Business

We’re Number 2! NYC second-biggest in tech startups, study says

New York’s startup scene staged a comeback in the first quarter, and investors are scouring the city in search of the next Instagram.

Venture capitalists funded 81 tech companies in the first three months of the year, up from 73 deals in the previous quarter and 72 a year ago, according to a new report from CB Insights.

All the activity kept the Big Apple humming along as the No. 2 hub for Internet startups behind Silicon Valley, even though the total dollar flow was down because of the smaller, early-stage investments dominating the mix of deals.

“New York funding dipped, but the state’s deal activity stayed strong,” CB said in the report. “So we don’t think the decline is a problem [yet]. New York remains a hub for early-stage investment.”

New York startups raised $335 million from venture capitalists in the most recent quarter, way down from the third quarter of last year, when Big Apple startups raised a whopping $831 million from VCs — a high not seen since the dot-com boom.

But investors and analysts cautioned against reading too much into the dollar disparity.

“You’ve got to be careful about what the deal mix is,” said Lawrence Lenihan, the founder of FirstMark Capital, a New York venture-capital firm. “There are usually anomalies like one big gigantic financing.”

In the latest quarter, the big money-grabbers were Aereo, a streaming TV startup backed by Barry Diller’s InterActiveCorp, and New Media firm BuzzFeed, which raised $20.5 million and $15 million, respectively.

Last year, Tumblr raised $85 million and ZocDoc raised $75 million, fueling the third-quarter tally.

“New York’s funding drop is not a major reason for worry, at least based on this single quarter. If it were to continue, sure, we’d be concerned,” said Anand Sanwal, CEO of CB Insights.

“New York’s healthy deal activity is a reason for optimism as those companies, at least the ones that show momentum, will eventually need to get larger follow-on financing.”

For the first time, CB Insights also looked at the mobile and telecom startup sector in light of Instagram’s sale to Facebook for $1 billion earlier this month.

The mobile photo-sharing app, with just 13 employees and no revenue, has entrepreneurs dreaming big despite concerns that there’s another bubble about to burst.

“The coming quarters will be interesting for the mobile sector as companies and investors try even more aggressively to ride the mobile wave,” it said in the report.

New York came in No. 2, again behind Silicon Valley, in the mobile space last quarter, commanding 12 percent of the deals in that sector and 9 percent of the money.

Overall, mobile and telecom startups raised $435 million last quarter in 93 deals.

New York’s tech scene is dominated by mobile and Internet startups and sees very few energy and health technology deals, which typically require bigger-money investments.

Across all sectors, from health tech to Internet startups, New York was behind only Silicon Valley and Boston in money raised and was second in terms of deals.

California saw 309 deals worth $2.85 billion, while Massachusetts had 76 deals worth $650 million.

Total venture capital of $5.9 billion last quarter was down from $7.6 billion the prior quarter, according to the report.