The VCs Invade New York City

Look out the VC are invading New York City!

Indeed, venture capitalists, often investing in start-up tech companies, love the Big Apple and are pouring billions of dollars into the city’s economy.

The total venture capital (VC) investment in New York City recently jumped in the latest reporting quarter. Artificial intelligence, crypto-currency and wedding planning venture firms topped the VC list, according to numbers from the New York City Economic Development Corporation (NYCEDC).

“Total venture capital investment in New York City during Q2 2018 rose dramatically from last year, up 28% to $2.97 billion,” NYCEDC officials wrote in a recent report.

The NYCEDC said those numbers were “the second highest total in the city’s history.” It said only the third quarter of 2017 was the better quarter for venture capital in the city. That was a quarter when it topped $3 billion.

“NYC is creating the infrastructure to grow industries of the future,” says Ryan Birchmeier, an NYCEDU spokesman. “This work is focused on ecosystem building that will attract new venture capital investment, grow start-ups, increase international expansions and create good paying jobs for New Yorkers.”

The leaders in this venture capital surge were Dataminr, an artificial intelligence platform, with a $392 million investment. The company provides alert services on real time information and events to inform decision making across the corporate enterprise.

Others making big investments were R3, a crypto-currency application, and Zola, a wedding planning service, each of which recorded deals of over $100 million.

Ted Bailey, Dataminr founder and CEO, said venture capital and tech companies are doing well here because “there is a robust network of early-stage companies, spanning multiple vibrant industries.

Nick Beim, an initial Datamir investor, says VC tech companies prosper here because “the city has strong tech talent pools, including university data science labs and a lot of financial quants.”

To ensure that VC and tech continue to prosper, he says the city should create incentives for “large technology companies to build engineering offices.” Beim, also a partner in the VC firm Venrock, also argues for improving local schools and transportation.

NYCEDC officials said providing an infrastructure for techs is the best way to attract them. One attraction, they say, is security.

They pointed to the recent announcement of a plan to convert two Manhattan buildings into a Global Cyber Center.

Part of the center’s mission will be to stop internet mischief. The center in Chelsea will bring together an international community of corporations, investors, start-ups and talent to expand the cyber security community, NYCEDC said.

“New York City needs to be ambitious about cyber security because our future depends on it,” said NYCEDC President and CEO James Patchett.

Patchett said that the center will create 10,000 “middle class jobs.”

It is slated to begin operating early next year, NYCEDC officials said. City taxpayers will pay $30 million for the center and the private sector $70 million.

Note: What Is Venture Capital?

Venture capitalists finance start-up companies and small businesses. Investments are made in companies that have long-term growth potential.

This kind of capital is usually provided by wealthy investors, investment banks or other financial institutions. Investing in new companies and new kinds of business, can be risky. One buys into a company with very little history.

But these new companies, which often don’t have access to conventional funding sources, also have the potential for huge returns. Venture capitalists also have a say in these start-ups. But they can make a bundle or lose their shirts.