New York has become a hotbed for tech startups after nearly a decade of IPOs

California-born Albert Wang moved to New York from Boston with his wife 10 years ago to take a job as a product manager at Datadog. At the time, Datadog was a startup that helped companies monitor cloud servers and databases.

While New York had its fair share of startup investors and venture-backed companies, it was not a hotbed of technology activity. The San Francisco Bay Area was the center of the tech scene. On the East Coast, Boston was well known as the center of enterprise technology.

But Datadog has grown quickly, going public in 2019 and now has a market capitalization of over $28 billion. Mr. Wang retired after he worked for four years, but chose to remain in New York to start his Bearworks, which provides software to salespeople.The city was completely different from the place he encountered when he arrived., You can also feel it when you’re in a bar or restaurant, Wang said.

“It’s very diverse now. More people are starting startups,” he says. Previously, “you tended to be surrounded by consultants and bankers, but now there’s more and more technology.”

Datadog’s initial public offering was followed less than two years later by UiPath, which develops software that automates office tasks. Both were preceded by cloud database developer MongoDB in 2017 and e-commerce platform Etsy in 2015.

None of these Big Apple companies are huge by technology industry standards (market caps range from $9 billion to just under $30 billion), but they have spawned many startups and some of their earliest employees has created an ecosystem that has generated enough wealth to turn investors into angel investors. For the next generation of entrepreneurs.

While the tech industry is still trying to recover from a tough 2022, which was the Nasdaq’s worst year since the 2008 financial crisis, New Yorkers are bullish on the city that never sleeps.

Last year, New York was second only to California, with $29.2 billion invested in 2,048 startups, according to the National Venture Capital Association. Massachusetts was in third place. In 2014, before the New York City IPO, California topped the list, followed by Massachusetts and then New York.

Over the past nine years, annual capital deployed in New York has increased sevenfold, according to NVCA data. And it comes after a sharp downturn across the industry last year. In his 2021, a record fundraising year, New York startups received nearly $50 billion from his 1,935 companies.

California companies raise three times as much money, and the Bay Area has a unique share of startup market momentum. Since San Francisco’s OpenAI launched ChatGPT in November, the city has become a mecca for artificial intelligence development.

Investors have poured more than $60 billion into Bay Area startups so far this year, with half of the money going to AI companies, according to PitchBook data.

Northern California has long been a hub for the tech industry; Murat Bicer remembers what it was like to start up in New York before the rush. In 2012, his Boston-based company RTP Ventures presented Datadog with a term sheet for a funding round, but he wanted one investor to join.

“I talked to so many companies,” said Beisser, who left RTP in 2015 to work for venture firm CRV. “A lot of companies left because they didn’t think you could build an enterprise software company in New York at the time. They said, ‘We’re in Boston.’ ”

This dynamic challenged Olivier Pomer, Datadog’s French co-founder and CEO, who was building a local network after a decade in New York. Boston had an enterprise scene. The rest of the technology was in Silicon Valley.

“At that time, West Coast VCs weren’t really investing outside of the West Coast,” Pommell said.

But Pommell decided to build Datadog in New York. Ultimately, Index Ventures, a European-founded company, participated in his Datadog funding round, giving the company the fuel to grow in the city. Pommell moved his company to the New York Times building on the edge of Times Square in Manhattan.

New York will need to consistently produce a string of successes to maintain momentum. It’s not easy. The IPO market has finally shown signs of life in the past week after being shut down for nearly two years, but investor enthusiasm has waned and there aren’t many clear-cut tech IPO candidates based in New York. .

New York saw a surge in startups during the dot-com boom, but many disappeared in the 2000s. Datadog, MongoDB, cloud infrastructure provider DigitalOcean all came out after the Great Recession. DigitalOcean went public in 2021 and currently has a market capitalization of over $2 billion.

Employees of those companies and even some of their founders founded new startups in New York. Google and Salesforce are among the major technology companies that have increased their presence in the city, making it easier for tech startups to find people with the right skills.. And investors who have prioritized the Bay Area for decades have recently set up shop in New York.

Andreessen Horowitz, GGV Capital, Index, and Lightspeed Venture Partners expanded their presence in New York in 2022. In July of this year, Sequoia Capital, MongoDB’s largest venture investor and one of Silicon Valley’s most respected firms, opened a New York office.

“There’s no question in my mind that you can build a great business in New York today,” Beisser said.

Elliott Horowitz, who co-founded MongoDB in 2007 and is now founding a New York-based robotics software startup called Viam, shared that sentiment.

“The biggest difference between now and then is that no one questions New York,” Horowitz said.

Mr. Horowitz is among a group of successful business founders who funneled some of their wealth to New York. He backed DeliverZero, a startup that allows people to order food in returnable, reusable containers. The company works with about 200 restaurants and some Whole Foods stores in New York, Colorado and California.

Wainer, co-founder of DigitalOcean, invested in collaboration software startup Multiplayer with Bowery Capital. He also supports cloud cost monitoring startup Vantage, founded by former DigitalOcean employees Brooke McKim and Ben Schaechter. Vantage has 30 employees and hundreds of customers, including Block, Compass and PBS, Schechter said.

Meanwhile, Weiner has moved to Florida but is starting a new company in New York. He and his co-founder of DigitalOcean, Ben Uretsky, launched his Welcome Homes, which provides technology that allows people to design and order new homes online. The company is building $47 million worth of homes, said Weiner, who visits Wellcome’s headquarters every month or two.

Companies like DigitalOcean, which had more than 1,200 employees at the end of last year, have helped people gain skills in cloud software marketing, product management and other key areas of technology, Weiner said.

“The talent pool has expanded,” he says.

This has simplified startup life for Catalyst co-founder and CEO Edward Chiu. Catalyst’s software is designed to help businesses better understand their customers. When he was responsible for customer success at DigitalOcean, Chiu said it was not easy to find people with the right experience.

“That feature was completely meaningless in New York City even just 10 years ago,” Chiu said. “Now it’s really easy to get hired for any role in New York City.”

The ecosystem is maturing rapidly. When Steph Johnson, a former communications executive at DigitalOcean and her MongoDB, got serious about raising money for her Multiplayer, which she started with her husband, the couple called her Graham Neray. .

Neray was chief of staff to MongoDB CEO Dev Ittycheria, who had left the company to start data security startup Oso in New York. Neray told Multiplayer’s founders that he would connect them with 20 investors.

“He did what he said he was going to do,” Johnson said of Neley. “He helped us so much.” Johnson said she and her husband decided to name their startup “Graham” because of how helpful he was. He said he was joking.

In a sense, Nerei was simply fulfilling his duty. To help found Oso, Neray turned to his Datadog colleague Pomel. He also sought connection with Itticheria.

“I have incredible respect for Oli and what he has achieved,” Neley said of Pommer. “He’s incredibly strong on both the product side and the go-to-market side, which is rare. He’s in New York and in infrastructure. I wanted to learn from this guy. .”

Pommell ultimately made the investment. So was Sequoia. Currently, the startup has over 50 clients including Verizon and Wayfair.

Last year, MongoDB announced the creation of a venture fund. Pommell said he and other Datadog executives have discussed forming an investment arm in response to the lawsuit.

“We want the ecosystem that employs us to thrive, which is why we are investing more, especially in New York and France,” Pommer said.

Ittycheria has a front row seat to New York’s startup renaissance. He told CNBC in an email that when he founded server automation company BladeLogic in 2001, he wanted to start in New York, but “New York didn’t have access to entrepreneurial talent,” so he moved to the Boston area. He said he had to relocate.

Next came MongoDB. By the time Mr. Itticheria was named CEO of the database company in 2014, New York was “starting to see an increase in venture activity given access to customers, talent and capital,” Mr. Itticheria said. He added that the company’s IPO three years later was a milestone as the company became the city’s first infrastructure software company to go public.

He said the IPO showed the market that people can “build and scale deep tech companies, not just in Silicon Valley, but in New York.”

clock: MongoDB CEO Dev Ittycheria talks about second quarter results: Very happy with where the company is positioned for the future