First and foremost, we hope everyone has a safe, relaxing, enjoyable Labor Day Weekend with friends and loved ones soaking up the last licks of summer before we all jump into Fall. It’s a good time to slow down and ponder some macro themes. Here are a few we’ll be working through on our walks on the beach or strolls through the neighborhood:
1. We think “Reverse Manifest Destiny” is in full swing.
Mattemark put out some great data recently showing the ascendancy of NY: New York startups, on the other hand, have more than doubled their relative share of the dollar volume invested into new tech companies nationwide between 2006 and today. Many of the companies founded between 2009 and 2012, when “Silicon Alley” was really coming into its own, found success and stayed put, and now serve as anchors in NYC’s startup community. So far in Q3 2016, New York City accounts for over 25% of total VC dollar volume.
We’re finding this to be true just anecdotally as well. During our interview process for our most recent class we talked to a number of CA-based companies looking to move to NY, and in the past month we’ve spoken with a handful of VC’s who have moved to NY from other markets, all citing generally the same thing – the desire to access what is ultimately a bigger market and to leave behind what at times can be a stifling monoculture for a more diverse economy where the most notable “unicorn” of the last year was a Broadway play… Keep it coming, we say.
2. We think Cities are the next platform
In the same way internet, and mobile internet, was the platform of the last 15 years, we think Cities and the urbanization of modern living will be the platform of the next 15 years (at least). Already, over 50% of humanity lives in cities and that number is only increasing. We’re scratching the surface of several breakthrough innovations around mobility (car-sharing, self-driving cars); delivery (drones); energy production and storage (solar, wind, batteries), and that’s just to name a few, but all are currently showing the most promise in rural environments as opposed to urban areas where space limitations and complex infrastructure make implementation difficult. And yet these are the biggest markets. Something’s gotta give, and we think the time is now.
This makes us particularly excited for our Urban Tech Growth Hub. We’re putting our money where our mouth is, and so is the City — who is supporting this effort not only financially, but by opening their agencies to the deployment of these critical technologies. That might not seem like much, but when one agency (NYCHA) has more residents than all of Baltimore, having a pilot there matters in a big way. Combining the Hub with our existing accelerator and coworking spaces, GCT has become New York’s largest, single, tech-focused footprint, and its most selective — and we’re excited to play a role in making the world’s best city even better.
3. The gulf between the corporate world and the startup world is shrinking from both sides.
We’re all watching the M&A market heat up… In the last month, we’ve seen two of the largest, quickest acquisitions ever — Dollar Shave Club by Unilever, and jet.com by Walmart. But there’s actually more to it than these big scores.
Much was made of a “funding slow down in 2016”, but from our view, more than any slow down, the rules changed. For startups, successfully raising a Series A now increasingly requires not just growth statistics (i.e. users), but revenue growth and the existence of large, scaled customers.
On the flip side, the days of corporate innovation theater may just be past us. Every day, we’re speaking with corporations who are coming to grips with startup engagement A.) being critical for identifying growth in a low-yield world and for attracting and retaining top talent, and B.) realize that isn’t accomplished by wearing blue jeans or converting the lunch room into an “innovation hub”.
Weathergage Capital put together this great visual last week around the “Series A” Gap:
There are many factors creating and influencing this gap, but surely one of the best ways to close it is via alignment with a scaled customer(s). The push-pull dynamic of startups seeking scale and corporations seeking innovation will effectively ensure that, where alignment between the two are found, the startups best positioned to take on scaled problems will cross the transom to Series A.
And we think that alignment is a good thing. It’s likely no coincidence that, because of the corporate world beginning to productively tip its hand, the startup sector feels like it’s turning a corner towards taking on more mature, broadly impactful challenges/opportunities. Pursuing innovation was always exciting; pursuing innovation that has the opportunity to achieve immediate scale has always been the dream. We’re excited to be a part of this story — and to help build the rulebook of how to introduce the scale of the corporate world to the innovation of the startup world.
Have a wonderful last weekend of summer everyone!