🚀 Why is the NYC startup scene taking off?

Plus, Swifties battle Ticketmaster!

Nov 20, 2022

Gratitude Vmas 2019 GIF by 2020 MTV Video Music Awards

We’re off next week for Thanksgiving, but wanted to send a big thank you to our Accelerated community for reading, commenting, and sharing this year! We love writing the newsletter and really appreciate all of you.

💪 Musk goes hardcore. Hundreds of Twitter employees reportedly resigned after CEO Elon Musk asked them to opt-in to an “extremely hardcore” new culture. Employees were given until Thursday afternoon to decide, and those who chose to leave will receive three months of severance pay. The move comes after half of the company’s 7,500 employees were laid off in an effort to cut costs. Musk tweeted that the “best people” are staying with Twitter, and platform usage has hit new highs.

⚖️ Elizabeth Holmes sentencing. The current chapter of the Theranos story came to an end, as Elizabeth Holmes was sentenced to 11 years in prison and a $400 fine, with restitution to be decided later. Holmes was convicted in January on four charges of defrauding investors, which carried a maximum penalty of 20 years as well as restitution. Prosecutors had asked for a 15 year sentence and $800M payment. Former Theranos COO Sunny Balwani will be sentenced in December.

🎟️ Ticketmaster under fire. Finally, a reason to share a Taylor Swift update! This week, Swift released pre-sale tickets for her Eras tour - and crashed the Ticketmaster site. While 2M fans eventually got tickets, most waited hours to get through, and the company canceled the general sale due to “insufficient inventory.” Swift released a statement expressing her disappointment, and the Justice Department is opening an investigation into Ticketmaster’s potential monopoly influence in live events.

To all the startups disrupting ticketing, we see you 👀

💸 FTX unravels. If you missed last week, crypto exchange FTX declared bankruptcy after the company “borrowed” customer assets to cover losses on its trading arm, resulting in a liquidity crunch. This week, former CEO Sam Bankman-Fried published a tweetstorm explaining what he thinks went wrong. Meanwhile - the company’s new CEO, John Ray (who previously oversaw the Enron bankruptcy) released his first statement: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information.” 😬

what we’re following 👀

Justine Moore @venturetwins

If I were looking to join a high-growth startup or tech company right now, I'd come to NYC. I spend hours every week combing through job postings, and there's an insanely high volume of quality roles here right now. This is particularly true if you want to work in-office.

We’ve been back in California for a week, and we’ve been reflecting on our time in New York this fall. As context: we spent nearly ten years in the Bay Area before deciding to switch it up. We moved to Santa Monica for the summer, and then spent a few months in Manhattan - so we’ve experienced three startup ecosystems this year!

NYC probably surprised us the most. We had visited New York a few times each year before COVID, and found the tech scene to be interesting but early. Compared to the Bay Area, there were far fewer startups and many were concentrated in fintech or healthtech (which are both great categories).

When we returned this fall, we found that the ecosystem had matured considerably. There were significantly more founders, a much stronger sense of community, and a proliferation of startups across a broader range of categories (including social apps, consumer marketplaces, vertical SaaS, and prosumer tools). The startup scene is vibrant and buzzing with energy - it’s palpable.

We spent some time talking with other investors and founders about what changed in NYC over the past few years, and distilled a few learnings on what can make an ecosystem “take off.” Here’s what we found:

Accessibility. NYC saw a massive outflow of residents during the first year of COVID - more than any other metro area in the U.S. This had a meaningful impact on the rental market, with “COVID deals” popping up around the city and making it much more affordable for young people to move in. A lower cost of living might have also made residents more comfortable giving up high-paying jobs in big tech, consulting, or finance to start a company / join a startup.
Bloomberg data (from UrbanDigs) on rent prices in NYC - notice the marked decline in April 2020!
Talent pool. Startup ecosystems thrive when early stage companies grow, raise a bunch of capital and/or exit, and spin out talented people. These people have seen the inside of a hypergrowth startup and want to apply what they learned to a new company. NYC had a number of notable exits in the mid / late 2010s - Etsy, Peloton, Datadog, Jet, Flatiron Health - just to name a few. There are also dozens of unicorns in NYC that are starting to “graduate” talent, like Ramp and Ro.

Data pulled from Pitchbook on VC-backed startups that exited for $100M+ (via M&A or public offering) headquartered in NYC.

Investors. NYC has always had a strong (but relatively small) group of VC firms - Thrive, USV, BoxGroup, and Bessemer are a few. The mid / late 2010s saw the rise of a new crop of NYC-first funds, many of whom invest at the earliest stages - including Primary Ventures, Human Ventures, and Redesign Health. Funds historically based on the West Coast are also opening up NYC offices for the first time. a16z is one of these! And finally, many of the growth-stage firms in NYC (e.g. Insight, Tiger Global, Coatue) started making early stage investments.

Culture. This one might be less repeatable, because NYC has an undeniably unique culture. But importantly, the city brought something that people were looking for after COVID: in-person interaction. While SF was still locked down and masked, NYC was back in action with parties, conferences, and dinners happening every week. For early stage companies looking for a local community or wanting to work in-office, NYC was an obvious choice.
Momentum. Hype around a startup ecosystem is kind of like inflation: it’s self-fulfilling and tends to be sticky. When people start talking about the great things going on in a city, others want to move there - and many will actually do it! This is especially true for founders deciding where to start their company: they want to be where the “action” is. More founders brings more investment $, which then attracts other founders. It’s a virtuous cycle!