New York City was an initial U.S. hotspot for the COVID-19 pandemic, and it’s also one of the most expensive cities in the world — so you might think startups would be anxious to leave.
However, when we surveyed a number of New York-based venture capitalists, they seemed bullish about the city’s future as a startup and technology hub. As AF Ventures’ David Levinson put it, “New York simply has too much to offer, from its richly diverse population, cultural significance and vast collection of industries to lose its entrepreneurial spirit.”
Lest you think this is just reflexive NYC boosting, several of our respondents offered stats and historical analyses to back up their arguments. They also discussed industries that are likely to flourish and how the shift to remote work will affect local startups.
Here’s who we interviewed:
- Eric Hippeau, managing partner, Lerer Hippeau
- Chad Anderson, managing partner, Space Capital
- Nihal Mehta, founding general partner, Eniac Ventures
- David Levinson, vice president, AF Ventures (formerly AccelFoods)
- Hans Morris, managing partner, Nyca Partners
- Matt Turck, partner, FirstMark
- Zach Aarons, co-founder and managing partner, MetaProp
- Andrew Ive, general managing partner, Big Idea Ventures
- Andrew Ackerman, managing director, urbantech, Dreamit Ventures
Keep in mind that if you’re on the hunt for an investor, several of these VCs are industry specific, which they note in their answers.
Eric Hippeau, Lerer Hippeau
How much is local investing a focus for you now?
We are NY-first investors and the most active VC firm in the city. Local investing has always been our priority, and it is more so now than ever before given the pandemic’s impact on New York. However, we make a large number of investments outside of New York, particularly if our extensive NY network can be useful to the company.
In the short term, how do you think local startups have been affected by the fact that New York is the epicenter of the pandemic?
Some categories are performing well during this period, and others have been hit hard. Companies have had to rethink roles, benefits, office space, communication and KPIs, which is easier for early-stage companies to some degree than larger organizations. Companies that entered this period strong will come out stronger and those who were struggling will feel the impact the most. This is true for New York and elsewhere.
What do you expect to happen to the startup climate in NYC longer term, particularly if the shift to remote work continues? Will it still be a startup hub?
New York is resilient and will come back stronger than ever, but it will take some time. The most innovative businesses are often started in a downturn. These periods shine a light on systematic gaps and key problems that fuel creative solutions and entrepreneurism.
Remote working is a trend that will continue to be integrated into every business as appropriate once offices begin to reopen. Businesses are looking to make up for losses they’ve experienced, so we’ll see many companies rethink their physical office space needs and rely even more heavily on digital resources for employees to work effectively. New York excels at software, so we expect to see innovation in remote working, learning and healthcare software continue to accelerate.
Are there particular industry sectors that you expect to do uniquely well or poorly, locally?
Healthcare technology and telemedicine have done well as they have become a necessity. COVID-19 has also shed a light on where there are gaps in health care. We’ve seen our New York-based health care investments including K Health, Medly and Klara step up in a real way to address patient needs during this time — be it telemedicine, on-demand prescription delivery or doctor-patient communication. We expect to see new innovations in healthtech emerge with New York as a hotspot.
On-demand fitness is another industry that’s seeing a boost. There was a rising popularity for at-home, on-demand fitness services before the crisis, and COVID-19 has accelerated the industry’s mass appeal. Mirror, one of our investments, is one example. Peloton is another that’s clearly benefiting. And ClassPass has adapted as well. All are New York companies.
Remote working and learning software have been essential, and we should expect these businesses to continue to have strong performance as they’re more universally adopted. Companies of all sizes need software collaboration tools in place to support their changing workforce. Air, which is workplace collaboration software for creative teams and one of our more recent investments, is well-positioned to address that need. I expect to see new innovations emerge as New York figures out how to get back to work in the months to come.