VC in NYC: Not So Rosy?

I caught up today with a friend who has been a VC for a long time in NYC.  He has been in the business since the 1990s and is now doing angel investing.  He has a great track record.

Now, I don’t know NYC.  We look at things based there and are open to investing in the area, but we’ve not yet found our first opportunity.  I asked him about what the funding environment was like down there.  I expected a rosy and optimistic view.  A lot of VC money has been pouring into NYC. I instead heard a bearish view.

His paraphrased comments:

  • A huge number of seed funds and angels
  • But, very few people who can lead a Series A round

Regarding the latter comment, he thinks there’s a dearth of folks with time and capital:

  • A number of firms outside of NYC are flying in, but aren’t much of a factor these days, as they’re slowing down their investment pace
  • Many of the luminary VCs based in NYC are already filled up with board seats and are spending most of their time investing elsewhere.  So, they live in NYC but they’re investing mostly in other states

So, my friend continues to focus on seed investments.  He also thinks there are great opportunity in finding “seed extensions”: a company needs a few quarters more of runway to hit more milestones, but my friend gets to invest at the same price as the original seed round.

I wonder if this POV is what you’re seeing in NYC.  With a long-term view, I’m optimistic for NYC–some great fundamental trends there for innovation.  But this current snapshot isn’t what I was expecting to hear.

I guess the “Series A crunch” virus is spreading (here’s a great post by Dan Primack on that).

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