At Work-Bench we bet on NYC early, before enterprise technology was really a thing here.
The rationale back in 2013 was that we have 52 of the Fortune 500 HQ here (more than anywhere else in the world!) and that we were primed to have more enterprise startups here building alongside their customers.
This bet has been core to our model as an enterprise VC fund as we’ve shared in previous blog posts:
Our secret sauce is really not so secret: we combine our team’s unique backgrounds in corporate IT with our location in NYC — and the density of Fortune 500 companies here — to understand corporate pain points at scale. We then work backwards from pain point to founders to find the most exceptional enterprise startups tackling these problems. Then we play matchmaker.
NYC Tech 3.0 can officially be cemented as an enterprise tech hub.
Between MongoDB’s IPO and several nice M&A outcomes over the past few years, we had begun generating a critical mass of exits. And then the big kahuna arrived — Datadog’s S-1 filing.
From the day the S-1 was released, people have been astonished at how such an incredible company has somewhat quietly been built in our backyard in NYC. What I love most, beyond even the incredible SaaS metrics like a 9 month payback period and 142% net retention, is that Datadog demonstrates that a deeply technical infrastructure company can get built in NYC and flourish.
But wait. There’s more!
Datadog’s IPO certainly delivered, but the thrilling news is that there’s more enterprise exits in the pipeline.
NYC has 8 unicorns backed by some of the biggest names in VC. We expect to see a flurry of additional exits from this group in the next 18–36 months, with companies like UiPath and InVision likely candidates to be out the gate next.
Beyond the NYC enterprise unicorns, we used Pitchbook to compile a list of enterprise startups who have either raised >$100M in funding or are valued at >$500M.
These 10 companies represent the next guard of NY enterprise growth. The sectors here vary from a distributed SQL database to data management & intelligence software to recruiting & applicant tracking software to SaaS operations management & security, and lots more.
Switching gears from the exit landscape, let’s take a look at trends shaping VC funding for NYC-based enterprise startups.
NYC Enterprise Funding Deep Dive: A Review of Trends From 2014–2019 H1
Every Friday for the past 5+ years we send out our Enterprise Weekly newsletter. In each newsletter we capture every enterprise financing that occurs that week, and we then save the NYC-specific fundings in our public NYC Enterprise Funding Database. The database records every single financing from 2014–2019 H1 for NYC enterprise startups, and for each financing we include the company name, amount raised, and the funding round.
Given that we haven’t done a deep dive into these stats in a few years, we were excited to take a peek and uncover the latest trends.
Quarterly NYC Enterprise Startup Deal Count and $ Raised (2014–2019 H1)
When you look at quarterly financing trends by Deal Count and $ Raised, you see signs of a vibrant ecosystem.
This year we passed $10B in aggregate VC funding in 445 financing rounds for enterprise startups which keeps us as a strong #2 in the country after Silicon Valley.
Things continue to heat up, and the 1H of 2019 ($1.95B) surpassed all of 2018 ($1.93B) in total dollars raised! 2018 total deal count was 74, and deal count in 1H of 2019 is tracking nicely at 52.
Funding Breakdown by Stage: 2014 v 2019 H1
When evaluating the funding distribution by stage, in 2014 things naturally skewed towards Seed and Series A financing events, at 67.3% of the total. Series C, D, and later rounds represented just 14.5% of financings.
When you look at the 1H of 2019, you can clearly see a more consistent split across stages given the amount of mature companies that have scaled. There’s still the steady drumbeat of Seed and Series A financing events, at 42.3% of the total, but now Series C, D, and later rounds come in at 30.8%.
Median Amount Raised Per Series: 2014–2019 H1
And lastly, in line with the rest of the country, median deal sizes at every stage continue creeping up.
Seed rounds doubled from median round sizes of $1.5M in 2014 to $3.0M in 1H of 2019.
Series A rounds more than doubled from median round sizes of $6.0M in 2014 to $13M in 1H of 2019.
Of particular interest to us at Work-Bench is the funding gap between these $3M seed rounds and $13M Series A’s. This white space is a sweet spot for us as Jess described in her post The Rise of the Seed II Round (and Why It’s Great for Enterprise Founders).
It’s been so rewarding to play a role in NYC enterprise tech’s continued evolution. 2019 is turning out to be a key inflection point in our ecosystem’s accelerating growth, between surpassing $10B in aggregate VC financing for our startups and Datadog’s $10B+ market cap post-IPO.
While we invest across the country, NYC is our home and we offer distinct value add support for companies in our own backyard. In Fund 1 about 40% of the portfolio was NYC, and in Fund 2 about 70% of the portfolio is in NYC with a healthy mix of sectors represented.
We couldn’t be more excited to see what’s next for NYC enterprise tech. If you’re an early stage enterprise startup looking for funding or to participate in our various community activities, please reach out!
Thanks to Jess Lin for her contributions to this post and to Priyanka Somrah for her tireless efforts to catalog all enterprise startup fundings for each Enterprise Weekly newsletter. Speaking of which, sign up 👇