When clients come to me for advice on raising capital, I always tell them this: It was a helluva lot easier for me to raise $43 million in three weeks when I took my company public than it’s going to be for you to raise the first $200,000 you need to get your business off the ground.
Turns out that Michael Bloomberg has been listening.
Last week, New York’s mayor announced the formation of NYC Seed, a $2 million venture fund for cash-strapped tech entrepreneurs looking to make their dreams a reality. Bloomberg announced the launch of the new fund at the kickoff event for New York’s first-ever Internet Week.
NYC Seed is a public-private joint venture that taps resources from six city agencies and organizations–the New York City Economic Development Corp; the New York City Investment Fund; the economic development arm of the Partnership for New York City; Polytechnic University; the New York State Foundation for Science, Technology and Innovation; and the Industrial and Technology Assistance Corp. The $2 million fund will invest up to $200,000 per company.
“New York City has always been a place where aspiring actors, artists and musicians have come to live out their dreams and ambitions, and we want to make sure it is the place where aspiring technology entrepreneurs come as well,” Bloomberg said.
The fund, which will be headquartered at Polytechnic’s incubator in downtown Brooklyn, will be overseen by an all-star board including Union Square Ventures’ Fred Wilson, Milestone Venture Partners’ Todd Pietri, DFJ Gotham Ventures’ Daniel Schultz and Greycroft’s Drew Lipsher.
Owen Davis, the fund’s managing director, said that NYC Seed will invest in pre-revenue companies founded by tech-savvy people with innovative ideas and a working prototype.
According to the fund’s website, “No idea is too early for consideration for NYC Seed. We fund small teams that want to express their original ideas through software and web-oriented technologies. We encourage first-time founders. There is no set formula for why we invest in a company, but there are some qualities we would like to see. We are looking for a team (2-plus people) with a compelling idea that makes sense today. Your team should be technically savvy, with members [who] possess a proven record of completing complex technology projects.”
The catch: Your company must be based in New York City, or be prepared to move here.
Though the fund’s size may be tiny compared with private venture capital funds such as Union Square Ventures and Greenhill-SAVP that have raised $100 million or more, Maria Gotsch, New York City Investment Fund’s president and chief executive, told Crain’s New York Business, “There is a strong demand for smaller amounts of capital for early-stage companies. NYC Seed will address that demand.”
But is $2 million really enough to jump-start New York’s internet/digital media industry? On Friday, several friends of mine in the internet business weren’t sure. Unlike Silicon Valley, where venture capital seems to flow like water, finding seed capital for New York startups often requires psychic powers and a divining rod. Couldn’t Bloomberg have ponied up a little more cash, they wondered.
As an entrepreneur and consultant, I’d certainly like to see New York put more money in the pot. A fund that invests $200,000 apiece in 10 early-stage companies is going to leave a lot of promising ventures behind–and, unless one of those 10 companies turns out to be the next DoubleClick, 24/7 Media or NetCreations, it won’t do much to create jobs in this town.
As a New York City taxpayer, on the other hand, I share the concerns that were posted on the Crain’s website after the news came out.
“This is [the] twilight zone,” the reader wrote. “Are we in 2000???? Why is taxpayers’ money invested in ventures which have a 1 in 30 chance of succeeding?? Return the taxes to individual taxpayers (shareholders) and let them make their decisions.”
The bottom line: Investing in startup companies is always a crapshoot, but I’m glad to see New York City finally putting some skin in the game. While our motto may be “If You Can Make It Here, You Can Make It Anywhere,” it’s nice to get a little help from our friends.
This entry was posted on Tuesday, June 10th, 2008 at 1:53 pm and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.One Response to “Getting Your Big Break in the Big Apple”
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June 23rd, 2008 at 5:23 pm
Has this approach been used in other cities? What was the success rate? Do you have any dates regarding internet week?