While online discussions tend to suggest that venture firms are retreating to the Bay Area and that San Francisco is the most important place to found a startup, Index Ventures is expanding its New York-based investment team. We are considering.
Shardul Shah, a partner at Index Ventures, told TechCrunch that the company is currently looking to hire another New York-based investor, adding three or four new people to the team within the next year. He plans to add it. He is a positive addition to the current 10-member team.
“For venture funds, that's hyper-growth,” Shah said, adding that Index is trying to “leverage the ecosystem here and the energy we have as a team.”
Shah said there are many positive aspects of New York's ecosystem that differentiate it from San Francisco. The Bay Area may have a better density of engineering talent and venture capital, but New York wins in one key area: customer density, Shah said. This is especially true for construction companies in the medical and financial sectors, he said. While large numbers of investors are helpful for early-stage startups, what really helps companies grow sustainably is a deep customer pool. Shah said the city's industrial diversity is another advantage.
He added that it's also a natural place for the company to maintain a presence, as it has portfolio companies and colleagues in both San Francisco and Europe. He added that European companies expanding into the U.S. typically set up shop in New York first, which is also an interesting strand of potential deal flow.
It probably doesn't hurt that the index already has a successful portfolio in New York. The company is part of some of the city's biggest startup winners, including Datadog, which went public in 2019 at a valuation of $7.8 billion, and Cockroach Labs, whose latest funding round in 2021 valued it at nearly $5 billion. was an early investor.
Shah said the index was founded in Geneva in 1996 and has expanded to new regions about every 10 years. The firm opened a New York office in 2022 as Bay Area investors expand eastward. Lightspeed Venture Partners also opened a New York office in the same year. Sequoia opens in 2023.
And unsurprisingly, this wave is mixed in with many of New York's prominent homegrown VC firms, including Goliath Insight Partners, which manages $80 billion in assets, and prestigious firm Union Square Ventures.
New York has consistently maintained its position as the second-largest venture ecosystem in the U.S., with New York Startups raising $12.6 billion in the first half of 2024, according to PitchBook data. That's significantly less than the $40.4 billion invested in California startups in the first half of this year, but it's not a nose-watering amount.
According to CB Insights' Unicorn Tracker, New York has 122 unicorns and San Francisco has 182. Of course, if you add in unicorns from larger areas (Palo Alto, Redwood City, etc.), there are dozens more Bay Area unicorns. ). But New York has far more of them than anywhere else outside of Silicon Valley.
Still, the New York ecosystem suffers from large-scale exits. Datadog is probably the most notable startup to leave the ecosystem, and that happened five years ago.
The index is ready to fund further growth.
“People seem to be going back about 20 years, to when they were saying Europe is a museum,” Shah said of the current rhetoric. “To say that [venture capital] It's not accurate because it only occurs on the West Coast. It's not even close. ”