Biggest New York startups

With $2.6 billion in venture capital invested in 2013, New York’s technology startup ecosystem is currently 87 percent larger than that of Massachusetts and 28 percent the size of Silicon Valley.

At first glance, this analysis appears to run counter to the public MoneyTree and National Venture Capital Association reports (the sources of almost all articles and blog posts on venture investment levels), which show New York continuing to trail Massachusetts and New England more broadly as the third-largest startup ecosystem in the country. In fact, however, it is based on the same data as these reports, but it uses categories better suited to measure the relative size of the New York technology ecosystem.

The primary challenge with the MoneyTree and NVCA reports is that they lump together venture investments in information technology and healthcare, making it difficult to compare information technology startup ecosystems on an apples-to-apples basis. In addition, these reports tend to focus on state-based analyses, which don’t work well for New York, since New York City is located in the very southeastern corner of the state. This means that important parts of the New York technology ecosystem are located in areas adjacent to New York City in northern New Jersey and southern Connecticut.

As a result of both factors, while these reports have partly captured the rise of the New York startup ecosystem, they have missed the big story that the New York technology startup ecosystem is now by a significant margin the second-largest in the country.

Another important metric in measuring the size of a startup ecosystem is number of large exits it produces, since this is the closest approximation of the aggregate economic value the ecosystem creates. This is a particularly interesting metric because it’s often predictive of future growth, given that companies that achieve large exits tend to be the best breeding grounds for the next generation of entrepreneurs and startup executives.