Andrew Weissman: As reported earlier, venture capital investments in tech companies in the second quarter of 2007 were the highest they’ve been in six years. According to VentureBeat, however, “The quarterly report also highlights the trends of larger deal sizes and more money going toward second-round and later-stage investments. The median deal size in the second quarter of 2007 reached $8 million, up from the $7.4 million seen during the same time last year and the highest media seen since 2000.”
This is consistent with earlier reports that suggest that funding for early stage ventures has declined significantly, and that in 2006 “funds under $100 million captured the least amount of capital in the 14 years that VentureOne of San Francisco has collected such data.”
It appears we have the situation where VC investing is up, but early-stage investments may be declining.
If this is the case, then are worthy early stage NY ventures going unfunded? In short, no. By being out of the spotlight of Silicon Valley, NYC ventures have the opportunity to grow without unrealistic external expectations. Their location also enables them to tap into resources that are particular to the NY area: media, advertising, marketing–the highest online growth areas right now. So, while in general it may indeed be more difficult raise seed money, this region should have an inordinate amount of company creation.
Which it does. In the last few months, I have met, invested small amounts in, heard about or used products developed by dozens of interesting seed-stage companies that are raising fractions of the median deal size listed above, yet are hitting significant growth milestones. These include Downfly, i’minlikewithyou, Tumblr, NewsGroper, ideeli, outside.in, wikiyou, and revlayer, to name just a few.
Some of these companies are funded by VC firms. Others have angel investors. I suspect others are getting financed by hedge funds venturing into new areas. But clearly the VC funding gap, if one exists, does appear to be getting filled by a variety of sources. And that’s the best part: interest in general in investing at the seed stage has not waned–it’s just getting filled in more ways. Especially in New York.
Andrew Weissman, a Silicon Alley Insider contributor, is a founder of Post Ventures.