Author: Diegane Dione (DiDi) – didi.dione@dionesytems.com - www.dionesystems.

com

New York Venture Capitalist investing 90% of their money outside of NY: According to ChubbyBrain,
which aggregates startup and investor information, some 47 New York venture capital firms funded startups
with more than $2 billion in the first half of 2009. But only 10% of that money went to New York City-
based startups, while the biggest chunk went to California-based companies.
http://www.businessinsider.com/chart-of-the-day-new-york-vcs-spend-90-of-their-money-out-of-town-
2009-8

ƒ Why are New York startups only getting 10%?

ƒ Why are startups in New York less attractive than the ones in California? This is a fundamental question
that needs to be answered in order to establish the right environment in for startups in NYC.

Based on my experience, I believe there is no sufficient infrastructure in place at the NYC government level,
throughout the NYC academic community to incubate startups to the point there are ready for VC funding.
The entrepreneurial spirit is not fully institutionalized in the New York academic community like in
California where the industry-academic relationship is more intertwined. Even though NYC has launched a
few seed funds to help fill the gap, but my understanding is that the number of startups they fund is very
limited, around 1 or 2 per quarter; therefore there is still insufficient seed funding.

Recommendations:
1. In order to significantly boost the prospects technology community, the NYC government needs to take
a much bigger lead in providing seed funding to startups.
ƒ This could be called an NYC-SBIR program
ƒ Apply a model similar to the Science & Technology Division of DHS which evaluates a 1000
proposals, then funds a 100 projects which leads to 2 or 3 to commercial success.
ƒ This would require an annual budget of $7.5 million to $15 million a year to fund a 100 projects
(or $75K to $150K per project that last 6 to 12 months)
ƒ Establish seed funds at local universities and community colleges. Be managed by independent
review committees (Academia, Industry and Government)
ƒ The funding could be targeted towards technology proposals that address
i. Efficiency of government
ii. Improvement of Urban Areas
iii. Industries which are under-represented in NYC
2. Currently the New York City Investment Fund (NYCIF) objective is to only co-invest and not be a lead
investor. The recommendation is to have NYCIF or newly created fund to be able to be a lead investor.
3. Technology startups offering solutions specifically targeted towards city agencies have a tough time in
NYC. Currently going the NYC agencies purchasing process is very difficult and risk averse because the
procurement process was not designed for the acquisition of new technologies or to deal with startups
with emerging technologies.
ƒ Provide the New York City agencies experimental budget that will allow them to Beta Test and
validate leading edge technologies
ƒ Establish an Inter-Agency Technology Assessment Committee that will include members of the
academic and business community, which will review the technologies funded through the NYC-
SBIR program and decide which ones deserve to be Beta Tested.

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