For many years, Silicon Alley has been seen as a hot bed for leading consumer facing technologies, producing homerun social platforms such as Tumblr, Foursquare and BuzzFeed as well as leading e-commerce sites like Fab, Bonobos, Gilt and Etsy. Many in the industry have posited that it’s NYC’s finger on the pulse of emerging cultural trends that has enabled such start-ups to be so successful, supporting a deeply refined understanding of their consumer demographics’ needs. The city that never sleeps was (and still is) an amazing ecosystem to study consumer behavior and achieve rapid viral growth due to our shear density and continued willingness to express ourselves in every way possible, from what we post online to what we wear in our wardrobe.
While consumer facing tech is still a mainstay here in the Big Apple, the last few years have given way to a booming industry in B2B startups that have fundamentally changed the NYC tech ecosystem. Emerging enterprise giants such as AppNexus, ZocDoc, MediaMath, Yodle, DataMinr and our very own SailThru have redefined the way that the tech community is thinking about NYC and we, at Bowery Capital, are big believers in city’s enterprise momentum.
Earlier this year, the Startup Genome reported that “NYC is the second largest ecosystem for software startups’, second to only Silicon Valley, in its annual Startup Ecosystem Report. As we look to the deal flow fueling this designation, we see a steady funding increase over the last 4 years of roughly 28.5% CAGR (2009-2012), and this year is on pace to be NYC’s biggest enterprise tech year ever with over $400M through the first 5 months of the year alone. Check sizes are also getting bigger here in the Big Apple, having gone from $6.8M in 2009 to just under $10M this year, demonstrating both growing investor interest and maturity of companies being financed. With several of the names above rumored as possible IPO or M&A targets within the next 12-18 months, NYC enterprise deal flow is edging in closer and closer on the Valley for #1.
Continued strength in the enterprise IPO and M&A markets (see Nic’s previous post in our blog), should facilitate more and more seasoned and first-time NYC entrepreneurs entering this arena, as they flock from jobs in media, finance and retail to capture this momentum. These resources, when augmented by NYC’s growing bench of tech talent, create a highly competitive composition to serve the technology needs of their growing industries. Insights from these industry professionals have thus far spearheaded the ecosystem’s ability to provide CMO’s with game-changing technologies that optimize social media & marketing strategies and enable a deeply analytical understanding of an organization’s customers.
Programs like NYC SeedStart and the FinTech Innovation Lab are concentrating immense resources to help cultivate these types of companies here in the city, and founders are stepping up to the table by developing continually more progressive business models. Following in the footsteps of these accelerator and incubator programs is newest addition, Work-Bench, a Union Square-based “post-accelerator” program focused exclusively on enterprise startups. Whereas most accelerator programs focus on product, Work-Bench is aiming to be the “masters program to an accelerator’s bachelor’s program” by helping its companies with their first sales. The program is so concretely focused on sales, that it even has ditched the convention of the demo day in favor of a “sales day” focused on attracting paid customers, rather than investors. By helping these early-stage companies demonstrate revenue, these programs are de-risking the investment process for VCs and enabling them to warm up to the sector. We at Bowery, follow a similar approach as we extend this thesis to scaling the customer acquisition efforts of our portfolio companies. As this support system becomes progressively more concentrated and sophisticated in ushering enterprise companies from conception to maturity, we should see a continually improving pipeline of enterprise companies here in the city.
With its dearth of resources, talent and support, NYC has rapidly evolved into one of the industry’s go to spots for enterprise technology. As several large exits loom in the horizon, the ecosystem has the potential to not just rival, but overtake our peers on the West Coast. While we don’t seek to claim that the city’s enterprise tech movement will impede or displace the cache of the NYC’s “hot” consumer start-ups, enterprise tech is certainly looking “cooler” than ever in the Big Apple this summer.