Alley vs. Valley

Is New York’s Startup Scene a ‘One-Trick Pony’?

This report sure makes a compelling case.
 Is New Yorks Startup Scene a One Trick Pony?

Let’s make a deal! (Courtesy CB Insights)

The latest CB Insights report on venture capital investment just dropped, and we’ve spent the morning digging into the data. Local entrepreneurs might want to sit down, because this is gonna sting a little.

Overall the quarter was a big one, with 812 deals adding up to $8.1 billion. The report points out that’s the biggest single quarter since the dot com days. (And what with Digg and Yahoo dominating the headlines, you’d be forgiven for getting a little confused on the year.) Seed stage investments made up 22 percent of those deals, which fits with our anecdotal sense that startups are springing up like mushrooms after a rainstorm.

In terms of deal volume, New York held onto the number-two spot for the second quarter in a row. A big part of that is digital: The report calls California and New York a “two-headed monster on the internet front,” and points out that “larger funding deals enable Florida and Washington to challenge Massachusetts for the #3 spot.”

However, here comes the down side: Internet is pretty much the only thing New York does. The report goes so far as to call the city’s venture capital sector a “one-trick pony,” adding that that 70 percent of deals and 80 percent of funding go to Internet businesses.

Meanwhile, Massachusetts remained the runner-up in terms of overall funding. It’s also worth noting that, if one digs into the details, New York and Massachusetts are awfully close in terms of deal volume, as well. Check out this chart:

screen shot 2012 07 17 at 12 39 00 pm Is New Yorks Startup Scene a One Trick Pony?

(Graphic courtesy of CB Insights)

That’s not exactly what we’d call a shut out.

California, to no one’s surprise, is still number one, laying claim to 45 percent of the nation’s total VC deals, and 58 percent of the money. Color us deeply unsurprised, nor do we expect that lead to suddenly evaporate any time soon.

Then again, Massachusetts and New York are pretty close in the grand scheme of things.  Hey Boston, wanna join forces?

Follow Kelly Faircloth on Twitter or via RSS. kfaircloth@observer.com