Nationally, 2018 continues to be on pace to see the most venture dollars ever invested in private companies. New York is following suit, with both deals and dollars in Q3 up from last quarter. The quarter saw 49 deals, up 17% from Q2 and up 26% from this time last year. More notably, however, was total funding, which hit $87.6 million – a sharp increase of 31% from last quarter, and up 26% from Q3 2017. This is a sum we haven’t seen the likes of since Q1 2016, when seed activity in NYC reached its peak of $113 million from 74 rounds.
For the second straight quarter, growth in funding for seed-stage companies in NYC outpaced growth in deal quantity. This is a trend that’s being mirrored on the national stage, as well; although dollars were up 17% in Q3, deal activity across the country actually declined for the first time since Q4 2017. With the ongoing growth of venture funds – average fund size has had a compound annual growth rate of 16%, with a year-to-date average of $283 million – we will continue to see greater desire and greater opportunity to invest larger amounts of capital. The result, of course, is increasing average deal size, which for seed deals in NYC hit $1.8 million in Q3, up 12% from Q2. In Q3, seed deals greater than $3 million accounted for 20% of total deals and accounted for 36% of total funding for the quarter.
Industries to Watch
Beyond D2C, retail gets an overhaul
Sure, we all love online shopping, but startups are increasingly turning their attention to reinventing the retail experience. Public Goods offers a new model that eliminates markups on goods; Perch is revolutionizing the way products are displayed and sold in store; and Uppercase, which raised one of the largest rounds of the quarter, offers a real estate solution that helps brands to launch stores from the ground up.
Real estate of mind
Softbank isn’t the only one investing in real estate deals. As entrepreneurs attack every corner of the industry, investors are biting. Q3 saw funding for EQUITYMULTIPLE, which helps to democratize real estate investing, while Moved aims to streamline the moving process and ROOM is creating better phone booths for offices. The ecosystem is massive and more players are coming.
For hire? Marketplace creativity
Marketplaces are popping up left and right, creating offerings and job opportunities that have never before been accessible to consumers. Whether it’s connecting job candidates to career coaches (The Lobby), employees to conflict coaches (Bravely), travelers to local guides (ViaHero), or individuals with financial advisors (Zoe Financial), startups are finding more and more ways to connect a distributed workforce.
Streamlining information overload
The rise of enterprise platforms like Slack and Google Drive has led to an overabundance of workplace data and communication. Companies like Seva and LAER AI are combatting this information overload by bringing transparency and simplicity to workers via intelligent internal search, while Blissfully helps companies manage spend on the tools themselves.
Unleashing the power of blockchain
Blockchain continues to unlock new models of innovation for fledgling businesses. Whether it’s orchestrating mobile connectivity supply and demand (OXIO) or allowing firms to monetize their spare CPU HashPower (Mineful), blockchain will continue to create opportunities for enhanced efficiencies.
AI goes horizontal
The use of artificial intelligence continues to permeate every industry, yet we are now seeing a surge of startups that are deploying AI in horizontal applications. From marketing tools (Paloma, Lately) to improving recruitment (MeaningBot), startups are starting to utilize AI to improve functional teams.
Primary NYC Seed Deal Report: Q3 2018
