New York City startups raised $10.2 billion in venture-capital investment during the first three months of the year, the largest total for any single quarter on record.
That record investment came as the quantity of deals—the number of individual startups receiving funding—declined about 15% compared with the first quarter of last year, according to a new report from PitchBook and the National Venture Capital Association. Total startup investment last quarter in the New York metro area was up roughly 150% compared with the same period last year.
The numbers show how funding is increasingly flowing toward startups that command nine-figure investment rounds, known as megadeals. There were 167 such deals reached in the U.S. from January through March, according to the report—already halfway to the total for all of last year.
In New York, there were 29 megadeals in the first quarter, according to PitchBook, compared with eight during the same period in 2020. There were 45 such deals total in New York last year.
“The focus on late-stage investments may be the harbinger of a surge in exit activity with many portfolio companies possibly ready to go public or be acquired,” the report concluded.
In New York, the top deals focused in the healthcare industry and e-commerce—unsurprising during a pandemic.
Ro, a digital health startup that operates an online pharmacy, raised $500 million. Co-founder and CEO Zachariah Reitano told Crain’s last month it is a matter of “when, not if” the Flatiron District company debuts on public markets.
Squarespace, the website-hosting platform based in Hudson Square, raised $300 million and has filed for an initial public offering later this year.
Text-message marketing firm Attentive added $470 million from investors last month. Cedar, a startup in the West Village seeking to improve healthcare billing, raised $200 million, also last month.
The largest individual investment deal was the $750 million to Midtown-based UIPath raised in January, ahead of an IPO due to take place later this month. The company’s software helps Bank of America, Verizon and other businesses automate administrative tasks.
The rise in large deals could be a troubling sign for new startups seeking early investment. Investment firms are still raising large sums to place into startups. But with most business being conducted on Zoom, the data indicates investors are falling back to established companies and founders they have relationships with. The number of first-financing deals—companies that received venture investment for the first time—is pacing behind previous years, according to the report.
That could carry over for the many new companies launched in the past year. Even outside a pandemic, the earliest investment is always the hardest for a new enterprise, said Travis Montaque, CEO and founder of Holler, a Midtown-based startup focused on messaging technology. The company last week finalized a deal for $36 million in Series B funding, which was set up by connections from the firm’s earlier investments.
“One of the most important variables when it comes to seed funding is your network,” Montague said. “Turning a good idea into a business reality isn’t just about having the vision, stamina and will to make it happen, but also about knowing the right people to help you raise that first bit of funding.”