnDeck Capital||Small business loans||New York||Series E||$77||Google Ventures, RRE Ventures, Tiger Global Management, First Round Capital, Peter Thiel, Institutional Venture Partners, SAP Ventures|
|Harry's Razor Company||Razor and men's grooming products||New York||Series A||$75||Highland Capital Partners, Tiger Global Management, Harrison Metal, SV Angel, Thrive Capital, BayernLB Capital Partner, Lakestar, Michael Marks, David Gilboa, John Winkelreid, Rob Malcolm, Neil Blumenthal, Andrew Hunt, Jeffrey Raider|
|Kaltura||Open-source online video platform||New York||Series E||$47||Intel Capital, 406 Ventures, Nokia Growth Partners, Nexus Venture Partners, SAP Ventures, Mitsui & Co. Global Investment, Commonfund, Gera Venture Capital|
|DigitalOcean||On-demand SSD cloud-hosting platform||New Yor||Series A||$37.2||Andreessen Horowitz|
|General Assembly||Global network of campuses for education in tech, business and design||New York||Series C||$35||Maveron, Western Technology Investment, Institutional Venture Partners, GSV Capital, Rethink Education|
|Aereo||Provides a remote antenna and DVR that consumers can use to access network television on web-enabled devices||Long Island City||Series C||$34||Highland Capital Partners, FirstMark Capital, IAC, Himalaya Capital Ventures, Gordon Crawford|
|CAN Capital||Small business alternative capital||New York||Growth Equity||$33||Accel Partners, Meritech Capital Partners, QED Investors, Ribbit Capital|
|Integral Ad Science||Media valuation platform||New York||Series D||$30||Atlas Venture, August Capital, Coriolis Ventures, Founder Collective, Pelion Venture Partners, Digital Trek|
|Oscar Health Insurance Co.||Health insurance provider||New York||Series B||$30||Founders Fund, Khosla Ventures, General Catalyst Partners, Thrive Capital|
|Exosome Diagnostics||Biofluid-based molecular diagnostic tests for use in personalized medicine||New York||Series B||$27||Forbion Capital Partners, NGN Capital, Arcus Ventures, Qiagen, Tiger Partners, CD Ventures, Monashee Capital|
*Quarterly tallies consist of equity rounds completed in the quarter and in which a venture capital or corporate venture firm participated in the round.
|The content of Venture Capital Report is compiled from data and sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Opinions expressed are those of the authors or the interviewees and are not necessarily the opinions of City National Bank, member FDIC. This publication is intended to be a source of general information regarding subject matters of interest to our clients. The effectiveness of the advice or suggestions presented, if any, will depend on the reader's situation and are for the reader to determine. If investments are discussed, the discussion should not be considered or relied upon as specific investment advice directed to the reader's specific investment objectives, nor should any discussion of specific securities be taken as a solicitation or recommendation for any reader to buy or sell such securities. City National Bank (and its clients or associated persons) may at times have positions in securities and investments discussed from time to time in this publication and may make additional purchases or sales inconsistent with the discussion. City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules and regulations in the areas of law, tax and accounting are subject to change and open to varying interpretations. The reader is encouraged to consult his or her own tax and legal adviser.|
|Investment and Insurance Products:
• Are Not insured by the FDIC or any other federal government agency
• Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
• May Lose Value